Comments of FTC Alumni, Noncompete Clause Rulemaking
As alumni of the Federal Trade Commission, we are providing these comments in response to the agency’s proposed Non-Compete Clause Rule. As we explained in a letter dated September 20, 2022 (attached), we have devoted significant portions of our careers to protecting consumers and competition and we continue to care deeply about the agency and its mission. Moreover, many of us agree that non-compete clauses can unreasonably limit competition, depending on factors such as the clause’s scope and duration. We applaud the FTC for examining this issue and offer no comments on the rule’s merits.
Instead, we write to express a number of concerns with the rulemaking process and with the rule’s potential impact on the FTC’s ability to fulfill its mission:
- First, as compared to prior rulemakings, the FTC lacks a firm factual foundation for this rule. The FTC has brought only a handful of enforcement actions involving noncompetes, all very recent, and the empirical literature provides only mixed support for the rule.
- Second, the rule rests on a very thin legal basis. The FTC has not attempted a competition rulemaking in decades, and the courts are limiting the ability of administrative agencies to exercise authority without a clear basis in statutory language.
- Third, this proposal could imperil the FTC’s future. In the past, Congress has responded to overly aggressive rulemaking by limiting the FTC’s authority. This rulemaking could easily lead to a diminished FTC that is less able to protect consumers in the future.
- Fourth, if promulgated, this rule could swallow the FTC’s enforcement resources. As the agency acknowledges, employers likely would respond with contracts that attempt to circumvent the rule. This could, and likely would, draw the FTC into an endless stream of litigation around the country about the rule’s scope.
- Fifth, the proposal would transform the States from allies into adversaries. Forty-seven States currently permit non-competes. By overriding all these States’ laws, the FTC would cause many of them to litigate and resist the rule, even though the FTC’s effectiveness depends in part on the States’ cooperation and resources.
Instead of promulgating a rule of questionable legality, the FTC should combat unreasonable non-competes through its traditional tools of case-by-case litigation, competition advocacy, and even informal guidance. These tools all fall squarely within the FTC’s statutory authority and competence.