President’s Executive Order Aims To Foster A Competitive Marketplace – Intellectual Property – United States

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President’s Executive Order Aims To Foster A Competitive Marketplace

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On July 9, 2021 President Joe Biden issued an Executive Order on Promoting
Competition in the American Economy, which urges the Attorney
General and Federal Trade Commission (FTC) to curb the use of
non-compete and no-poach agreements.  The Executive Order aims
 to foster a “fair, open, and competitive
marketplace,” and calls for a “whole-of-government”
approach to reverse trends of industry consolidation and
anticompetitive practices. The Order indicates these trends have
harmed employees’ wages, work conditions, and mobility.
 It further targets what it characterizes as the
“overuse” of non-compete agreements and other barriers to
entry in certain markets.

Here are some of the Order’s key provisions:

  • The Order encourages the FTC to curtail the use of
    non-compete clauses.

    • “To address agreements that may unduly limit workers’
      ability to change jobs, the Chair of the FTC is encouraged to
      consider working with the rest of the Commission to exercise the
      FTC’s statutory rulemaking authority under the Federal Trade
      Commission Act to curtail the unfair use of non-compete clauses and
      other clauses or agreements that may unfairly limit worker
      mobility.” (Order, Sec. 5(g).)

  • The Order emphasizes the importance of worker mobility
    and recognizes the hindering effect of non-compete

    • “The American promise of a broad and sustained prosperity
      depends on an open and competitive economy. For workers, a
      competitive marketplace creates more high-quality jobs and the
      economic freedom to switch jobs or negotiate a higher wage.”
      (Order, Sec. 1.)

    • “Consolidation has increased the power of corporate
      employers, making it harder for workers to bargain for higher wages
      and better work conditions. Powerful companies require workers to
      sign non-compete agreements that restrict their ability to change
      jobs.” (Id.)

  • The Order calls for immediate action and affirms the
    Administration’s policy to enforce antitrust laws to combat
    harmful effects in labor markets.

    • “We must act now to reverse these dangerous trends, which
      constrain the growth and dynamism of our economy, impair the
      creation of high-quality jobs, and threaten America’s economic
      standing in the world.” (Id.)

    • “This order affirms that it is the policy of my
      Administration to enforce the antitrust laws to combat excessive
      concentration of industry, the abuses of market power, and the
      harmful effects of monopoly and monopsony – especially as
      these issues arise in labor markets.” (Id.)

  • The Order calls for agencies to exercise regulatory
    authority and further implement policies to promote competition in
    the economy more generally.

    • “This order recognizes that a whole-of-government approach
      is necessary to address overconcentration, monopolization, and
      unfair competition in the American economy. Such an approach is
      supported by existing statutory mandates. Agencies can and should
      further the policies set forth in section 1 of this order by, among
      other things, adopting pro-competitive regulations and approaches
      to procurement and spending, and by rescinding regulations that
      create unnecessary barriers to entry that stifle competition.”
      (Order, Sec. 2(g).)

  • The Order urges the Attorney General and FTC to
    consider revising the Antitrust Guidance for Human Resource
    Professionals of October 2016 “to better protect workers from
    wage collusion.”

    • The Guidance, which addresses wage-fixing and no-poaching
      agreements, warns that an individual is likely breaking antitrust
      laws if he or she:

      • “agrees with individual(s) at another company about
        employee salary or other terms of compensation, either at a
        specific level or within a range (so-called wage-fixing
        agreements), or

      • agrees with individual(s) at another company to refuse to
        solicit or hire that other company’s employees (so-called
        “no poaching agreements).” (Guidance, 3.)

Although the Executive Order does not create any immediate
changes to industry use of non-compete agreements, companies should
look out for possible FTC action regulating restrictive covenants
in employment contracts.

*Siena Carlos is a law clerk in Sheppard Mullin’s Del Mar

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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