Briefing Document: Ryan LLC, et al. v. FTC
This case concerns a legal challenge to the Federal Trade Commission's (FTC) Non-Compete Rule, which sought to prohibit most non-compete agreements between employers and workers. The plaintiffs, Ryan LLC and several intervenors, argued that the FTC exceeded its statutory authority in issuing the rule and that the rule was arbitrary and capricious. The U.S. District Court for the Northern District of Texas agreed with the plaintiffs and set aside the rule, preventing it from going into effect.
No Explicit Authority for Substantive Rulemaking: Section 6(g) did not explicitly grant the FTC the power to create substantive rules on unfair competition; it primarily dealt with procedural and organizational matters.
Section 18 Focused on Unfair or Deceptive Practices: While Section 18 allowed for substantive rulemaking regarding "unfair or deceptive acts or practices," it did not extend this power to "unfair methods of competition."
Historical Context: The FTC's own historical interpretation and subsequent amendments to the Act further supported the court's conclusion. For instance, Congress enacted specific amendments to grant force of law rulemaking power on certain topics, implying that Section 6(g) did not already confer such broad authority.
Overly Broad: The rule employed a one-size-fits-all approach, banning almost all non-competes without considering potentially legitimate uses or tailoring exceptions.
Insufficient Evidence: The FTC relied on studies that examined different state policies, not on a categorical ban like the one it sought to implement.
Failure to Consider Alternatives: The FTC did not adequately assess less disruptive alternatives or consider the potential reliance interests of parties bound by existing agreements.
Remedy: The court ultimately decided to "set aside" the Non-Compete Rule, preventing its enforcement and declaring the FTC's action unlawful under the Administrative Procedure Act (APA). The court emphasized that its decision applied nationwide, not just to the specific plaintiffs in the case.
Court Ruling * Noncompete Rule Impact Assessment * Noncompete Rule AI Analysis
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