FTC Non-Compete Ban Is Banned

On August 20, 2024, a federal court in Texas permanently blocked the Federal Trade Commission's (FTC) final rule banning most non-competes. U.S. District Judge Ada Brown granted summary judgment in favor of the plaintiffs in Ryan LLC v. Federal Trade Commission, et al. after finding that the FTC's final rule exceeded the agency's authority.

Judge Brown determined that the FTC had improperly overstepped its statutory authority by attempting to create a new rule banning non-competes. The rule was based on the FTC Act's "housekeeping rules," which lack statutory penalties, rather than the "substantive rulemaking power" provisions of the statute. The court also called the final rule "arbitrary and capricious" and concluded the final rule would cause irreparable harm. As a result, Judge Brown stated in her order that, "The Non-Compete Rule, 16 C.F.R. § 910.1–.6, is hereby SET ASIDE and shall not be enforced or otherwise take effect on September 4, 2024, or thereafter."