Prudential Security, Inc., et al; Analysis of Agreement Containing Consent Order To Aid Public Comment, 3737-3742 [2023-01093]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 88, Number 13 (Friday, January 20, 2023)]
[Notices]
[Pages 3737-3742]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-01093]


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FEDERAL TRADE COMMISSION

[File No. 221 0026]


Prudential Security, Inc., et al; Analysis of Agreement 
Containing Consent Order To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement; request for comment.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair methods of competition. 
The attached Analysis of

[[Page 3738]]

Agreement Containing Consent Order to Aid Public Comment describes both 
the allegations in the complaint and the terms of the consent order 
embodied in the consent agreement that would settle these allegations.

DATES: Comments must be received on or before February 21, 2023.

ADDRESSES: Interested parties may file comments online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Please write: ``Prudential 
Security, Inc., et al; File No. 221 0026'' on your comment and file 
your comment online at https://www.regulations.gov by following the 
instructions on the web-based form. If you prefer to file your comment 
on paper, please mail your comment to the following address: Federal 
Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, 
Suite CC-5610 (Annex Q), Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Austin Heyroth (202-326-3011), Bureau 
of Competition, Federal Trade Commission, 400 7th Street SW, 
Washington, DC 20024.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing a consent order to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of 30 days. The following 
Analysis of Agreement Containing Consent Order to Aid Public Comment 
describes the terms of the consent agreement and the allegations in the 
complaint. An electronic copy of the full text of the consent agreement 
package can be obtained from the FTC website at this web address: 
https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before February 21, 
2023. Write ``Prudential Security, Inc., et al; File No. 221 0026'' on 
your comment. Your comment--including your name and your state--will be 
placed on the public record of this proceeding, including, to the 
extent practicable, on the https://www.regulations.gov website.
    Due to protective actions in response to the COVID-19 pandemic and 
the agency's heightened security screening, postal mail addressed to 
the Commission will be delayed. We strongly encourage you to submit 
your comments online through the https://www.regulations.gov website.
    If you prefer to file your comment on paper, write ``In the Matter 
of Prudential Security, Inc., et al; File No. 221 0026'' on your 
comment and on the envelope, and mail your comment to the following 
address: Federal Trade Commission, Office of the Secretary, 600 
Pennsylvania Avenue NW, Suite CC-5610 (Annex Q), Washington, DC 20580.
    Because your comment will be placed on the publicly accessible 
website at https://www.regulations.gov, you are solely responsible for 
making sure your comment does not include any sensitive or confidential 
information. In particular, your comment should not include sensitive 
personal information, such as your or anyone else's Social Security 
number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. You are also 
solely responsible for making sure your comment does not include 
sensitive health information, such as medical records or other 
individually identifiable health information. In addition, your comment 
should not include any ``trade secret or any commercial or financial 
information which . . . is privileged or confidential''--as provided by 
section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 
16 CFR 4.10(a)(2)--including competitively sensitive information such 
as costs, sales statistics, inventories, formulas, patterns, devices, 
manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted on https://www.regulations.gov--as legally required by FTC 
Rule 4.9(b)--we cannot redact or remove your comment from that website, 
unless you submit a confidentiality request that meets the requirements 
for such treatment under FTC Rule 4.9(c), and the General Counsel 
grants that request.
    Visit the FTC Website at https://www.ftc.gov to read this document 
and the news release describing this matter. The FTC Act and other laws 
the Commission administers permit the collection of public comments to 
consider and use in this proceeding, as appropriate. The Commission 
will consider all timely and responsive public comments it receives on 
or before February 21, 2023. For information on the Commission's 
privacy policy, including routine uses permitted by the Privacy Act, 
see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Agreement Containing Consent Order To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Order (``consent 
agreement'') with Prudential Security, Inc. (``Prudential Security''); 
Prudential Command Inc. (``Prudential Command''); Greg Wier, the co-
owner, President, and Director of these companies; and Matthew Keywell, 
the co-owner, Secretary, and Treasurer of these companies (collectively 
``Respondents''). Prudential Security, Inc. and Prudential Command Inc. 
(collectively ``Prudential'') are Michigan corporations that provided 
security guard services to clients in several states, including 
Michigan, Tennessee, Ohio, South Carolina, and Pennsylvania.\1\
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    \1\ Respondents sold and transferred the bulk of Prudential's 
security guard assets, including security guard employees, to 
another company in August 2022. As described below, the transferred 
employees are not subject to Non-Compete Restrictions with the 
buyer, and the buyer is not charged in the complaint.
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    The consent agreement settles charges that Respondents violated 
Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45, by 
imposing post-employment covenants not to compete (``Non-Compete 
Restrictions'') on their employees. A Non-Compete Restriction is a term 
that, after a worker has ceased working for an employer, restricts the 
worker's freedom to accept employment with competing businesses, form a 
competing business, or otherwise compete with the employer. As 
explained below, the proposed complaint alleges that Respondents' 
conduct constitutes an unfair method of competition because it is 
restrictive, coercive, and exploitative and negatively affects 
competitive conditions. The complaint further alleges that Respondents' 
imposition of Non-Compete Restrictions took advantage of the unequal 
bargaining

