The Fifth Circuit Is Bad News For the Future of the FTC’s Non-Compete Ban

May 15, 2024 8:33 pm
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That pro-corporate entities  would sue the FTC to attempt to block the rule comes as no surprise. In fact, they said themselves that  they were planning to do so. As early as January, months before the final rule was announced, the U.S. Chamber of Commerce was loudly and proudly announcing that, regardless of the contours of the final rule, they’d be suing.

Sure enough, within hours of the FTC’s vote on the final rule, a national tax services provider, Ryan LLC (represented by former Trump Secretary of Labor Eugene Scalia), sued in the  Northern District of Texas, arguing that the FTC lacks the authority to issue rules regarding economic competition. The Chamber initially filed its own lawsuit in the Eastern District of Texas, but given the similarities between the two and the fact that Ryan filed first, the Chamber was given permission to join Ryan’s suit instead.

Ryan LLC is hardly a household name, but its interest in blocking the non-compete ban is easy to discern. As David Dayen at The American Prospect has reported, Ryan is owned by Donald Trump’s tax adviser, who also happens to be a Republican megadonor. The firm’s speciality is helping corporations avoid paying taxes; by its own admission, approximately 200 of the company’s principals are currently bound by non-competes.

Ryan LLC’s lawsuit, which the Business Roundtable, the Texas Association of Business, and the Longview Chamber of Commerce have also joined, argues that, for a whole host of reasons, the FTC lacks the authority to enact a rule banning non-competes. Yet since at least 1973, the judiciary has acknowledged that Congress specifically delegated the power to make rules related to unfair methods of economic competition to the FTC. This lawsuit and its corporate champions appear to be placing a bet that, in the 50 years since, the judiciary has changed enough that this previous ruling—which, in theory, should still govern—will no longer be grounds for the courts to uphold the FTC’s rule.

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