FTC warns healthcare companies about restrictive non-competitiveness

Diving briefs:

The Federal Trade Commission is urging major healthcare employers and staffing companies to consider employment contracts to eradicate restrictive non-competitive clauses. On Wednesday, FTC Chair Andrew Ferguson wrote to an unspecified number of healthcare companies warning regulators that they would enforce the law against unfair or anti-competitive non-competitors. The letter emphasizes that the recipient is not suspected of illegal activities. It is part of a larger philosophical change in the FTC when it comes to non-competition, as it moves away from the complete ban that the Biden administration has supported its target enforcement strategy. The new position of the FTC was probably a relief for hospitals and other employers, and was lobbying heavily against the ban.

Dive Insights:

The healthcare industry generally relies on non-competitive agreements. In particular, the number of doctors employed in hospitals and other businesses is increasing. The American Medical Association estimates that non-competitive clauses affect 37% to 45% of physicians.

However, the frequency of arrangements does not mean they are popular. Doctors have testified to antitrust regulators that noncompetitors continue to lock them in place and that they are unable to find other jobs even if they are unhappy with the current situation.

Past FTC research shows that non-competitors could raise medical prices, curb wages for workers, and hinder the creation of new businesses.

The FTC has the authority to pursue an overly broad or potentially anti-competitive non-competitive. However, under President Donald Trump, the agency has retreated from the Biden administration's aggressive stance. This sought to completely eliminate non-competitors of non-enforcement workers.

Last week, the FTC commissioner voted to suspend advocacy for the national ban that Texas and Florida courts had already blocked. (Another Pennsylvania court had allowed it to proceed).

As a result of the lawsuit, the ban was not enforced. With the FTC's decision to step back from appeal, this is not the case at least during this administration. Instead, the FTC plans to chase the particularly troublesome non-competitive.

Last week, the agency asked the public for information that could be notified of future enforcement actions. The FTC specifically called for employers to call on employers who have non-competitors that are not an issue that could be illegal, particularly for “market participants in the health sector.”

And now, Ferguson follows his promise earlier this month to send letters to businesses in the industry, like Healthcare, “are plagued by the bushes of non-competitive agreements.”

Ferguson's letter asks the winners to “enforce a comprehensive review (OF) agreement, including non-competitive and other restrictive agreements, to ensure that they are compliant with applicable laws and are properly tailored to the situation.”

“If your company is currently using unfair or anti-competitive non-competitive under the FTC Act, we strongly recommend that you cancel immediately and notify relevant employees of the cancellation,” Ferguson wrote.

There are some gray areas for things that make non-competitive illegal, which can make compliance difficult. However, recent FTC actions against pet cremation companies have given some clues on bars for regulatory enforcement. Earlier this month, the FTC filed a complaint against Gateway Services after realising that it was imposing contracts on almost all employees who banned them from working in the pet cremation industry for the past year after leaving the company.

“We remain the top priority for enforcement of unreasonable non-competitive agreements,” Kels Moen, deputy director of the FTC's Competition Bureau, said in a statement Wednesday. “We strongly encourage all employers, not just those receiving today's letter, to carefully review their contracts.”

The FTC did not answer questions about what the company received or why it was chosen.