Equitable Growth delivers comment letter responding to the Federal Trade Commission’s Advanced Notice of Proposed Rulemaking on Non-Compete Clauses

The Washington Center for Equitable Growth this week delivered a comment letter (opens in a new tab) responding to the Federal Trade Commission’s Advanced Notice of Proposed Rulemaking on Non-Compete Clauses (opens in a new tab).

In our comment letter, we demonstrate why non-compete clauses limit U.S. labor market competition. Absent some offsetting benefit to labor market competition, non-compete clauses are plainly anticompetitive. We note that if non-compete clauses had offsetting benefits to U.S. workers and labor market competition, then one would expect to see that reflected in workers’ wages. But the weight of the empirical evidence demonstrates that, in most cases, non-compete clauses are associated with lower wages and worse conditions for workers.

What’s more, non-compete clauses are often implemented in deceptive or coercive ways. Even when not initially deceptive or coercive, once a non-compete clause is in place, employers can degrade working conditions or depress wages without the threat of competition from other employers or concern that workers will quit.

Non-compete clauses also can limit competition in U.S. product markets by locking up labor supply and making it costly or impossible for new firms to enter and compete. These exclusionary effects from non-compete clauses harm both workers and downstream customers.

Indeed, non-compete clauses have few legitimate justifications to competition versus benefits to employers. Even if there are some circumstances where non-compete clauses are not anticompetitive, there are significant benefits to a clear, bright-line rule. Such rules provide unambiguous guidance to employers and employees alike, and they avoid uncertainty about what conduct is and is not allowed.

Read the full letter submitted (opens in a new tab) to the Federal Trade Commission.