WASHINGTON — When the Federal Trade Commission finalized a rule banning non-compete agreements earlier this month, the backlash came quickly: Within 24 hours, the U.S. Chamber of Commerce prompted a handful of business groups to file a lawsuit to block the ban. They argued that the FTC had no authority to impose this in the first place.
The playbook is becoming a familiar story: the Biden administration is finalizing a new rule regulating business, and the House and industry lobby groups immediately sue to stop it, claiming it agency has exceeded its authority.
So far this year, the government has issued seven rules, addressing everything from independent contractors to credit card late payments and climate disclosure requirements, only to face almost immediate lawsuits from the House and other groups.
In total, the House expects to file at least 22 lawsuits against the Biden administration before the end of President Joe Biden’s current term, a dramatic increase from the three lawsuits it filed against the Trump administration and the fifteen which she initiated during Obama’s first term.
And they are not the only ones. The American Bankers Association, another influential Washington lobbying group, has signed four lawsuits against banking regulators since September 2022, after previously not signing a single legal challenge to federal policy for about a decade.
Officials from both the House and the ABA emphasize that litigation is always a last resort. But they see it as a necessary step when agencies issue regulations that fall outside the scope of their authority.
“It’s not just about one single ordinance, right? It’s about the thousand ordinances that will become final this year. It’s about the more than 200 ordinances that have an economic impact of more than $200 million a year,” says Neil Bradley, the chamber’s executive vice president, told CNBC in an interview.
“We went from a time where we were arguing about a particular arrangement,” Bradley said, “to a time where the concern was about the direction as a whole.”
According to a measure from George Mason University, overall private sector regulations have increased under Biden — especially compared to the Trump administration, where they remained roughly flat.
But Patrick McLaughlin, director of policy analysis at George Mason’s free-market, libertarian Mercatus Center think tank, which created the benchmark, says the nature of Biden’s regulations is more remarkable than its scope.
According to McLaughlin, the Biden administration has been “extensive in their interpretation of authorization statutes.”
“The House and others see an opportunity to push back on regulations that, in their view, go beyond what Congress has authorized,” McLaughlin said.
The specific targets of the lawsuits have varied: The House has already sued a dozen agencies under the Biden administration, compared to just four agencies under Obama. Despite the range of issues at play, the group’s arguments largely center on the claim that agencies are trying to regulate in areas that only Congress can address.
For example, even before the FTC issued a ban on non-compete agreements, the House vowed to take FTC Chair Lina Khan to court regardless of the details.
Lina Khan, chairwoman of the Federal Trade Commission, speaks during the New York Times annual DealBook summit in New York City, November 29, 2023.
Michael M Santiago | Getty Images
“Maybe she’ll come up with a policy that we would agree with substantively,” Bradley said of Khan before the final rule was released. “But the precedent of that authority is unacceptable.”
Critics of the regulations also argue that the Biden administration failed to properly monitor the rulemaking process, in part by failing to include stakeholder views in the final regulations.
“If they insist on finalizing regulations that fall outside their purview, and if they ignore constructive feedback from banks and other stakeholders, litigation is the only tool left in our toolbox,” said Rob Nichols, president and CEO of ABA, earlier this year. “It is not an instrument that we want to use, but it is one that we will continue to use strategically if necessary.”
The Biden administration says the focus of all its regulations is on protecting consumers and saving money. Their estimates show that the FTC’s non-compete ban will increase wages by at least $400 billion over the next decade.
The administration also estimates that the Consumer Financial Protection Bureau’s measure to reduce late credit card penalties will save 45 million Americans $220 a year, and that the Environmental Protection Agency’s air quality rule will deliver up to $46 billion in net health benefits by 2032 .
“We have every confidence that these agencies are acting within their authority,” White House Assistant Press Secretary Michael Kikukawa said in a statement to CNBC. “These rules will help American workers and families by raising wages, lowering costs, saving lives and building a fairer economy.”
But there can also be costs associated with complying with regulations, especially when each new government can rewrite the rules of the road.
“If you invest in one thing, do you find out that there’s some obscure regulation that you weren’t aware of that would suddenly drop the value of that investment?” asked McLaughlin of the Mercatus Center. ‘Or ensure that you can no longer produce it at all?’