The FTC Trades Blanket Non-Compete Bans for Case-by-Case Enforcement

Direct Sellers, time to let out a sigh of relief. On September 5, 2025, the Federal Trade Commission (FTC) officially dropped its appeal of a federal court’s decision striking down the FTC’s rule banning non-competes.^[1] But stay vigilant as the FTC’s scrutiny of non-competes remains.

No Blanket Non-compete Ban

As reported in our previous articles No More Non-Competes?, Navigating the FTC’ s Final Rule Banning Non-Competes: Why Direct Sellers Shouldn’t Panic, and Update: FTC’ s Noncompete Rule Set Aside, in early 2023, the FTC proposed a sweeping rule that would have banned most non-compete agreements nationwide, including those covering employees and independent contractors.^[2]The FTC’s rationale behind the Rule was to promote labor mobility, foster competition, and prevent what the FTC characterized as unfair methods of competition that restrict workers’ ability to seek better employment opportunities or start new businesses.^[3]The Rule, if implemented, would have required employers to rescind existing non-compete clauses and notify affected workers, with only narrow exceptions for certain business sales and senior executives.^[4]However, the Rule quickly faced significant legal challenges. In August 2024, Judge Ada Brown of the U.S. District Court for the Northern District of Texas set aside the Rule in the case of Ryan LLC v. FTC. In her decision, the court held that the FTC lacked the statutory authority to impose such a broad prohibition and that the Rule was arbitrary and capricious for failing to target only harmful non-competes.^[5]Judge Brown’s decision had nationwide effect, effectively nullifying the Rule and prompting the FTC to consider an appeal. 

The FTC not only voluntarily dismissed Ryan, LLC v. FTC but also Properties of the Villages v. FTC—a case in the Middle District of Florida seeking similar relief.^[6] The decision to voluntarily dismiss these cases, made by a 3-1 Commission vote, marked a significant shift in agency strategy under new leadership following the transition from the Biden Administration to the Trump Administration.  

In commenting on the decision to drop the cases, the majority at the FTC, led by Chairman Andrew Ferguson and Commissioner Melissa Holyoak, cited the Rule’s “patently obvious” illegality, the lack of clear congressional authorization, and the overbreadth of the ban as key factors. They emphasized that the FTC would instead focus on targeted enforcement actions against specific anticompetitive non-compete practices, rather than pursuing broad rulemaking.^[7]

The decision was not without controversy; Commissioner Rebecca Kelly Slaughter dissented. In her dissent, Slaughter argued that the agency was abandoning a critical protection for millions of workers, which would lead to suppressed wages and stifle innovation. Slaughter noted the voluntary dismissal disregarded the overwhelming public support for banning noncompete agreements—that out of the 26,000 comments the FTC received on the rulemaking to ban noncompetes, 25,000 were in support of the categorical ban.^[8]

FTC Enforcement Actions Moving Forward

So, you are probably wondering, what does this mean for Direct Sellers? Are all non-competes enforceable moving forward? Not exactly. Though the withdrawals signal the end of the FTC’s attempt to impose a nationwide ban through rulemaking, they do not signal the end of regulatory scrutiny. This is evidenced by the FTC creating the Joint Labor Task Force, which will prioritize the “investigation and prosecution of deceptive, unfair, or anticompetitive labor market conduct”^[9]and the FTC’s public inquiries into non-compete practices, aiming to address “harmful labor market conduct through case-by-case enforcement and public advocacy.”^[10]

The FTC demonstrated its commitment to policing abusive non-compete agreements through traditional enforcement channels via the Commission’s recent action against Gateway Services, Inc., the largest pet cremation company in the United States. In September 2025, the FTC filed an administrative complaint alleging that Gateway imposed overbroad non-compete agreements on nearly all employees, from executives to hourly workers, restricting them from working in the pet cremation industry anywhere in the country for one year post-employment.^[11]The FTC took issue with Gateway’s “overbroad” scope, which banned all employees, regardless of the position, from working in the pet cremation industry anywhere in the United States for one year after leaving Gateway.^[12]The FTC’s proposed Decision and Order requires Gateway to cease enforcing these agreements, notify employees of their release, and limits the use of non-solicitation clauses.^[13]

