The Firm Exemption and the Hierarchy of Finance in the Gig Economy

Abstract

Worker-owned or controlled firms face a little-studied threat from antitrust law that typifies broader problems with the current antitrust paradigm, namely that it favors coordination through concentrated ownership and control while disfavoring coordination through democratic participation, for example by workers. Our existing system for provisioning credit reinforces, at multiple levels, antitrust’s criteria for allocating economic coordination rights. The so-called gig economy illustrates these problems especially acutely. Incorporation by workers, producers, or service-providers is not—without structural reforms—a solution to the antitrust paradoxes created by the gig economy. We show that a firm created and controlled by ride-share drivers or other individual service-providers would have difficulty qualifying for antitrust’s firm exemption under existing law. More, this differential legal obstacle is exacerbated by the hierarchy of finance. In contrast to dominant firms, which have relied on venture capital and now the financial markets to invest in molding their regulatory environments, worker-controlled firms will not be able to access finance in analogous ways—for reasons that largely track and reproduce antitrust's firm exemption itself.

Keywords: antitrust, price-fixing, theory of the firm, firm exemption, worker cooperatives, finance, hierarchy of finance, gig economy