A federal judge has ruled against the Federal Trade Commission, stating that it lacks the authority to prevent companies from imposing noncompete agreements on their employees.
What Happened: On Tuesday, Judge Ada Brown of the U.S. District Court for the Northern District of Texas declared that the FTC did not have the jurisdiction to issue rules against unfair competition practices, including the ban on noncompete agreements. This rule was intended to prohibit companies from limiting their employees’ ability to work for competitors, reported The New York Times.
This decision, which was made permanent and applies nationwide, effectively blocks the ban from taking effect in September, as planned.
The FTC had estimated that the ban on noncompete agreements could potentially increase workers’ earnings by at least $400 billion over the next ten years. This rule would have impacted around 30 million American workers, or approximately one in five workers in the country.
Victoria Graham, a spokeswoman for the FTC, expressed the agency’s disappointment with Judge Brown’s ruling, stating that they will continue to fight against noncompetes that infringe on the economic freedom of hardworking Americans, stifle economic growth, curb innovation, and suppress wages.
“We are seriously considering a potential appeal, and today’s decision does not prevent the [FTC] from addressing noncompetes through case-by-case enforcement actions,” Graham added.
Why It Matters: The FTC has been actively scrutinizing major tech companies for anticompetitive practices. Recently, Amazon.com Inc. faced an FTC inquiry over its acquisition of AI talent from Adept.
Similarly, Microsoft Corp. is under FTC scrutiny for its deal with Inflection AI, which involved hiring nearly all of the startup’s employees and paying $650 million as a licensing fee. The FTC is assessing whether this agreement should have been subject to antitrust review.
Moreover, Joe Lonsdale, co-founder of Palantir Technologies Inc., has voiced concerns about the unchecked power of big tech companies and criticized FTC Chair Lina Khan for her aggressive stance. He described her as a “bully” and called for more accountability in the tech sector.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
