Coalition Letter: FTC Lacks Authority on Non-Competes
AFSA joined a coalition of other organizations opposing a Federal Trade Commission (FTC) proposed rule imposing a nationwide ban on almost all noncompete clauses. If finalized, the rule would nullify millions of such contracts. Courts, scholars, and economists have found these contracts entirely reasonable and beneficial for both businesses and employees. Additionally, 47 states permit noncompete clauses. The letter warns that the FTC is using this rule to improperly usurp the role of Congress and lacks the constitutional or statutory authority to issue such a rule. The coalition notes that Congress has previously curbed such FTC overreaches with appropriations riders, and that it would be prudent to revisit such tools today. The letter outlines the congressional and constitutional limits that the rule oversteps:
- Congress granted targeted statutory authority to the FTC to issue rules to protect consumers, such as preventing fraud and false advertising. The FTC’s authority on competition issues is limited to adjudicating individual cases where the FTC must consider the factual context and reasonableness of conduct in each matter.
- The Supreme Court recently recognized the important constitutional limitations on the ability of executive agencies to issue major rules without clear guidance from Congress. Two years ago in AMG Capital Management v. FTC, the Supreme Court unanimously rejected the FTC’s claims that it could interpret its own statutes to claim broad authority.
- In cases involving other agencies, courts have invoked the major questions and non-delegation doctrines to strike down agency excesses and to preserve the role of elected officials in addressing important issues.
March 2nd, 2023
