On July 9, 2021, President Biden issued Executive Order 14036, titled “Promoting Competition in the American Economy”. The order is wide-ranging and addresses issues related to competition across industries and practices. For instance, the EO directs the Federal Trade Commission to look into banning “pay for delay” pharmaceutical agreements; it directs the Federal Communications Commission to issue rules promoting competition among internet providers; it directs the Department of Justice to vigorously enforce United States antitrust laws.
One headline-grabbing element is that the EO encourages the Federal Trade Commission to ban or limit non-compete agreements in the labor market. According to the Fact Sheet issued alongside the EO, roughly half of private sector business require some employees to enter into non-compete agreements in order to be hired for a job. In recent years, non-compete agreements have come under increasing scrutiny as their use expanded to even low-wage workers.
The Executive Order does nothing to impact the current non-compete landscape, however, we expect the Federal Trade Commission to issue rules restricting non-competition agreements pursuant to their rule-making authority in the Federal Trade Commission Act. 15 U.S.C. Sec. 57a. The rule-making process is as follows: 1) the Commission will publish a proposed rule in the federal register; 2) the public will have a period of time to comment on the proposed rule, typically 180 days; 3) the Commission will address the public comments and may potentially alter the proposed rule; 4) finally, the Commission will publish the Final Rule in the Federal Register.
Cantrell Zwetsch is monitoring the rule-making process and will provide updates as the process plays out.