Rounding Out the Roundup

Cite this Article
Daniel J. Gilman, Rounding Out the Roundup, Truth on the Market (July 03, 2024),

In yesterday’s Agencies Roundup, I discussed the likely fate of the Federal Trade Commission’s (FTC) new rule banning most noncompete agreements, read through the lens of the Supreme Court’s Loper Bright decision. I thought the rule infirm to begin with—a somewhat foolish swing for the fences on a regulation that the FTC couldn’t possibly enforce. I thought that the FTC’s prospects looked dimmer still in the wake of Loper Bright. As I wrote yesterday: 

It’s not entirely clear where the ground of statutory ambiguity will settle in the wake of Loper Bright, but it is clear that the ground has shifted, and that cannot bode well for the FTC’s non-compete rule. 

A challenge to the rule filed in the Northern District of Texas awaited a ruling, and now we have it. Judge Ada Brown has issued a preliminary injunction postponing the rule’s effective date, at least for the plaintiffs. Here’s a very clear excerpt on where she thinks this is going, and when: 

Before the Court is Plaintiff Ryan, LLC’s (“Ryan”) and Plaintiff-Intervenors the Chamber of Commerce of the United States of America, Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce’s (“Plaintiff-Intervenors”) (referred collectively with Ryan as “Plaintiffs”) Opposed Motion for Stay of Effective Date and Preliminary Injunction against the Federal Trade Commission’s (“FTC” or the “Commission”) “Non-Compete Rule” (sometimes referred to as the “Rule”), 16 C.F.R. § 910.1-.6, which makes most non-compete agreements unenforceable. (ECF Nos. 23 and 46). The Rule’s effective date is September 4, 2024. However, the text, structure, and history of the FTC Act reveal that the FTC lacks substantive rulemaking authority with respect to unfair methods of competition under Section 6(g). The Court GRANTS the motion for preliminary injunction and postpones the effective date of the Rule as applied to the Plaintiffs. While this order is preliminary, the Court intends to rule on the ultimate merits of this action on or before August 30, 2024.

It ain’t over. It’s a preliminary injunction, not a ruling on the merits of the underlying case. And the U.S. District Court for the Northern District of Texas is not the 5th U.S. Circuit Court of Appeals, which is not the U.S. Supreme Court. Maybe the rule is not yet circling the drain, but the FTC shouldn’t invest in too many green bananas either. There’s a soprano doing warm-up scales in the wings. 

That’s all for now, folks. Whatever your feelings or beliefs about the subject matter of the rule, the FTC’s authority to adopt it, or the FTC’s ability to enforce it, supposing adequate authority, I wish you all a happy Fourth of July. Let freedom ring.