Re: Notice of Proposed Rulemaking, Federal Trade Commission; Noncompete Clause Rule; 88 Fed. Reg. 3482-3546 (January 19, 2023)
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
The undersigned organizations, who together represent businesses that provide goods and services to virtually every American in every corner of the country, submit these comments regarding the proposed Noncompete Rule. We strongly oppose the proposal because noncompetes serve vital business and employee interests and because the FTC lacks legal authority to issue the proposed rule.
Most importantly, noncompetes serve pro-competitive interests. Courts, scholars, and economists all have found that noncompetes encourage investment in employees and help to protect intellectual property. In every sector of the economy, employers rely on noncompetes to protect investments in their workforce, to protect trade secrets and other confidential information, and to structure their compensation programs. As the FTC's own economist John McAdams recently explained, noncompetes "allow firms to reduce recruitment and training costs by lowering turnover," encourage firms to offer higher wages to compensate new employees, and "increase the returns to research and development," thereby promoting innovation. Unfortunately, the Commission ignored or downplayed this evidence, thereby undermining "confidence in the integrity of the rulemaking process or the ultimate outcome."
Moreover, noncompetes promote pro-competitive interests far more effectively than alternatives such as trade-secret laws or nondisclosure agreements. By relying on noncompetes over nondisclosure agreements or trade-secret law, "employers avoid the difficulties of proving an actual or threatened misappropriation of trade secrets to secure an injunction," a costly and time-consuming process. Scholars have found that noncompetes "may represent a more efficient mechanism to prevent proprietary knowledge transfers in certain circumstances, particularly when monitoring and the enforcement of trade secrets law is costly."
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