The FTC is back to being the activist US agency progressives sought in 1914 | Robert Reich

Last week, under its Biden-appointed chair, the Federal Trade Commission proposed a new rule banning non-compete agreements – and it’s a big deal

Have you ever been forced to sign a non-compete agreement when you started a job?

About 30 million Americans are trapped by contracts that say if they leave their current job, they can’t take a job with a rival company or start a new business of their own.

These clauses deprive workers of higher wages and better working conditions. In effect, they’re a form of involuntary servitude.

Last week, while America was fixated on Kevin McCarthy’s travails, the Federal Trade Commission (FTC) proposed a sweeping new rule that would ban these non-compete agreements.

This is a big deal. The FTC estimates that such a ban could increase wages by nearly $300bn a year (about $2,000 a worker, on average) by allowing workers to pursue better job opportunities.

Non-competes also harm the economy, depriving growing businesses of talent and experience they need to build and expand. California’s ban on non-competes has been a major reason for Silicon Valley’s success.

The rule isn’t a sure thing. House Republicans will try to kill it. Corporate America will appeal it up to the supreme court, which is hostile to independent regulatory agencies such as the FTC.

For decades, non-compete agreements have been cropping up all over the economy – not just in high-paying fields like banking and tech but as standard boilerplate for employment contracts in many low-wage sectors such as construction, hospitality and retail.

A recent study found one in five workers without a college education subject to them, disproportionately women and people of color.

Employers say they need non-compete agreements to protect trade secrets and investments they put into growing their businesses, including training workers.

Rubbish. Employers in the states that already ban them (such as California) show no sign of being more reluctant to invest in their businesses or train workers.

The real purpose of non-competes is to make it harder (or impossible) for workers to bargain with rival employers for better pay or working conditions.

As we learn again and again, capitalism needs guardrails to survive. Unfettered greed leads to monopolies that charge high prices, suppress wages and corrupt politics.

As Adam Smith, the putative godfather of conservative economics, put it in The Wealth of Nations: “People of the same trade seldom meet together, even for merriment and diversion but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

America once understood the importance of fighting monopolies.

The presidential election of 1912 was dominated by the question. Once elected, Woodrow Wilson created the FTC to save capitalism from the depredations of powerful corporations and “robber barons” that had turned the economy of the Gilded Age into vast monopolies, fueling unprecedented inequality and political corruption.

But as the FTC began prosecuting giant corporations, the robber barons saw the agency as a major threat – and did what they could to strip it of its powers. Within a few years, the FTC was derided as the “little old lady of Pennsylvania Avenue”.

In 1976, when I ran the policy planning staff of the FTC, the agency again began cracking down on corporations under its aggressive chairman, Michael Pertschuk. (Pertschuk died just weeks ago.)

Big corporations were so unhappy with the FTC under Pertschuk that they tried to choke off the agency’s appropriation, briefly closing it down in 1978. But Pertschuk didn’t relent.

He (and I) left the agency when Ronald Reagan appointed a new chairman, who promptly defanged it.

Now, under its new Biden-appointed chair, Lina M Khan, the FTC is back to being the activist agency that progressives sought in 1914 and Pertschuk resurrected in 1976.

The FTC’s new proposed rule banning non-compete agreements marks the first time since Pertschuk headed the FTC that the agency has issued a rule prohibiting an unfair method of competition.

I wouldn’t be surprised if the new radical-right Republicans now in control of the House tried to pull off a stunt similar to what the House tried in 1978.

In the meantime, kudos to Biden, Lina Khan (and her fellow FTC commissioners Rebecca Kelley-Slaughter and Alvaro Bedoya), and to the FTC staff for protecting American workers and economic competition – and thereby protecting American capitalism from the depredations of untrammeled greed.


Robert Reich

The GuardianTramp

Related Content

Article image
Resilience: the one word progressives need in the face of Trump, Covid and more | Robert Reich
The climate crisis, the economy, Biden’s struggle to enact his spending agenda. The list goes on. The lesson? Be strong

Robert Reich

31, Oct, 2021 @5:00 AM

Article image
Jeff Sessions is leading America back into Reefer Madness | Jamie Peck
The US attorney general is trying to undo the progress made in liberalizing marijuana consumption in the US. This will only lead to more people in jail

Jamie Peck

18, Jul, 2017 @2:51 PM

Article image
Joe Manchin knifed progressives in the back. They won’t forgive, and won’t forget | Andrew Gawthorpe
The senator’s betrayal is devastating for the future of trust and cooperation within the Democratic party

Andrew Gawthorpe

23, Dec, 2021 @11:27 AM

Article image
John McCain had the chance to do the right thing on healthcare. He failed | Lucia Graves
There are many reasons to respect the Arizona senator, but his remarkable stoicism and service can’t excuse his yes vote in the Senate

Lucia Graves

25, Jul, 2017 @11:36 PM

Article image
American healthcare is in crisis. We must fight for the real needs of the people | Bernie Sanders and James Clyburn
Community health centers serve roughly 25 million people. We believe our bill will double that number, write senators Bernie Sanders and James E Clyburn

Bernie Sanders and James E Clyburn

30, Jun, 2017 @3:44 PM

Article image
Workers matter and government works: eight lessons from the Covid pandemic
We have also learned that healthcare is a right, billionaires are often wrong –and conspiracy theories can often prove deadly

Robert Reich

23, May, 2021 @5:00 AM

Article image
Donald Trump has unified America – against him | Robert Reich
The president’s assault on decency has created an emerging coalition, across boundaries of race, class and partisan politics

Robert Reich

19, Jul, 2020 @5:00 AM

Article image
Trump can't shift public attention from coronavirus to the streets of America | Robert Reich
The president shows no leadership on public health but wants to be a strongman on law and order. Voters won’t buy it

Robert Reich

26, Jul, 2020 @5:00 AM

Article image
Fire and pestilence, flood and wind, the personal is political: Trump must go | Robert Reich
Americans face existential challenges. The president has done nothing to help and much to make things worse

Robert Reich

23, Aug, 2020 @5:00 AM

Article image
Donald Trump's four-step plan to reopen the US economy – and why it will be lethal | Robert Reich
The president and his allies are hiding the facts and pretending ‘freedom’ conquers all. As a result, more Americans will die

Robert Reich

03, May, 2020 @5:00 AM