US FTC Asks Public About its Proposal to Ban Non-Competing Clauses

Will this have an impact on VTubing domestically?

The latest NecroNews episode covered this story first.

The United States Federal Trade Commission seeks for public comment on its proposal to ban non-competing clauses, which the government agency believes that:

  • It will increase workers' earnings by nearly $300 billion
  • Save consumers up to $148 billion on health costs each year, and
  • Double the number of companies in the same industry founded by a former worker.

FTC also cites a 2021 Haverford College study (PDF) stating that banning non-competes nationwide may close racial and gender wage gaps by 3.6 to 9.1 percent. The commission is open for comments regarding this proposal until March 10, Friday.

What’s in the Proposed Measure?

The January 5 Notice of Proposed Rulemaking (NPRM) which will prohibit employers from imposing non-compete clauses on workers adds a subchapter on Rules Concerning Unfair Methods of Competition:

  • Defining what a non-compete clause is, as well as providing a functional test whether a contractual term is a non-compete clause;
  • Making non-compete clauses an unfair method of competition;
  • Providing instructions for employers to enact, as well as safe harbors;
  • Stating exceptions in line with Federal anti-trust laws; and
  • Superseding existing state laws in relation to this matter.

The full proposed section, as well as the Fact Sheet for this proposal, is described in the FTC website.

What Could This Mean for VTubers?

Should the subchapter be officially added, registered businesses established in the United States will be subjected to this regulation. These include VTuber agencies registered under existing Federal laws.

We asked our Twitter audience what they think of this Federal regulation.

VTuber Kari ponders: "While I think it’s good for employees to not be tied down by non-competes if they try to work for other companies, I’m a little conflicted with those who try to start businesses that compete against their previous employer. Non-competes should probably apply in that aspect, especially for the purposes of protecting trade secrets. In terms of talent agencies, VTubing or otherwise, that’s going to be interesting."

Content creator manager Lintello Brume replies to Kari's thoughts, mentioning a different scenario: "There is still law around protection of trade secrets that covers those situations. If you really did join a company to learn their secrets and then spin up a competitor, the company can still likely crush you in legal process without ever having to prove anything."

Journalist Andrew "Ducky" Amos who writes for Dexerto is interested to know how this will develop: "This would be interesting, but would also rise to the claims of whether agency VTubers are employees or contractors, and how their legal status would impact the implementation of this. If it passes, it might change all of content creation."

Our Take: It's a Welcomed Move, But...

It is understood that while this applies to businesses in the United States, it is not necessarily reflective of current processes in human resource management.

In Japan where the concept of VTubers developed, the issue of non-compete clauses was put into the spotlight following the termination of Saki Ashizawa's contract with Riot Music:

Saki Ashizawa Terminated by Riot Music
Her agency explains in full detail their story regarding this sudden decision.

If the proposed regulation will be proved successful, it's still unlikely that other countries will follow suit. Non-competing clauses are applied in several countries worldwide, which according to a 2018 Greenberg Traurig multi-country survey depends on the country of jurisdiction.

Banner Photo: Gabrielle Henderson / Unsplash