FTC Signals Renewed Scrutiny Of Noncompete Agreements Through Targeted Warning Letter

May 28, 2026

What's New

The Federal Trade Commission (FTC) recently issued a warning letter to a mortgage services company expressing concern that its use of noncompete agreements may violate federal antitrust law. The FTC indicated it is using its Section 5 authority to assess whether such provisions are “unjustified, overbroad, or otherwise unfair or anticompetitive.”

The letter highlights practices drawing scrutiny, including requiring noncompetes for all employees and imposing restrictions that may limit worker mobility and competition. The agency emphasized that employer interests—such as protecting confidential information, goodwill, or specialized skills—can be addressed through less restrictive alternatives, including non-disclosure or non-solicitation agreements.

The FTC encouraged the company to review its agreements, discontinue noncompetes that are not reasonably necessary, and notify affected workers.

What It Means

The FTC’s warning letter confirms that, despite the failure of its 2024 rulemaking, the agency is advancing its noncompete agenda through case-by-case enforcement, signaling a willingness to challenge agreements viewed as overbroad or insufficiently justified under antitrust principles.

The letter highlights the agency’s enforcement lens—particularly its skepticism toward blanket noncompetes, tenuous training rationales, and restrictions exceeding what is needed to protect goodwill or confidential information.

Notably, the FTC’s involvement was triggered by the employer’s own lawsuit to enforce a noncompete, indicating that enforcement may draw federal scrutiny and turn routine contract enforcement decisions into potential antitrust risk.

What You Should Do

Given continued scrutiny, employers should review their use of noncompete agreements to ensure restrictions are tied to legitimate, role-specific interests, and assess whether narrower tools can achieve the same objectives.

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