[[Page 3739]]

power between Respondents and their employees, particularly low-wage 
security guard employees, and thus reduced workers' job mobility, 
limited competition for workers' services, and ultimately deprived 
workers of higher wages and more favorable working conditions.
    As further described below, the consent agreement contains a 
proposed order remedying the Section 5 violation alleged in the 
complaint. Under the terms of the proposed order, Respondents--
including any companies that Greg Wier and Matthew Keywell control or 
come to control in the future--must cease and desist from entering, 
maintaining, enforcing, or attempting to enforce any Non-Compete 
Restriction, or communicating to any employee or other employer that 
the employee is subject to a Non-Compete Restriction.
    The proposed order has been placed on the public record for 30 days 
to receive comments from interested persons. Comments received during 
this period will become part of the public record. After 30 days, the 
Commission will again review the consent agreement and the comments 
received and will decide whether it should make the proposed order 
final or take other appropriate action.
    The purpose of this analysis is to facilitate public comment on the 
proposed order. The analysis is not intended to constitute an official 
interpretation of the complaint, the consent agreement, or the proposed 
order, and the analysis does not modify their terms in any way.

II. The Complaint

    The complaint includes the following allegations:
    Prior to August 2022, Prudential employed security guards who 
worked at facilities in several states. These security guards, who 
accounted for the vast majority of Prudential's workforce, typically 
earned hourly wages equal to or slightly above the minimum wage. 
Prudential imposed Non-Compete Restrictions on each of these security 
guard employees as a condition of employment. Among other limitations, 
these Non-Compete Restrictions require the following:
     For two years after ceasing to work for Prudential, the 
employee must not work for any competing business within 100 miles of 
the employee's primary jobsite.
     The employee also must not join, form, or ``in any manner 
whatsoever help'' any competing business for two years within 100 miles 
of the employee's primary jobsite.
     The employee must pay $100,000 to Prudential as 
``liquidated damages'' if the employee violates the terms of the Non-
Compete Restriction.
    Respondents' security guard employees were not permitted to 
negotiate the terms of the Non-Compete Restrictions and very few, if 
any, security guards consulted an attorney before the restrictions were 
imposed by Respondents. The security guard employees were not offered 
any monetary compensation or job security in exchange for being subject 
to the Non-Compete Restrictions.
    The complaint alleges that Respondents repeatedly and actively 
relied on these Non-Compete Restrictions to discourage, delay, and 
prevent current and former security guard employees from seeking or 
accepting alternative employment. Respondents threatened individual 
employees with enforcement of their Non-Compete Restrictions, including 
the liquidated damages provision, to discourage them from accepting 
positions with competing employers. Respondents also contacted 
competing security guard companies to notify them of the Non-Compete 
Restrictions and to threaten lawsuits if the competitor hired 
Respondents' former employees. And Respondents ultimately filed 
multiple lawsuits seeking to enforce Non-Compete Restrictions against 
individual employees and related lawsuits against competing security 
guard companies.
    For example, in 2018, a competing security guard company extended 
job offers to a number of security guards who worked for Prudential 
Security, promising significantly higher wages and more favorable 
working conditions. The security guards left Prudential Security and 
joined the competing company. Upon learning this, Prudential Security 
sued several of the security guards to prevent them from continuing 
employment with the competitor. After months of litigation, a Michigan 
state court dismissed the suit, finding that there was ``nothing in the 
employment, training or knowledge of the individual defendants which 
would warrant enforcement of a non-compete under the circumstances.'' 
\2\ The court also concluded that the Non-Compete Restrictions' two-
year duration and 100-mile geographic scope were also unreasonable and 
unenforceable as a matter of state law. Respondents nevertheless 
continued to impose Non-Compete Restrictions on all incoming security 
guard employees that were identical to the restrictions the Michigan 
court had determined to be unreasonable and unenforceable.
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    \2\ Prudential Security, Inc. v. Pack, No. 18-015809-CB (Mich. 
Cir. Ct. Dec. 13, 2018).
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    Similarly, in 2019, a competing security guard company hired a 
former Prudential Security employee who had become subject to a Non-
Compete Restriction upon joining Prudential Security as a security 
guard. Prudential Security sued the former employee and the competing 
company to enforce the Non-Compete Restriction, seeking injunctive and 
monetary relief. As a result, the competing company terminated the 
former Prudential Security employee.
    In August 2022, Respondents sold their security guard assets to 
another security guard company. At present, Respondents do not provide 
security guard services. Former Prudential security guards who now work 
for the buyer of the assets are not subject to Non-Compete Restrictions 
with the buyer. But approximately 1,500 of Respondents' former 
employees are still subject to Non-Compete Restrictions with 
Respondents. In addition, Respondents Greg Wier and Matthew Keywell 
have other business interests and may launch new businesses in the 
future.

