On April 23, 2024, the FTC finalized a trade regulation rule prohibiting employers from enforcing non-compete agreements against workers. In response, business groups sued and Daniel Crane, a law professor at the University of Michigan, published a piece in Notice and Comment that reported on the views of 17 anonymous online volunteers regarding the fate of the rule in the courts. All but one of the volunteers, drawn from law professor listservs, predicted the law would be struck down, either based on the “Major Questions Doctrine” (MQD) or for lack of authority to promulgate substantive rules governing unfair methods of competition (UMC).

Plainly, a poll of unknown volunteers responding to a party with known views is not, as Crane acknowledges, “anything like a scientific study.” While the piece is titled a “prediction,” it cannot be said to offer much in the way of predictive value (as Crane also comes close to acknowledging) given the obvious problems of sample size, the selection bias inherent in soliciting anonymous volunteers from online fora, and little evidence that anything but a superficial legal analysis was conducted. These flaws are compounded by the piece’s failure to mention that twenty-nine legal scholars publicly put their names on a comment letter in the public record arguing that the rule is on strong legal ground.

The problem with anonymity is that it allows academics to make off-the-cuff assessments without significant engagement with the statutory text or relevant caselaw. Crane and his volunteers offer no serious legal analysis to support the view that the FTC is barred by the MQD doctrine from promulgating the non-compete rule.^[i] We think the place to start is with an evaluation of the legality of the FTC’s non-compete rule under current legal principles.^[ii] While the Supreme Court could always overrule itself, under present law, we think that the MQD does not apply to the FTC’s trade rule authority and, even if it did, that Congress clearly authorized the rule in the FTC Act as amended.

Why the Court’s Existing Major Questions Doctrine Does Not Apply

Some anonymous commentators have suggested that because the FTC’s proposed rule will have a substantial impact and has not previously been in force, the FTC will run afoul of the Supreme Court’s recent decision in West Virginia v. EPA. As one volunteer wrote, the FTC’s rule on non-competes is “a big enough deal to make the front page of the New York Times;” hence the court will strike it down. 

We believe this analysis is mistaken for several reasons.  The first is a misunderstanding of what, at least according to the Supreme Court, triggers the major questions doctrine. As the West Virginia decision suggested, the MQD is concerned with novel assertions of agency authority, particularly when Congress could have acted but did not.  But nothing novel is at issue here.  Rather, the FTC is doing what it has been doing since the 1960s:  promulgating trade regulation rules, and doing so pursuant to a textually explicit grant of authority on which it has previously relied.  The case centers not a new question, but an old one, upon which the courts and Congress have already expressed views on more than one occasion.  It is therefore a weak candidate for application of the major questions doctrine.

To be more specific, the D.C. Circuit addressed the exact statutory question in 1973 and held that the “plain language” of the statute is clear: it authorizes the FTC to “make rules and regulations for the purpose of carrying out the provisions of [the Act].” Nat’l Petroleum Ref’rs Ass’n v. FTC, 482 F.2d 672 (D.C. Cir. 1973). That case, as Judge Richard Posner wrote in 1985 “has long been regarded as authoritative,” United Airlines v. CAB, 766 F.2d 1107, 1112 (1985). Its holding was also reaffirmed by Congress on two occasions, as described below.  The situation is therefore completely different from that in West Virginia where the Court faced an agency using its authority in what the court believed was a novel and uncontemplated fashion.   

Nor is this a case where the FTC has, in some sense, gotten ahead of Congress—as the Court put it, asserted an authority to “adopt a regulatory program that Congress had conspicuously and repeatedly declined to enact itself.” West Virginia at 2610. As discussed below, the subject of FTC rulemaking authority was specifically addressed by Congress in 1975 and 1980, and the FTC has relied not on some vague provision, but a specific text authorizing its promulgation of rules.   

Finally, some of the volunteers seems to think the novelty lies not in the FTC’s claim to rule-making authority, but in the commission’s condemnation of employee non-compete agreements; one volunteer wrote, for example, that contracts are “largely a matter of state law.”  This view displays a regrettable ignorance of antitrust law, given that contracts in restraint of trade have been a central concern of the antitrust laws since 1890.  Restrictive employment contracts, moreover, have been a concern of unfair competition laws since the common law era. To say there is a “mismatch” between the policing of restrictive employment agreements and the expertise of the FTC simply misunderstands the history and practice of both antitrust and its policing of employment contracts that restrict competition.

Another Look at the Plain Language and Legislative History^[iii]

Some of the anonymous volunteers, perhaps aware that the question of the FTC’s rulemaking authority is not novel, instead opined that the FTC lacks the authority to write substantive rules governing unfair competition.   But that view, as stated earlier, was considered and rejected by the D.C. Circuit in 1973 in the landmark case of National Petroleum Refiners Association v. FTC. 482 F.2d 672 (D.C. Cir. 1973), cert. denied, 415 U.S. 951 (1974). The court declined to “import . . . a restriction” into the statutory text that was not there. “[W]e are hardly at liberty to override the plain, expansive language of Section 6(g),” Judge Wright wrote, as “ambiguous legislative history cannot change the express legislative intent.”  That intent is made clear by Section 6(g) of the FTC Act grants the Commission, in unqualified terms, the “power . . . to make rules and regulations for the purpose of carrying out the provisions of this Act.”