This case not only illustrates the FTC’s renewed focus on fact-specific, case-by-case enforcement under Section 5 of the FTC Act but also Chairman Ferguson’s intention to “act as a cop on the beat, enforcing the antitrust laws against unlawful noncompete agreements to protect American workers, rather than trying to legislate them away.”^[14]

Immediately following through on his word, on September 10, 2025, Chairman Ferguson set his sight on the healthcare sector by sending letters to healthcare organizations to “encourage” the business “to conduct a comprehensive review” of their employment agreements “to ensure that they comply with applicable laws and are appropriately tailored to the circumstances.”^[15]It remains to be seen whether this letter will lead to stronger FTC enforcement against the healthcare industry.

With the FTC’s shift away from a blanket ban on noncompete agreements, many such agreements will live to see another day. However, Direct Sellers should heed the FTC’s suggestion to healthcare organizations and review their noncompete agreements to ensure they are “appropriately tailored” in time, scope, and position.

We are well-versed in this area and are happy to help. 

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[1] Unopposed Motion to Voluntarily Dismiss Appeal, Ryan, LLC v. FTC, No. 24-10951 (5th Cir. Sept. 5, 2025), Dkt. No. 226.

[2] Non-compete Clause Rule (NPRM), Regulations.Gov (Jan. 8, 2023), https://www.regulations.gov/docket/FTC-2023-0007/document.

[3] Noncompete Rule, Fed. Trade Comm’n, https://www.ftc.gov/legal-library/browse/rules/noncompete-rule

[4] 16 C.F.R. § 910.1; 16 C.F.R. § 910.1.

[5] Order, Ryan, LLC v. FTC, 3:24-cv-00986-E (N.D. Tex. Aug. 20, 2024), Dkt. No. 211.  

[6] Federal Trade Commission Files to Accede to Vacatur of Non-Compete Clause Rule, Fed. Trade Comm’n (Sept. 5, 2021), https://www.ftc.gov/news-events/news/press-releases/2025/09/federal-trade-commission-files-accede-vacatur-non-compete-clause-rule.

[7] Statement of Chairman Andrew N. Ferguson, Joined by Comm’r Melissa Holyoak, Ryan, LLC v. FTC (Sept. 5, 2025), https://www.ftc.gov/system/files/ftc_gov/pdf/ferguson-holyoak-statement-re-noncompete-acceding-vacatur.pdf  (Ferguson Ryan Statement).

[8] Statement of Commissioner Rebecca Kelly Slaughter, Regarding the Dismissal of Appeals in Noncompete Rule Litigations (Sept. 5, 2025), https://www.ftc.gov/system/files/ftc_gov/pdf/slaughter-noncompetes-litigation-withdrawal-statement.pdf.

[9] Memorandum by Chairman Andrew N. Ferguson, Directive Regarding Labor Markets Task Force (Feb. 26, 2025), https://www.ftc.gov/system/files/ftc_gov/pdf/memorandum-chairman-ferguson-re-labor-task-force-2025-02-26.pdf.

[10] Request for Information Regarding Employer Noncompete Agreements, https://www.ftc.gov/system/files/ftc_gov/pdf/2025-Noncompete-RFI.pdf.

[11] Complaint, In re Gateway Pet Memorial Servs., Matter No. 2210170 (Sept. 4, 2025), https://www.ftc.gov/system/files/ftc_gov/pdf/Gateway-Complaint.pdf.

[12] Statement of Chairman Andrew N. Ferguson Joined by Commissioner Melissa Holyoak, In the Matter of Gateway Pet Memorial Services Matter Number 2210170 (Sept. 4, 2025) (Ferguson Gateway Statement) https://www.ftc.gov/system/files/ftc_gov/pdf/gateway-ferguson-holyoak-statement-2025.09.04.pdf.

[13] Decision and Order, In re Gateway Pet Memorial Servs., Matter No. 2210170 (Sept. 4, 2025)https://www.ftc.gov/system/files/ftc_gov/pdf/Gateway-DecisionOrder.pdf.

[14] Ferguson Gateway Statement

[15] Letter by Chairman Andrew N. Ferguson, Noncompete Agreements (Sept. 10, 2025), https://www.ftc.gov/system/files/ftc_gov/pdf/noncompete-warning-letter-template.pdf.