“The regulation would undermine the rule of law by invalidating tens of millions of existing contracts to which employers and employees voluntarily agreed,” the lawmakers wrote. “The rule is also inconsistent with tenets of federalism because it sets a one-size-fits-all approach that would outlaw practices that forty-seven states have deemed to be legal.”
The FTC, in proposing the ban, had asserted that non-compete agreements were “exploitative” in nature, serving to suppress wages and hinder innovation and competition. Holding that such agreements violate the Federal Trade Commission Act, the agency also estimated that banning them could increase wages by $300 billion per year and expand opportunities for more than 30 million Americans.
On Tuesday, however, the Republican congressmen argued that the FTC does not possess the authority to impose such a sweeping rule, noting that one of the letter’s recipients, FTC Commissioner Christine Wilson, had dissented from the commission’s “literally limitless” approach to the issue.
“[T]he FTC Act never gave the agency the authority to issue substantive rules that classify a common economic practice as an ‘unfair method of competition,’ as the Biden FTC seeks to do here,” the lawmakers wrote.
Further arguing that the FTC would be unlikely to win a legal battle over the ban, the Judiciary Committee members requested all documents and communications relating to the FTC’s analysis of the potential economic and legal ramifications of the rule, as well as any documents regarding the agency’s legal authority to implement it.
