The U.S. Federal Trade Commission (FTC) has initiated a series of actions in relation to non-competes. Largely aligned with the prior administration's view that non-competes harm employee mobility and competition for labor, the current FTC leadership is charting a new course premised on ad hoc enforcement. Ex ante rule-making is out.
In September, the FTC used its antitrust powers to order the country's largest pet cremation company to stop enforcing non-compete agreements against its workforce. It has also sent warning letters to certain healthcare firms urging them to check their employment agreements for antitrust compliance. And, more generally, it has launched a public inquiry seeking information on non-competes, signaling that further enforcement action may be in the cards.
These moves come at a time when antitrust authorities across the globe are zeroing in on anticompetitive labor market practices. They cement the role of the FTC as a frontrunner in this charge but highlight the agency's clear shift in enforcement strategy under the Trump administration.
Concrete enforcement action
The FTC alleges that pet cremation firm Gateway breached antitrust rules by imposing anticompetitive non-compete agreements on nearly 1,800 workers. These typically prevent employees from working in the pet cremation service industry anywhere in the U.S. for one year after leaving the company.
According to the FTC, the agreements unfairly alter the bargaining positions between employees and Gateway and suppress competition by impeding the entry or expansion of rival businesses.
The agency's proposed consent decree prohibits Gateway from entering, maintaining, or enforcing non-compete agreements (plus related conditions) for ten years.
Healthcare sector on notice
Aside from Gateway, the FTC has singled out the employment contracts in the healthcare sector as at particular risk of antitrust violations.
Chairman Andrew Ferguson has sent warning letters to several large firms urging them to "conduct a comprehensive review of their employment agreements."
He says there is information to suggest that many healthcare employers and staffing companies include non-competes that may unreasonably limit employment options for nurses, physicians, and other medical professionals.
It is unclear whether any other industries will receive similar warnings.
Tuning in to public feedback
More broadly, the FTC has also issued a public request for information on non-compete agreements.
It wants to better understand the scope of such agreements, how they are used, and the impact they have. The inquiry is open until November 3, 2025.
Less regulation, more enforcement?
Under Biden, the FTC pursued a strict regulatory approach to tackling non-compete agreements. In 2024, it issued an unprecedented rule that was intended to impose a nationwide ban on non-competes, with only limited exceptions. However, the rule faced immediate legal challenges and ultimately did not take effect.
The Trump administration's FTC is adopting a markedly different strategy.
Ferguson stresses the importance of an enforcement-led approach over blanket regulation. He believes that "a steady stream of enforcement actions" provides transparency and has a wider influence on the behavior of market players.
Importantly, Ferguson is clear that not all non-compete agreements are unlawful. He recognizes that they can have procompetitive effects, for example by promoting investment in employees or allowing owners to profitably sell their businesses. The FTC has now withdrawn its defense of the sweeping non-compete rule and will instead assess the lawfulness of non-competes on a case-by-case basis.
Overall, this is good news for U.S. employers. But in the face of a possible surge in enforcement against non-competes, firms—particularly those in the healthcare sector—should not be complacent. The FTC is clear that the Gateway case "will not be the last." It plans to use the results of the public inquiry as well as its Joint Labor Task Force to inform future enforcement action.
Key takeaway 1: Review your non-compete arrangements
Under the threat of heightened antitrust scrutiny, U.S. employers should review their non-compete agreements for any antitrust red flags.
The Gateway case and warning letters suggest that the FTC is on the lookout for non-competes that, for example:
- are imposed on all new employees, regardless of their responsibilities
- have a broad geographic scope (Gateway's restrictions applied nationwide)
- apply indiscriminately to both highly ranked executives and hourly workers in lower skilled positions (according to the FTC, non-competes for the latter may not be justified)
- are required in areas where the employer exits operations on a wide scale
- are used to create barriers in circumstances where the employer faces tough competition
- are overbroad in duration.
Key takeaway 2: Stay on top of non-U.S. developments
Antitrust enforcement against employee non-compete agreements has, to date, largely been reserved to the U.S. Many non-U.S. antitrust agencies, including in the EU and UK, view such non-competes as falling outside antitrust rules. In some other jurisdictions, employee non-competes are on the radar (e.g., Australia, where the government is proposing to ban certain non-competes, as well as wage fixing and no-poach agreements) but plans are still in progress.
However, stamping out other labor market practices, such as wage-fixing, no-poach and exchange of competitively sensitive information, is a growing priority for authorities across the globe. The UK, the EU and various member states, Brazil, and Turkey have all seen recent enforcement action.
Agencies are also publishing guidance in this area. The UK Competition and Markets Authority, for example, has recently issued a guide for employers on how not to infringe UK antitrust rules when recruiting workers and setting pay and other working conditions.
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