Federal Court Puts FTC Non-Compete Ban on Hold

Judge Ada Brown in the Northern District of Texas has stayed the effective date of the FTC’s Non-Compete Rule and granted plaintiffs’ motion for preliminary injunction against the Rule, effective today, July 3, 2024. The court found that the FTC lacks substantive rulemaking authority with respect to unfair methods of competition under Section 6(g) of the FTC Act. The court analyzed the “text, structure, and history” of the FTC Act in coming to its decision that the FTC exceeded its statutory authority in promulgating the Rule. The court also found a substantial likelihood that the FTC’s actions were ‘arbitrary and capricious.’ However, the court declined to issue a nationwide injunction, limiting the scope of the injunctive relief to plaintiff (Ryan LLC) and plaintiff-intervenors (Chamber of Commerce, Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce). The court did not view the circumstances of plaintiffs’ case as ‘appropriate’ for nationwide injunctive relief and raised concerns regarding standing and redressability for nationwide relief. The court intends to rule on the merits of the case by August 30, 2024. The court’s ruling comes days after the Supreme Court’s decision striking down Chevron Deference, the longstanding doctrine under which courts generally deferred to an agency’s reasonable interpretation of an ambiguous statute.