DealLawyers.com Blog

As Liz shared on CompensationStandards.com in August, a federal judge in the Northern District of Texas struck down the non-compete ban that the FTC adopted earlier this year in Ryan v. Federal Trade Commission, saying that the agency exceeded its authority and that the rule was arbitrary and capricious. The ban would have had significant implications for M&A transactions, despite the sale of business carve-out. Bloomberg recently reported on the tight spot the FTC is in in deciding how to proceed:

The ruling leaves the FTC with some difficult questions on strategy, Justin Wise reports.

– To potentially salvage its ban, the FTC must appeal US District Judge Ada Brown’s ruling that it lacks powers granted by Congress to enact substantive rules targeting unfair methods of competition.

– But doing so risks a circuit court opinion saying it “lacks substantive rulemaking authority regarding unfair competition,” said James Tysse, a partner in Akin Gump’s appellate practice. “It could make things worse.”

The article also says that while businesses can keep enforcing non-competes and aren’t required to send the notices voiding non-competes that would have otherwise been required, “attorneys have been warning businesses to think more strategically about which employees they ask to sign [non-competes] and how broadly the contracts are drafted.” The NLRB is “moving ahead with an enforcement strategy to effectively make restrictive covenants illegal under federal labor law.” Labor issues are clearly front and center for nearly the entire alphabet of agencies these days — and, as I shared earlier this week, merger investigations are no exception!

– Meredith Ervine