Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC files to accede to vacatur of non-compete provision rule, (Sep 8, 2025)

By Sara Cracau, J.D.

The agency will leave the issue of continuing validity of non-competes to Congress.

The FTC announced that it has decided to accede to vacatur of the non-compete provision rule by taking steps to dismiss its appeal in a suit challenging the FTC’s non-compete rule. The Republican Commissioners argued that the FTC’s prior commissioners acted arbitrarily and capriciously in making the rule overly broad without adequate explanation, and in disregarded evidence that supported less drastic alternatives. Democratic Commissioner Rebecca Slaughter dissented, arguing that non-competes present barriers to worker mobility and suppress wages, prevent the formation of business, and hamper innovation.

Background. In January 2023, the FTC proposed a rule that sweepingly banned non-compete clauses in employment contracts and retroactively invalidated such provisions in existing employment agreements. Following receipt and consideration of public comment, the rule was finalized on April 23, 2024 [16 C.F.R. Part 910], and subsequently appeared in the Federal Register on May 7, 2024, with the stated effective date of September 4, 2024 [Non-Compete Clause Rule, 89 Fed. Reg. 38342 (May 7, 2024)].

The very day the regulation was finalized, Ryan LLC, a tax consultancy business, filed a complaint against seeking to have the court vacate and set aside the rule and various related declaratory judgments. The federal district court in Dallas invalidated the FTC's Non-Compete Clause Rule, holding that it shall not be enforced or otherwise take effect. The court found that in promulgating the rule, the FTC exceeded its statutory authority, and acted arbitrarily and capriciously in making the rule overly broad without adequate explanation, and in disregarding evidence that supported less drastic alternatives. The FTC appealed.

Non-compete clause rule. On September 5, 2025, the FTC took steps to withdraw its appeal in Ryan, LLC v. FTC. No. 2-10951 (5th Cir) and Properties of the Villages v. FTC, No. 24-13102 (11th Cir.) and to accede to the vacatur of the non-compete clause rule. The commission voted 3-1 to dismiss the appeal and accede to the vacatur. The FTC aims to promote competition and to protect and educate consumers.

Chairman Ferguson concurring statement. Chairman Ferguson opined that the rule was patently illegal and that it purported to ban almost all contracts in which an employee was restricted in working for a competitor of his employer after the period of his employment, thereby extinguishing thirty million existing private contracts. Furthermore, it preempted the laws of all fifty states. He was also of the opinion that the rule did not protect a single American nor did it bring relief to a single employee who is stuck in a position because of a non-compete. Such rules can be abused and severely inhibit a person’s ability to make a living. The Commission should have been working to identify illegal non-compete agreements and eliminating them. He advocated protecting workers by patrolling the market for specific anti-competitive conduct that harms American consumers and workers and taking bad actors to court. He concluded that the FTC should continue to enforce antitrust laws aggressively against non-compete agreements but leave legislating to Congress and the states.

Commissioner Meador’s concurring statement. Commissioner Meador opined that the rule was substantively overbroad and an ill-advised use of resources. He noted that non-compete clauses present opposing economic considerations which require careful analysis but that, although they can raise serious competitive concerns, they are not uniformly benign or harmful. He advocated for more balanced enforcement that the blanket ban espoused by the rule. Although non-compete clauses can protect legitimate investments in training, encourage collaboration, and safeguard proprietary and confidential information, they can create barriers that restrict worker mobility and suppress wages in a manner that harms competition.

Rather than adopting a categorical approach, Commissioner Meador found it more appropriate to outline a general analytical framework for the Commission to apply when evaluating non-compete employment agreements. He identified many of the pro-competitive benefits and adverse effects associated with such restrictions and the contextual factors that affect how these provisions should be assessed, based on traditional antitrust principles and supplemented by the FTC’s authority under section 5 of the FTC Act. He urged the Commission to consider the following factors in evaluating non-compete clauses: the likelihood of free-riding; the availability of a less restrictive alternative; the scope and duration analysis; market power; and evidence of economic effects.

Commissioner Slaughter’s dissenting statement. Commissioner Slaughter vigorously dissented, disagreeing with the dismissal of the appeal and acceding to the Ryan court decision. She indicated that the FTC acknowledged that non-competes present barriers to worker mobility and suppress wages, prevent the formation of business, and hamper innovation. Furthermore, she noted that they even deprive consumers of the better products and better prices expected from competitive markets.

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