President-elect Donald Trump’s announcement that he intends to appoint Federal Trade Commissioner Andrew Ferguson to chair the Federal Trade Commission (“FTC”) may lead to a status change regarding the FTC’s recent nationwide ban on noncompete agreements (the “Non-Compete Ban Rule”).[1]
The Non-Compete Ban Rule is currently the subject of a pending appeal in front of the United States Court of Appeals for the 5th Circuit.[2] The lower court found that the FTC violated the relevant enacting statute in promulgating the Non-Compete Ban Rule and that the rule is arbitrary and capricious.[3] The current administration appealed that decision, arguing that the FTC had the statutory authority to impose the nationwide rule.[4]
Mr. Trump’s pick to replace the current head of the FTC may lead to an abandonment of the pending appeal. Andrew Fergson—who was one of the FTC commissioners when the Non-compete Rule was finalized and approved—dissented to that finalization and approval.[5] Ferguson argued, among other things, that the FTC lacked statutory authority to implement such a rule.[6] Another upside to picking Ferguson is that his status as a current FTC commissioner allows him to assume the role of FTC chair as soon as Mr. Trump begins his second term without the need for U.S. Senate approval.[7]
Because of the cumbersome process required to implement a new rule that would effectively unwind the current rule,[8] it is possible that the incoming administration could continue the appeal in hopes that the Fifth Circuit agrees with the lower court by finding the rule to be a violation of statutory authority.
This replacement at the FTC is by no means a guarantee that the Non-Compete Ban Rule will be abandoned. Only time will tell how Mr. Trump’s new administration will manage the ongoing legal disputes and political rhetoric surrounding it. Stay up to date on news regarding the Non-Compete Ban Rule by checking Shields Legal Group’s website for important updates and breaking news.
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8/29/24 — Texas Federal Court Shuts Down FTC Ban on Non-Competes
7/24/24 — The FTC’s Ban on Non-Competes Finds Favor in Pennsylvania, But Not Texas
5/13/24 — The FTC Rule on Non-Competes – the Saga Moves to the Courthouse
1/23/24 — Texas Non-Competes and the FTC’s Proposed Rule
[1] The FTC’s rule banning non-competes is located at 16 C.F.R. § 910.1-.6.
[2] See generally Ryan, L.L.C. v. Federal Trade Commission, No. 24-10951, currently pending before the United States Court of Appeals for the Fifth Circuit.
[3] Memorandum Opinion and Order (Doc. 211), Ryan, LLC v. Federal Trade Commission, No. 3:24-cv-00986-E, United States District Court for the Northern District of Texas, at p. 26.
[4] See Opening Brief for Appellant (Doc. 41), Ryan, L.L.C. v. Federal Trade Commission, No. 24-10951, currently pending before the United States Court of Appeals for the Fifth Circuit, at p. 1-3.
[5] https://www.ftc.gov/about-ftc/commissioners-staff/commissioners.
[6] Dissenting Statement of Commissioner Andrew N. Ferguson Joined by Commissioner Melissa Holyoak, In the Matter of the Non-Compete Clause Rule, Matter Number P201200, June 28, 2024, at p. 1.
[7] John Hendel, Trump picks FTC Commissioner Andrew Ferguson to lead the agency, Politico, December 10, 2024, https://www.politico.com/news/2024/12/10/andrew-ferguson-ftc-chair-trump-00193517 (“Meador will need to be confirmed by the Senate, but Ferguson can assume the role of TRC chair immediately following Trump’s inauguration on Jan. 20 since he is already a commissioner”).
[8] Regulatory Reset: How easy is it to undo regulation?, Regulatory Studies Center, Columbian College of Arts & Sciences, The George Washington University. https://regulatorystudies.columbian.gwu.edu/regulatory-reset-how-easy-it-undo-regulation (describing the Notice-and-comment rulemaking procedure).