III. Legal Analysis

    Section 5 of the FTC Act prohibits ``unfair methods of 
competition.'' \3\ Congress empowered the FTC to enforce section 5's 
prohibition on ``unfair methods of competition'' to ensure that the 
antitrust laws could adapt to changing circumstances and to address the 
full range of practices that may undermine competition and the 
competitive process.\4\ The Commission and federal courts have 
historically interpreted Section 5 to prohibit conduct that contradicts 
the policies or the spirit of the antitrust laws, even if that conduct 
would not violate the Sherman or Clayton Acts.\5\
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    \3\ 15 U.S.C. 45(a).
    \4\ E.g., Atl. Refining Co. v. FTC, 381 U.S. 357, 367 (1965) 
(``The Congress intentionally left development of the term `unfair' 
to the Commission rather than attempting to define the many and 
variable unfair practices which prevail in commerce.'') (internal 
citations and quotation marks omitted); see also Fed. Trade Comm'n, 
Statement of the Commission On the Withdrawal of the Statement of 
Enforcement Principles Regarding `Unfair Methods of Competition' 
Under Section 5 of the FTC Act, at 3 (July 9, 2021) (``[T]he FTC Act 
reflects a basic tradeoff: Section 5 grants the Commission extensive 
authority to shape doctrine and reach conduct not otherwise 
prohibited by the Sherman Act, but provides a more limited set of 
remedies.'').
    \5\ E.g., FTC v. Motion Picture Advert. Serv. Co., 344 U.S. 392, 
394-95 (1953) (``The `Unfair methods of competition', which are 
condemned by [Section] 5(a) of the [FTC] Act, are not confined to 
those that were illegal at common law or that were condemned by the 
Sherman Act. Congress advisedly left the concept flexible to be 
defined with particularity by the myriad of cases from the field of 
business.'') (internal citations omitted); Fashion Originators' 
Guild of Am. v. FTC, 312 U.S. 457, 463 (1941) (Commission may 
``suppress'' conduct whose ``purpose and practice . . . runs counter 
to the public policy declared in the Sherman and Clayton Acts''); 
FTC v. Brown Shoe, 384 U.S. 316, 321 (1966) (Commission's power 
reaches ``practices which conflict with the basic policies of the 
Sherman and Clayton Acts even though such practices may not actually 
violate these laws''); E.I. du Pont de Nemours & Co. v. FTC (Ethyl), 
729 F.2d 128, 136-37 (2d Cir. 1984) (Commission may bar ``conduct 
which, although not a violation of the letter of the antitrust laws, 
is close to a violation or is contrary to their spirit''); see also 
FTC v. Ind. Fed'n of Dentists, 476 U.S. 447, 454 (1986); FTC v. 
Sperry & Hutchinson Co., 405 U.S. 233, 244 (1972); FTC v. R.F. 
Keppel & Bros., Inc., 291 U.S. 304, 309-10 (1934).

