FTC revisits noncompete rules after Biden-era ban blocked

The Federal Trade Commission (FTC) on Thursday issued a public request for information on noncompete agreements as it seeks to identify practices it considers “unfair” and “anticompetitive,” a topic that has drawn attention across the mortgage and real estate industries. 

Under the Trump administration, the FTC said it will take a case-by-case approach rather than imposing a nationwide ban like the Biden administration. It argues that noncompete clauses may serve legitimate business purposes in certain circumstances but are also vulnerable to abuse.

“Unreasonable noncompete agreements have proliferated for too long in the dark,” said Kelse Moen, deputy director of the FTC’s Bureau of Competition and co-chair of the agency’s Joint Labor Task Force. “With the assistance of the employees and workers most burdened by them, the Trump-Vance FTC intends to uproot the worst offenders and restore fairness to the American labor market.”

Noncompete clauses restrict workers from joining a competitor or starting a rival business after leaving an employer. The FTC said it wants to better understand their scope, prevalence and effects to guide future enforcement actions.

The approach marks a shift from the Biden administration. In April 2024, the FTC under Chair Lina Khan finalized a nationwide ban on noncompetes, following a 2021 executive order directing the agency to curb their use. 

At the time, Khan argued the terms kept wages low and stifled innovation, estimating that banning them could result in 8,500 new startups and up to 29,000 additional patents annually over the next decade.

But in August 2024, a U.S. district court judge in Texas blocked the FTC’s rule.

“Unfortunately, the Commission’s noncompete enforcement efforts have been obstructed by the Biden-Harris Administration’s Noncompete Rule, a blanket nationwide ban that exceeded the Commission’s regulatory power by purporting to prohibit nearly all noncompete agreements across all industries within the Commission’s jurisdiction without regard for their likely effects in specific contexts,” the FTC wrote in its request for information. 

According to the FTC, “Nonetheless, the Trump-Vance FTC remains committed to rooting out unfair and anticompetitive conduct in all appropriate cases where Congress has authorized the agency to act.”

Public comments are due by Nov. 3.