In this chapter, we turn our attention to labor unions and their role in providing countervailing power. Congress recognized the consequences of individual employees having to negotiate with large employers. For the most part, individual employees have no bargaining power and face all-or-nothing offers that reflect monopsony power. Consequently, Congress passed legislation that would permit employees to unionize and thereby create a labor monopoly. The idea was to level the playing field so workers could not be abused. This chapter provides a brief review of the statutes and the scope of the labor exemption.

The formation of a union converts a monopsony into a bilateral monopoly. The economic effects of a bilateral monopoly are generally positive. Employment and output expand. Thus, both employees and consumers are better off. We explain this analysis and illustrate it with reference to professional sports. This chapter also explores the antitrust conundrum arising from bilateral monopoly.