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[[Page 3740]]

    The Commission's recent Section 5 Policy Statement describes the 
most significant general principles concerning whether conduct is an 
unfair method of competition.\6\ A person violates section 5 by (1) 
engaging in a method of competition (2) that is unfair--i.e., conduct 
that ``goes beyond competition on the merits.'' \7\ A method of 
competition is ``conduct undertaken by an actor in the marketplace'' 
that implicates competition, whether directly or indirectly.\8\ Conduct 
is unfair if (a) it is ``coercive, exploitative, collusive, abusive, 
deceptive, predatory,'' ``involve[s] the use of economic power of a 
similar nature,'' or is ``otherwise restrictive and exclusionary,'' and 
(b) ``tend[s] to negatively affect competitive conditions'' for 
``consumers, workers, or other market participants''--for example by 
impairing the opportunities of market participants, interfering with 
the normal mechanisms of competition, limiting choice, reducing output, 
reducing innovation, or reducing competition between rivals.\9\ The two 
parts of this test for unfairness ``are weighed according to a sliding 
scale'': where there is strong evidence for one part of the test, 
``less may be necessary'' to satisfy the other part.\10\ In appropriate 
circumstances, conduct may be condemned under Section 5 without 
defining a relevant market, proving market power, or showing harm 
through a rule of reason analysis.\11\ In addition, the Commission may 
consider any asserted justifications for a particular practice.\12\ Any 
such inquiry would focus on ``[t]he nature of the harm'' caused by the 
method of competition: ``the more facially unfair and injurious the 
harm, the less likely it is to be overcome by a countervailing 
justification of any kind.'' \13\ Unlike ``a net efficiencies test or a 
numerical cost-benefit analysis,'' this analysis examines whether 
``purported benefits of the practice'' redound to the benefit of other 
market participants rather than the respondent.\14\ Established limits 
on defenses and justifications under the Sherman Act ``apply in the 
Section 5 context as well,'' including that the justifications must be 
cognizable, non-pretextual, and narrowly tailored.\15\
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    \6\ Fed. Trade Comm'n, Policy Statement Regarding the Scope of 
Unfair Methods of Competition Under Section 5 of the Federal Trade 
Commission Act, Commission File No. P221202 (Nov. 10, 2022).
    \7\ Id. at 8-10.
    \8\ Id. at 8.
    \9\ Id. 8-10.
    \10\ Id. at 9.
    \11\ Id. at 10.
    \12\ Id. at 10-12 (``There is limited caselaw on what, if any, 
justifications may be cognizable in a standalone Section 5 unfair 
methods of competition case, and some courts have declined to 
consider justifications altogether.'').
    \13\ Id. at 11.
    \14\ Id.
    \15\ Id. at 11-12.
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    As described below, the factual allegations in the complaint would 
support concluding that Respondents' use of Non-Compete Restrictions is 
an unfair method of competition under Section 5. First, Respondents' 
use of Non-Compete Restrictions is a method of competition. Respondents 
knowingly imposed and enforced Non-Compete Restrictions on and against 
their employees. By design, this conduct restricted the employment 
options available to affected workers and therefore implicated 
competition for labor. Respondents' imposition and enforcement of Non-
Compete Restrictions impeded the free movement of security guard 
employees who sought to work elsewhere.
    Second, Respondents' conduct is restrictive, exploitative, and 
