How Lina Khan Just Crowned Herself

May 21, 2024

There is always a dramatic moment when an aspiring despot gets irritated by the niceties of tradition and law and just gets on with it. Caesar displayed his true colors – purple – when he refused to rise before the Roman Senate that had come to honor him. Napoleon grabbed his crown, as agreed to by a cowed Pope Pius VII, and crowned himself l’empereur.

And Lina Khan outlawed all non-compete agreements.

If this strikes you as an overwrought comparison (and it is – a bit), consider the analysis of Corbin Barthold, internet policy counsel at TechFreedom in an insightful piece in City Journal. Some non-compete agreements are clearly pro-competitive, allowing businesses to become more efficient by investing in their employees’ training and skills. Some, like non-competes for fast-food employees, look like overkill. The complexities and fairness of non-compete agreements by income and profession have generally been left up to the states to debate and regulate. Until now …

In April, the FTC addressed perceived “unfair methods of competition” by following the procedure laid out in Section 5 of the FTC Act. The FTC is meant to work by example, identifying an alleged anticompetitive behavior, filing a complaint, holding a hearing, issuing findings of fact, and only then firing off a cease-and-desist order that corrects the misdeed and provides guidance for other businesses. Khan, instead, simply outlawed almost all noncompete agreements as unfair methods of competition under Section 5.

“Rather than use the Section 5 enforcement mechanism to target a specific company’s contracts, the commission simply decreed that about 30 million non-competes are an extinct species,” Barthold writes. This flies in the face of the U.S. Supreme Court’s “major questions doctrine,” which holds that regulations that concern issues of “vast economic and political significance,” must have a clear authorization from Congress. It is on this basis that the Court slapped down a Centers for Disease Control rule to enact a nationwide moratorium on evictions during the pandemic. You can agree or disagree with the wisdom or fairness of that rule, but it is clear that health regulators have no business setting nationwide housing policy.

Chair Khan is attempting to squirm out of this legal restriction by claiming that Section 6 of the FTC Act, which gives the agency the authority to conduct investigations and compile reports, also gives her the ability to set rules for businesses across the nation. Her argument rests on a subclause, Section 6 (g), which allows the agency to make rules and regulations for the purpose of carrying out its investigations, and to publish reports on the same. These are clearly housekeeping rules by which to structure investigations, not to rearrange the national economy as Chair Khan and her majority of commissioners see fit. As AEP Advisory Board Member Geoff Manne posted, “this is an extremely weak basis of authority for the FTC rule …”

Berthold writes: “This is not another effort to bend or stretch antitrust law as it exists; it’s a bid to rebuild it from the ground up. This is Khan’s most aggressive – and dangerous – move as chair.” Berthold began his piece by quoting Khan as wanting to use antitrust to shape “the distribution of power and opportunity across our economy.” She wasn’t kidding.

Chair Khan has lately sought to rope in gullible “Khanservatives” into supporting her efforts by speaking the language of free markets and capitalism. But make no mistake. Her ambitions are vast and they are despotic. The U.S. Supreme Court should take up this case to uphold its major questions doctrine and to protect the democratic role of Congress.