The Federal Trade Commission (FTC) recently extended the public comment period for its proposed ban on non-compete agreements. This proposed rule would ban the use of all non-compete agreements and any other agreement that serves the same purpose. The FTC claims such a ban would protect workers and promote competition, resulting in increased innovation. Regardless of the purported ills this policy aims to address, the legal bedrock on which it stands is dubious and may constitute agency overreach.

The Commission’s authority over non-compete agreements stems from sections 5 and 6(g) of the FTC Act. Section 5 prohibits “unfair or deceptive acts or practices in or affecting commerce” while section 6(g) grants the FTC authority “to make rules and regulations for the purpose of carrying out the provisions of this subchapter [section 5].” Together these acts provide the justification for the FTC’s authority to make rules and regulations. For a rule to be warranted, it must address something “unfair or deceptive,” which this recent non-compete ban does not do.

Published in its entirety in Medium.