The Major Questions Doctrine, FTC Rulemaking, And Rulemaking On Noncompete Clauses

By Marina Lao, Seton Hall Law School

After relying almost exclusively on case-by-case adjudications to prohibit “unfair methods of competition” (UMC), the Federal Trade Commission recently made its first modern foray into competition rulemaking. In early 2023, it proposed a rule that would ban virtually all noncompete clauses in employment contracts as “unfair methods of competition,” in violation of Section 5 of the FTC Act. The Commission based its notice-and-comment rulemaking authority on Section 6(g) of the Act. Whether the grant of rulemaking authority under that provision extends to substantive, as opposed to merely procedural, rules has been the subject of debate for some time, and the debate has only intensified after the U.S. Supreme Court decided West Virginia v. EPA in 2022.

This essay briefly addresses Section 6(g); I have argued elsewhere that, under a textualist interpretation, the rulemaking authorization granted in that provision should be inclusive of substantive competition rules. I also examine the Major Questions Doctrine (MQD) articulated in West Virginia, and consider its implications on FTC competition rulemaking in general and on regulation with respect to noncompete clauses in particular. The essay explains my conclusion that the doctrine is not a game-changer on the basic question of whether Section 6(g)’s grant of rulemaking authority extends to substantive rules as a general matter – that question, on its own, simply should not qualify as a major question. Though the doctrine could place limits on the content of any substantive rules that the agency may permissibly promulgate, I explain why agency issuance of UMC rules governing noncompete clauses should not automatically raise a “major question” – the subject does not have the novelty, political significance, or other indicia of a major question to trigger West Virginia’s clear statement rule. This essay does not address whether the specifics of the FTC’s proposed rule—an across-the-board categorical ban on virtually all noncompetes–and various alternatives, included in the Notice of Proposed Rulemaking, might involve a major question.

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