Antitrust, Non-Competition, and No-Poach Agreements in Digital Industries

Abstract

The use of NCAs is currently regulated under state law. These laws embody diverse approaches to the regulation of NCAs which generally limit enforcement of NCAs to those with reasonable and narrowly tailored terms. State law also incorporates various approaches to mitigating the negative effects NCAs might have on workers, including requiring adequate disclosure, consideration, and banning their use in certain employment contracts. These diverse approaches can leave regulatory gaps in certain states and can result in overregulation in others. But this can also be a feature—diverse approaches to legal regulation of NCAs at the state level takes advantage of the laboratory of the states to generate information that will allow economic research to better evaluate the effects of these diverse legal approaches without exposing the entire nation to potential mistakes. There has also been a growing and robust literature that has examined state variation in the regulation of NCAs and the effect of these laws on worker welfare. However, current evidence does not yet suggest a reliable and predictable link between the use of NCAs and the effect on employee welfare. Moreover, changes in employee welfare can be negatively correlated to changes in consumer welfare. Any antitrust rule that broadly prohibits the use and enforcement of NCAs would be based on incomplete evidence, would interfere with the current operation of the balanced and nuanced state by state approach to regulating NCAs, and would potentially be at odds with the antitrust laws’ focus on consumer welfare.