Opposition Growing To The F.T.C.’s Noncompete Move

The F.T.C.’s proposal to ban noncompete agreements is among the agency’s most sweeping moves in recent years, and it would have far-reaching consequences if it takes effect. But the move has also given business lobbyists an opportunity: a chance to challenge the agency’s power in court.

"We’ve been preparing for this moment, whether it was this issue or another,” Sean Heather, a senior vice president of international regulatory affairs and antitrust at the U.S. Chamber of Commerce, told DealBook at The NY Times. “It has nothing to do with the subject matter, but we don’t think they have the authority.”

A big question is whether Congress gave the F.T.C. this authority. Some skeptics — including Noah Phillips, a Republican former commissioner at the regulator — argue that lawmakers didn’t give the agency the power to write new rules.

But antitrust experts note that a 1973 federal court decision — National Petroleum Refiners Association v. F.T.C. — did grant rule-making power. That legal decision allowed it to require businesses to post octane ratings on gas pumps. The rule, still in place today, was able to stand because it addressed a public harm, and Congress didn’t explicitly limit the F.T.C.’s rule-making power.

But a lot has changed since then. Antitrust experts across the political spectrum say courts now don’t tend to find agency authority where it’s not explicitly granted. Last June, the Supreme Court’s conservative majority ruled in West Virginia v. E.P.A. that the environmental agency overstepped its authority by creating emissions regulations that touch on “major questions” with big economic consequences.

That “major questions doctrine” had once been considered a fringe conservative legal position. Now, however, it’s become a key part of litigation strategy for industrial groups looking to fight new regulatory rules.

Even supporters of the F.T.C.’s move are wary. The regulator will most likely modify its proposal based on public comments made over a 60-day period, so no final rule will be issued for some time. Even then, whatever the agency does must still pass legal muster.

“That might be an uphill battle, given the way judges — particularly conservative judges — think,” Jon Leibowitz, a Democratic former F.T.C. chair, told DealBook. “It’s not a Hail Mary, but it’s definitely a shot down the field.”