By Matthew Luciani
Global Legal Law Firm
Competition law is a division of law intended to prevent market distortion caused by anti-competitive business practices. Although more commonly known in America as antitrust law, the Biden Administration brought the terminology of competition law and its related policies back to the forefront of American law when President Biden signed his July 2021 Executive Order Promoting Competition in the American Economy (EO 14036), which aims to enforce antitrust laws to tackle excessive concentration, abuses of market power, and the negative effects of monopoly and monopsony.
In essence, EO 14036 issues a general policy of the Biden Administration to combat the recent consolidations of the technology and banking industries. The order seeks a "whole of government" approach calling for federal agencies to cooperate with each other where overlapping authority exists and creates the White House Competition Council within the Executive Office of the President.
This has had a sweeping impact on the payments industry because one of the stated purposes of EO 14036 was to prevent further consolidation of the banking and technology industries.
There has been debate about how the competition laws and their related enforcement in the United States compare to counterparts in Europe. Although the Sherman Act was one of the first major, modern competition law legislations in the world, its enforcement in these industries has not been strict.
According to the White House, over the past four decades, the banking industry has witnessed numerous mergers and acquisitions, resulting in the closure of nearly 10,000 institutions across the country.
Since 2006, the Federal Reserve approved over 3,500 bank mergers, leading to the four largest banks (JP Morgan, Bank of America, Wells Fargo and Citibank) holding about $9 trillion in assets.
This amount is roughly equivalent to the combined assets of the next 300 banks (see https://tinyurl.com/5fc4b6f8).
In response to EO 14036, the Department of Justice and Federal Trade Commission issued a joint statement announcing their intention to review federal merger guidelines and adopt a more rigorous analytical framework. One initial proposed change was a Notice of Proposed Rulemaking in January 2023, seeking to invalidate employer-employee noncompete agreements by adding “subchapter j” to the Code of Federal Register.
Following the closing of its public comment period, the National Labor Relations Board also issued an opinion seeking to invalidate such agreements under federal law.
This step by two of America’s largest regulatory agencies demonstrates their commitment to empowering smaller entities and preventing further consolidation in the American economy. In fact, the FTC and NLRB highlighted the prevalence of non-compete agreements among American workers, particularly those earning less than $40,000 yearly.
This policy shift will directly impact how businesses may regulate their employees' conduct, raising questions about who will and will not be affected by the proposed regulations. As the FTC pointed out, states like California, North Dakota and Oklahoma already have prohibited noncompete agreements, prompting businesses in those states to find alternative means of protecting their confidential, proprietary information.
In the payments industry, this is noteworthy as California serves as a major technology hub and houses some of the country’s largest banking institutions.
As to the propositions themselves, on a nationwide scale, the NLRB’s opinion would have a narrower impact compared to the FTC’s proposed subchapter j. Specifically, the NLRB’s opinion pertains directly to Section 7 of the National Labor Relations Act, which applies to nonsupervisory employees in all private employers. Workers not covered under Section 7, such as supervisors and independent contractors, would not be affected by the NLRB’s opinion.
The FTC’s proposed subchapter j would have a broader application. As proposed, it would apply to any person defined under 15 U.S.C. § 57b-1(a)(6), which encompasses natural persons, partnerships, corporations, associations or other legal entities. Consequently, subchapter j would apply to almost all employers, with a narrow exception carved out for persons selling a business entity.
The digital payments and fintech sectors will be directly impacted by these policy shifts, affecting both business-to-business relationships and employer-employee relations. The administration’s objective of slowing down the consolidation of markets is clear, particularly in the highly competitive and evolving field of digital payments where numerous mergers have occurred. Consequently, EO 14036 and these proposed policy changes in employer-employee relations will undoubtedly affect growing companies that seek to protect their trade secrets.
Even if the FTC’s proposal is not adopted and the NLRB doesn't adopt its general counsel’s opinion, there is a trend toward more federal regulation of the employment relationship. It is in employers’ best interests to prepare for potential changes and explore state-level legislation where anticompetitive practices are already unenforceable. This will enable them to find alternative means to protect their investments in trade secrets and other business practices without relying on non-compete agreements. 
Matthew D. Luciani is an associate at Global Legal Law Firm who works on out-of-state litigation cases. Before joining Global Legal, he attended Ave Maria School of Law, where he served on the Finance Committee. He also worked for a trial law firm focused on employment and estate litigation. For more information please contact Global Legal at info@attorneygl.com.
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