coercive. Respondents' actions tend to restrict the opportunity of 
rival security guard companies to compete for the services of the 
affected employees. Respondents' imposition of Non-Compete Restrictions 
on their workers was also exploitative and coercive. Non-Compete 
Restrictions, by reducing workers' negotiating leverage vis-[agrave]-
vis their current employers, tend to impair workers' ability to 
negotiate for better pay and working conditions.\16\ Here according to 
the complaint, Respondents' security guard employees--who were all 
subject to Non-Compete Restrictions as a condition of employment--
earned low wages, were not permitted to negotiate the terms of the Non-
Compete Restrictions, and did not consult attorneys before joining 
Prudential. By contrast, Respondents were repeat players, experienced 
in using and enforcing Non-Compete Restrictions. These allegations 
support a finding of considerable imbalances in economic power and 
bargaining power at the time that the employees became subject to the 
Non-Compete Restrictions. This power imbalance is further evidenced by 
the fact that the employees did not receive any money, job security, or 
other compensation in exchange for being subject to the Non-Compete 
Restrictions.
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    \16\ See, e.g., Dep't of the Treasury, Report, Non-compete 
Contracts: Economic Effects and Policy Implications (Mar. 2016) at 
10, https://home.treasury.gov/system/files/226/Non_Compete_Contracts_Econimic_Effects_and_Policy_Implications_MAR2016.pdf (``When workers are legally prevented from accepting 
competitors' offers, those workers have less leverage in wage 
negotiations [with their current employer.]'').
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    Respondents' enforcement of the Non-Compete Restrictions, as 
alleged in the complaint, was likewise exploitative and coercive. As 
described above, Respondents enforced Non-Compete Restrictions against 
security guards to discourage, delay, and prevent them from accepting 
offers of other employment. Respondents' threats and lawsuits aimed to 
force workers into forgoing job opportunities that offered higher pay 
and better working conditions as compared to Respondents' jobs. The 
coercive effect of these threats relied, critically, on the affected 
workers' relatively vulnerable economic positions. Workers subject to 
Respondents' enforcement actions were particularly susceptible to 
economic instability once they had left their prior positions: 
Respondents' Non-Compete Restrictions foreclosed the very job 
opportunities that likely would have provided the workers with the best 
alternatives to continued employment with Respondents--jobs in the same 
industry in the same broad geographic area.
    Third, Respondents' use of Non-Compete Restrictions negatively 
affects competitive conditions. In well-functioning labor markets, 
workers compete to attract employers and employers compete to attract 
workers. For example, workers may attract potential employers by 
offering different skills and experience levels. Employers may attract 
potential employees by offering higher wages, better hours, a more 
convenient job location, more autonomy, more benefits, or a different 
set of job responsibilities. Because factors beyond price (wages) are 
important to both workers and employers in the job context, labor 
markets are ``matching markets'' as opposed to ``commodity markets.'' 
\17\
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    \17\ See generally David H. Autor, Wiring the Labor Market, 15 
J. of Econ. Perspectives 25-40 (2001); Enrico Moretti, Local Labor 
Markets, in 4b Handbook of Labor Economics 1237-1313 (2011).

