On January 5, 2023, the U.S. Federal Trade Commission (FTC) voted 3–1 along party lines to propose a new federal antitrust rule that would ban most noncompete clauses in employment contracts as unfair methods of competition. The proposed rule, if adopted in its current form, would broadly prohibit employers from entering into noncompete agreements with employees and, in many circumstances, independent contractors.1 It follows on the heels of consent orders prohibiting noncompete agreements that the Commission announced on January 4.2
While the FTC has clearly established authority to issue consumer-protection rules specifying “unfair or deceptive acts of practices” (UDAP),3 it is uncertain whether the FTC may issue antitrust rules specifying “unfair methods of competition” (UMC).4 Indeed, the FTC’s proposed competition rule against noncompetes is a replay of a tumultuous period in the agency’s history. Before 1975, when the Federal Trade Commission Act was amended to establish UDAP rulemaking authority, the FTC relied on an aggressive interpretation of its own powers to support rulemaking.5 Now the FTC has revived the same theory to support UMC rulemaking. President Joe Biden has urged the FTC to revive the aggressive posture it took during the 1970s, and Chair Lina Khan has signaled that other UMC rules are likely to follow.6
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