It’s spring in an election year, and the Biden Administration’s regulatory ambitions are in full bloom. On April 24, the Federal Trade Commission became the latest to finalize a long-awaited rule—this one banning employment-based noncompete agreements. It’s one of some 2,500 regulatory actions the administration plans to act on by the end of its first term.
Like many of the rules, the FTC’s blanket ban on noncompetes defies its agency’s constitutional and statutory authority, shifting power from Congress and into the hands of three unelected commissioners. The FTC only has the authority to identify specific, individual instances of unfair competition on a case-by-case basis, but Chairwoman Lina Khan has decried this approach as “whack-a-mole” and pledged instead to lay down prescriptive, often one-size-fits-all rules, without letting the Constitution stand in her way.
The U.S. Chamber of Commerce filed a lawsuit to challenge the FTC’s rule. One doesn’t have to imagine what the agency would do next if the ban is allowed to stand. In a 2022 policy statement that dramatically reinterpreted its authority to govern “unfair methods of competition,” the FTC laid out its intentions to target a litany of other actions that businesses take to remain competitive, from loyalty rebates to entire classes of mergers and acquisitions.
The Chamber’s lawsuit against the FTC is our latest effort to challenge the Administration’s aggressive campaign to micromanage business decisions. It follows our victories against the Securities and Exchange Commission over its stock buyback rule, the National Labor Relations Board over its joint-employer rule, and the Consumer Financial Protection Bureau over its rule on “Unfair, Deceptive, or Abusive Acts or Practices.”
In each instance, the courts agreed that the agency in question had exceeded its rulemaking authority, but this hasn’t stopped agencies from continuing to impose ideological mandates.
Examples abound. The SEC is wading into climate regulation by micromanaging environmental impact disclosures. The Occupational Safety and Health Administration has proposed a rule to enable union organizers, activists, and others to enter workplaces under the guise of “assisting” OSHA inspectors. An FTC rule targeting “unfair and deceptive fees” would threaten entire business models that incorporate variable or dynamic pricing.
Every rule is couched in the typical boilerplate about consumer and worker protection, but it’s a thin disguise for the real purpose: establishing sweeping new powers that can be weaponized whenever and against whomever these agencies choose. The thesis behind the power grab is that government knows better than markets, which is a costly idea for every American—consumers and workers included.
Through the end of last year, the Biden administration had imposed $447 billion in net regulatory costs on the economy,[i] and this sum pales in comparison to the $616 billion already proposed for 2024. These costs are borne by businesses of every size, though smaller firms struggle most, and they are unavoidably passed to consumers in the form of higher prices and reduced economic growth. Glenn Hubbard argued recently in The Wall Street Journal how the assault on growth hurts every aspect of society, from individual livelihoods to public finances.
The business community has rightly decried overregulation for years, prompting some critics to accuse us of crying wolf. Today, there’s no question that the wolf is here. The regulatory agencies are redefining the relationship between business and government without heed to elected representatives or the Constitution. The U.S. Chamber will see these agencies in court.
[i] $201 billion in 2021 + $117 billion in 2022 + $129 billion in 2023 = $447 billion
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About the authors
Suzanne P. Clark
As President and CEO of the U.S. Chamber of Commerce, Suzanne Clark heads strategy, government relations and market innovation to support member companies and businesses.
