The U.S. Chamber of Commerce is asking a federal court to halt the Federal Trade Commission's noncompete ban, alleging it violates the law in "numerous ways."
The Federal Trade Commission on April 23 voted to ban noncompete agreements in a move it estimates will save up to $194 billion in healthcare costs over the next decade. The ban is set to take effect 120 days after its publication in the Federal Register.
Shortly after the announcement, the U.S. Chamber of Commerce released a statement blasting the ban and said it would sue to block "this unnecessary and unlawful rule and put other agencies on notice that such overreach will not go unchecked."
The organization made good on the promise, filing a lawsuit in the U.S District Court for the Eastern District of Texas on April 24.
In its lawsuit, the Chamber of Commerce alleges that the FTC lacks the authority to issue regulations proscribing "unfair methods of competition." It also alleges that even if it did, the "noncompete rule would still be unlawful because noncompete agreements are not categorically unlawful under Section 5."
The lawsuit also alleges that the rule is "impermissibly retroactive" and reflects an "arbitrary and capricious exercise" of the FTC's power.
"The commission's categorical ban on virtually all noncompetes amounts to a vast overhaul of the national economy and applies to a host of contracts that could not harm competition in any way," the lawsuit alleges.
The Chamber of Commerce is seeking an order "vacating and setting aside the noncompete rule in its entirety" and an order permanently enjoin the FC from enforcing the rule against the plaintiffs in the case. Along with the chamber, the Business Roundtable, the Texas Association of Business and the Longview Chamber of Commerce are named as plaintiffs.
The groups are also seeking an order to delay the effective date and implementation of the noncompete ban until the conclusion of the case.
FTC spokesperson Douglas Farrar told Becker's the commission's legal authority is "crystal clear."
"In the FTC Act, Congress specifically 'empowered and directed' the FTC to prevent 'unfair methods of competition' and to 'make rules and regulations for the purposes of carrying out the provisions of' the FTC Act," Mr. Farrar said. "This authority has repeatedly been upheld by courts and reaffirmed by Congress. Addressing noncompetes that curtail Americans' economic freedom is at the very heart of our mandate, and we look forward to winning in court."
The rule has also been met with opposition from the American Hospital Association and Federation of American Hospitals. FAH CEO Chip Kahn said the ban "makes it more difficult to recruit and retain caregivers to care for patients, while at the same time creating an anti-competitive, unlevel playing field between taxpaying and tax-exempt hospitals — a result the FTC rule precisely intended to prevent."
Becker's spoke with several surgeons regarding the ban. Among them was Zoher Ghogawala, MD, chairman of neurosurgery at Burlington, Mass.-based Lahey Medical Center and president of the North American Spine Society. He said noncompete clauses in contracts "prevent patients from having access to their doctor of choice in many cases."
"A doctor should be allowed to practice in an environment that allows them to be productive and have access to his/her patients, regardless of whether or not the doctor was previously working in another practice in the community," Dr. Ghogawala said. "The action by the FTC is in service of patients and provides greater access to doctors."