Economist Comments in the Matter of the FTC's Proposed Non-Compete Clause Rule

The empirical evidence on non-compete agreements cited by the FTC shows mixed results in studies on earnings, job creation, firm formation, entrepreneurship, training, investment, and firm value, and does not support an economy-wide ban. Additionally, while the FTC says alternatives to non-competes, such as non-disclosure agreements and non-solicitation agreements, are comparably effective, research on this question is virtually non-existent. The FTC's cost-benefit analysis is also flawed and incomplete, as it assumes away uncertainty, ignores costs, and fails to show that earnings effects are real, not transfers. The Commission concludes that the proposed rule would yield net benefits even though by its own admission it lacks the information necessary to conduct a cost-benefit analysis. Instead of an economy-wide ban, the FTC should focus on more targeted inquiries in industries or occupations where evidence is more conclusive, such as those involving low-wage workers