Warren, Whitehouse grill Chamber of Commerce over FTC noncompete issue

WASHINGTON — Two top Senate Democrats on Tuesday pressed the biggest U.S. business advocacy organization on its threat to sue the Federal Trade Commission over a plan to ban noncompete clauses.

Sens. Elizabeth Warren, D-Mass., and Sheldon Whitehouse, D-R.I., requested detailed information from the U.S. Chamber of Commerce about its plan to sue the FTC to halt the proposal. The large lobbying organization represents about 3 million businesses.

“The Chamber’s description of noncompete agreements as a tool for ‘fostering innovation and preserving competition’ is demonstrably false, and represents precisely the form of Washington insider doublespeak that big business has been using for years to justify anti-worker and anticonsumer policies,” the letter from the senators addressed to Chamber of Commerce CEO Suzanne Clark states.

“Noncompete agreements are legal contracts prohibiting staff from taking similar positions with recent employers or starting their very own businesses,” Warren, who sits on the Senate Banking Committee, and Whitehouse, a member of the Senate Finance and Budget committees, wrote.

The FTC has said that noncompete clauses, which affect 1 in 5 American staff, violate the agency’s fair trade laws by stopping staff from starting a job at a competing business until a specific amount of time has passed. The agency has called the agreements, often entered into when staff start a recent job at an organization, exploitative.

The brand new rule that may bar employers from imposing noncompete clauses could increase staff’ wages by $300 billion a yr, based on the FTC.

Noncompete clauses are already banned in at the very least 10 states. A ban in Oregon helped raise wages for lower wage staff by 2% to three%, based on a 2021 study.

However the Chamber has called the proposal “blatantly illegal.” In a press release released shortly after the FTC announced the proposal in early January, the organization argued Congress has not given the agency the authority to make the rule change.

Clark announced in January that the Chamber will sue to oppose the proposed regulation. The Chamber CEO reiterated her position several days later in an op-ed in The Wall Street Journal.

Within the op-ed, Clark said the FTC’s intent to trigger Section 5 of the FTC Act to ban unfair methods of competition undermines its commitment to “preserving innovation in a free market.” As written, Section 5 prohibits ”unfair or deceptive acts or practices in or affecting commerce” for everybody engaged in commerce, including banks, based on the Consumer Compliance Handbook.

Warren and Whitehouse’s letter to Clark challenged that view.

“This assertion is absurd,” the senators said. “These noncompetes do nothing but stifle competition for staff, businesses looking for to rent them, and entrepreneurs starting their very own businesses.”

To justify the agency’s oversight, the senators referenced a November 2022 policy statement on Section 5 that identifies the FTC’s authority over “coercive, exploitative, collusive, abusive, deceptive, predatory” conduct that goes beyond competition.

Warren and Whitehouse also contended that banning noncompete clauses is definitely higher for businesses. They wrote that the agreements depress wages, prevent market growth and force employees into worse jobs or out of the workforce altogether.

“Notwithstanding the Chamber’s doomsday predictions and threats to sue to overturn the law, the FTC’s proposed rule would help staff, small businesses, and your complete economy, and the agency has the legal right to impose this rule,” the senators said.

Warren and Whitehouse issued a March 13 deadline for the Chamber to offer details on its decision to oppose the noncompete rule, outline any fundraisers who’ve contributed to its efforts to fight the proposal and detail which of its members use noncompete agreements.

The U.S. Chamber of Commerce didn’t immediately reply to CNBC’s request for comment.