The U.S. Chamber of Commerce will oppose the proposed regulation with all the tools at our disposal, including litigation. If the FTC can regulate noncompete agreements without authorization from Congress, there is no aspect of employment or commercial arrangements that it doesn’t have the authority to regulate or ban arbitrarily.
In its more than 100-year history, the FTC has never enforced a rule to regulate competition, and Congress never intended the agency to have that power. Instead, legislators gave the FTC authority to identify on a case-by-case basis individual acts that constitute unfair competition. Critically, this authority is subject to judicial oversight.
This structure has been a key to preserving innovation in a free market and avoiding overregulation. It prevents the FTC from writing the laws it is assigned to enforce, which is necessary to protect the constitutional separation of powers.
Yet the present FTC isn’t content to live under the legal strictures imposed by elected representatives and the Constitution. Before issuing the proposed noncompete ban, the FTC issued a radical reinterpretation of the agency’s authority under Section 5 of the Federal Trade Commission Act, which governs “unfair methods of competition.” This means the FTC is walking away from having to weigh consumer benefits against consumer harms or even identify actual harm to consumers. In her dissent, FTC Commissioner Christine Wilson slammed the new rules for givingthe agency “authority summarily to condemn essentially any business conduct it finds distasteful.”
The proposed regulation to ban noncompetes takes this one step further. Rather than reviewing and judging the specific and individual conduct of companies under Section 5, the FTC has proposed simply to issue a nationwide ban of a type of employment contract that three unelected commissioners have decided they don’t like.
The minds of progressive activists must be running wild with ideas of what they could do if this approach is allowed to stand. Don’t like the pay gap between executives and nonexecutives? The FTC could simply declare it unfair and regulate it. Think that businesses above a certain size shouldn’t be allowed to get any bigger through mergers? The FTC could simply declare those businesses can’t make acquisitions.
Sound far-fetched? Like the banning of noncompetes, both of these policies have been put forward by Sens. Bernie Sanders and Elizabeth Warren.
This fight is about much more than the fate of noncompete agreements. That’s why the Chamber of Commerce will fight in court to hold the FTC accountable to the rule of law.
By Suzanne Clark
Ms. Clark is president and CEO of the U.S. Chamber of Commerce.