This July, several Seyfarth attorneys signed a letter in response to President Biden’s Executive Order on Promoting Competition in the American Economy. On December 20, 2021, following the FTC’s and DOJ’s virtual workshop on “Making Competition Work: Promoting Competition in the Labor Markets” in early December, Seyfarth partners Dawn Mertineit, Robert Milligan, Kate Perrelli, and Erik Weibust were among the 73 signatories to another letter drafted by our friend Russell Beck, this time addressed to the FTC and Jonathan Kanter, the Assistant Attorney General, Antitrust Division.
Like the previous letter, this submission recommends against federal regulation of non-competes. It references new research by Gerald Carino at the Federal Reserve Bank of Philadelphia supporting the position that non-competes may help, rather than stifle, start-ups. The letter also points out the limitations in prior research that suggested—perhaps erroneously—that non-competes hamper innovation and growth, and highlights the “correlation implies causation” fallacy often associated with negative views of restrictive covenants (including the unproven theory that non-competes suppress wages).
The letter also addressed certain comments made at the FTC workshop suggesting—in our view, inaccurately—that non-competes are per se harmful (in fact, on the same day that the FTC/DOJ workshop started, the US Chamber of Commerce published an article noting that reasonable non-competes do not stifle competition, and may in fact benefit employees—and positing that banning non-competes could hinder employer efforts to recruit and retain top talent). While we agree that non-competes can be used inappropriately, especially with low-wage workers or where sprung upon employees with virtually no ability to review or consider their impact, many non-competes have beneficial effects for companies and workers alike. As a result, the signatories recommended again that any non-compete legislation continue to be conducted at the state level.
We are sure to hear more from the Biden Administration on this important topic, and will update our readers with any developments.