The holding of National Petroleum Refiners Association has been ratified twice by Congress.  In the 1975 Magnuson-Moss FTC Improvement Act, Congress added new procedural requirements for substantive rulemakings involving the FTC’s authority over unfair or deceptive acts and practices (UDAP). In doing so, it was careful to note that these new requirements “shall not affect any authority of the Commission to prescribe rules (including interpretive rules), and general statements of policy, with respect to unfair methods of competition in or affecting commerce.” 15 U.S.C. § 57a(a)(2).

This savings clause clarified that the new procedural requirements in Magnuson-Moss do not apply to unfair-competition rulemaking, which, as the D.C. Circuit had recently held, is separately authorized under Section 6(g). By specifying “rules (including interpretive rules)”—using the same word, “rules,” as it used to describe the unquestionably legislative UDAP rules governed by Section 18—Congress affirmed that Section 6(g) authorizes rules that carry the force of law. Any other interpretation of this sentence would render “(including interpretive rules), and general statements of policy” mere surplusage.

At the same time, Congress directly amended Section 6(g), adding the phrase “(except as provided in section 18(a)(2) of this Act)” before “to make rules and regulations for the purpose of carrying out the provisions of this [Act].” The new language affirms that the text that follows it authorizes the FTC to enact legislative rules. If Congress had the view that Section 6(g) conveys no such authority, the new language regarding Section 18 would not change the legal powers of the FTC, and “a statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant.”

In 1975, Congress easily could have reversed the court’s findings. Instead, legislators added both a savings clause and an exception applicable only to UDAP rulemakings, codifying the holding in National Petroleum.  Finally, in 1980, Congress again ratified the FTC’s unfair competition rulemaking authority, adding new procedural requirements in Section 22 that apply to “any rule promulgated by the Commission under section 6 or section 18, except that such term does not include interpretive rules, rules involving Commission management or personnel, general statements of policy, or rules relating to Commission organization, procedure, or practice.” 15 U.S.C. § 57b-3 (emphasis added). Congress treated the word “rules” in Section 6(g) as encompassing legislative rules. Not only does the 1980 amendment expressly reference “rules” promulgated by the Commission under Section 6 and impose additional procedural requirements on those rules, but it limits those requirements to Section 6 rules that carry the force of law by expressly carving out interpretive rules, rules involving management or personnel, general statements of policy, and rules relating to organization, procedure, or practice.

Some have argued that the 1975 Act should not be interpreted as affirming the D.C. Circuit’s view in National Petroleum Refiners Association, based on the premise that Congress would have imposed the same heightened procedural requirements on unfair competition rulemakings that the new Section 18 applied to UDAP rulemakings. But not only is that speculation inconsistent with the plain text, it is also out of step with the legislative history.   For example, Senator Hart saw the heightened procedures for UDAP as an experiment: “An assessment and comparison . . . of the experiences and results of this dual approach to FTC rulemaking will facilitate future congressional determination of what, if any, changes should be made in [the rulemaking provisions] of this bill.” 120 Cong. Rec. 40173.  And what sense  would it make for Congress to give the FTC UDAP rulemaking authority but not unfair competition authority, given the centrality of unfair competition to the statutory scheme?

***

The undeniable fact is that Section 6(g) and the FTC’s rulemaking authority has already been subject to an explicit dialogue between the judicial and legislative branches. “The long time failure of Congress to alter [a law] after it had been judicially construed, and the enactment by Congress of legislation which implicitly recognizes the judicial construction as effective, is persuasive of legislative recognition that the judicial construction is the correct one.” As the Court has explained, “This is the more so where . . . the application of the statute . . . has brought forth sharply conflicting views both on the Court and in Congress, and where after the matter has been fully brought to the attention of the public and the Congress, the latter has not seen fit to change the statute.” National Petroleum Refiners is such a precedent, properly treated today as “part of the warp and woof of the legislation.”

For all these reasons, the anonymous predictions given to Crane and reprinted here must be understood to be of very little value. We believe that a close look at the statutory text and relevant case law suggests that the deck that is stacked in favor of the Federal Trade Commission and its authority to promulgate trade rules.

Lev Menand is an Associate Professor of Law at Columbia Law School; Tim Wu is the Julius Silver Professor of Law, Science and Technology at Columbia Law School.

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[i] The closest the piece comes to offering substantive support for these conclusions are the following statements:

— “[M]y rationale is that any agency rulemaking that’s a big enough deal to make the front page of the New York Times is likely going to be invalidated by the courts.”

— “MQD grounds because it is retroactive, because the rule affects the contracts of 30 million, because contracts are perceived to be largely a matter of state law, and because employment is not the FTC’s ‘wheelhouse.’ They will say that the role belongs to the Department of Labor and the National Labor Relations.”

— “The justices’ constitutional and policy sympathies are likely to be engaged here, which means they’re more likely to stretch existing law to stop the rule.”

— “Someone will ask the FTC lawyer in court, devastatingly: ‘so, could the FTC just prohibit all horizontal mergers in markets where the HHI exceeds 1800 and save itself the hassle of merger review?’ Someone will also point out that the very recent UMC statement emphasizes the use of economic power and adverse impacts on competitive conditions, while the rule requires neither economic power nor economic effects.”

[ii] Some skeptics of trade regulation rules have offered such assessments. We engage with their arguments below.

[iii] The below section draws from the comment letter we wrote.