House Republicans Criticize FTC Proposal to Ban Noncompete Clauses

In a letter to FTC Chair Lina M. Kahn, House Judiciary Committee Chair Jim Jordan (R-OH), Representative Darrell Issa (R-CA), Representative Thomas Massie (R-KY) and Representative Scott Fitzgerald (R-WI) criticized the FTC rule proposal to ban noncompete clauses. The Representatives asserted that the proposal "exceeds its delegated authority and imposes a top-down, one-size-fits-all approach that violates basic American principles of federalism and free markets."

In their letter, the Representatives said that the prohibition would nullify approximately 30 million existing noncompete agreements and the prohibition would have "significant adverse effects" on the economy. The Representatives said that the statutory authority of the FTC does not permit the agency to pursue a rule of this nature, stating that the FTC cannot "issue substantive rules that classify a common economic practice as an 'unfair method of competition.'" The Representatives further asserted that the proposed rule circumvents the precedent established by the ruling of the Supreme Court in West Virginia v. EPA, which said that an executive agency must have explicit and clear authorization from Congress to issue a regulation that has "great economic and political significance."

The Representatives requested that Ms. Kahn respond no later than February 28, 2023 by providing the House Judiciary Committee with documentation containing:

• the legal authority of the FTC to impose the rule and related litigation and economic analysis;
• any communications with outside parties related to the proposal;
• a breakdown of the hours/appropriated funds spent and expected to be spent on the proposal;
• a list of personnel that contributed to or expects to contribute to the proposal; and
• a list of objectives that were "deprioritized or delayed" due to the pursuit of the rule.

For more information and analysis, click here for Fried Frank's Antitrust and Competition Law Alert® on the FTC proposal.