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[[Page 3741]]

    In general, in matching markets, higher-quality matches tend to 
result when both sides--here, workers and employers--have more options 
available to them.\18\ Having more options on both sides could, for 
example, allow for matching workers with jobs in which their specific 
skills are more valued, the hours demanded better fit their 
availability, or their commutes are shorter and more efficient. Matches 
could also be better in that various employers' compensation packages, 
which differ in terms of pay and benefits, are coupled with employees 
who value those offerings more and will, for example, tend to stay at 
those jobs longer as a result. Competition for labor allows for job 
mobility and benefits workers by allowing them to accept new 
employment, create or join new businesses, negotiate better terms in 
their current jobs, and generally pursue career advancement as they see 
fit.\19\
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    \18\ See, e.g., Dep't of the Treasury, Report, The State of 
Labor Market Competition (Mar. 7, 2022) at 5-7, https://home.treasury.gov/system/files/136/State-of-Labor-Market-Competition-2022.pdf; Dep't of the Treasury, Report, Non-compete 
Contracts: Economic Effects and Policy Implications, supra note 16, 
at 3-5, 22-23.
    \19\ See, e.g., Cynthia L. Estlund, Between Rights and Contract: 
Arbitration Agreements and Non-Compete Covenants As A Hybrid Form of 
Employment Law, 155 U. Pa. L. Rev. 379, 407 (2006).
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    By preventing workers and employers from freely choosing their 
preferred jobs and candidates, respectively, Non-Compete Restrictions 
like those used by Respondents impede and undermine competition in 
labor markets.\20\ In the aggregate, Non-Compete Restrictions reduce 
competition for workers by limiting the choices of workers and rival 
employers. Research suggests that Non-Compete Restrictions measurably 
reduce worker mobility,\21\ lower workers' earnings,\22\ and increase 
racial and gender wage gaps.\23\ At the individual level, a Non-Compete 
Restriction forces a worker who wishes to leave a job into a difficult 
choice: stay in the current position despite being able to receive a 
better job elsewhere, take a position with a competitor at the risk of 
being found out and sued, or leave the industry entirely. In this way, 
Non-Compete Restrictions tend to leave workers with fewer and lower-
quality competing job options,\24\ thereby reducing workers' bargaining 
leverage with their current employers and resulting in lower wages, 
slower wage growth, and less favorable working conditions.\25\
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    \20\ See, e.g., Dep't of the Treasury, Report, The State of 
Labor Market Competition, supra note 18, at 5-7.
    \21\ Matthew S. Johnson, Kurt Lavetti, & Michael Lipsitz, The 
Labor Market Effects of Legal Restrictions on Worker Mobility 2 
(2020), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3455381; 
Evan Starr, J.J. Prescott, & Norm Bishara, The Behavioral Effects of 
(Unenforceable) Contracts, 36 J.L., Econ., & Org. 633, 652 (2020); 
Evan Starr, Justin Frake, & Rajshree Agarwal, Mobility Constraint 
Externalities, 30 Org. Sci. 961, 963-65, 977 (2019); Matt Marx, 
Deborah Strumsky, & Lee Fleming, Mobility, Skills, and the Michigan 
Non-Compete Experiment, 55 Mgmt. Sci. 875, 884 (2009).
    \22\ Michael Lipsitz & Evan Starr, Low-Wage Workers and the 
Enforceability of Noncompete Agreements, 68 Mgmt. Sci. 143, 144 
(2021); Johnson, Lavetti, & Lipsitz, supra note 21.
    \23\ Johnson, Lavetti, & Lipsitz, supra note 21.
    \24\ See, e.g., Jessica Jeffers, The Impact of Restricting Labor 
Mobility on Corporate Investment and Entrepreneurship 21-22 (Dec. 
24, 2019), https://ssrn.com/abstract=3040393.
    \25\ See, e.g., Johnson, Lavetti, & Lipsitz, supra note 21; 
David J. Balan, Labor Practices Can be an Antitrust Problem Even 
When Labor Markets are Competitive, CPI Antitrust Chronicle (May 
2020) at 8.
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    Here, as described above, Respondents' imposition and enforcement 
of Non-Compete Restrictions deprived Respondents' former employees of 
the benefits of competition, leaving them with lower wages, less 
favorable working conditions, and increased economic uncertainty. 
Respondents' use of Non-Compete Restrictions also deprived competing 
businesses of the benefits of competition by impairing their ability to 
employ workers, including workers they had already located and 
convinced to join.
    Finally, as the complaints allege, any legitimate objectives of 
Respondents' use of Non-Compete Restrictions could be achieved through 
significantly less restrictive means, including, for example, by 
entering confidentiality agreements that prohibit employees and former 
employees from disclosing company trade secrets and other confidential 
information. As a Michigan state court concluded in 2019, there was 
``nothing in the employment, training or knowledge of [Respondents' 
security guards] which would warrant enforcement of a non-compete.'' 
\26\
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    \26\ Supra note 2.
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IV. Proposed Order

    The proposed order seeks to remedy the unfair method of competition 
alleged by the Commission in its complaint and to prohibit Respondents 
from entering, maintaining, enforcing, or attempting to enforce any 
Non-Compete Restriction, or communicating to any employee or other 
employer that the employee is subject to a Non-Compete Restriction. 
These injunctive provisions, contained in Section II of the proposed 
order,\27\ are intended to ensure that Respondents' current, former, 
and future employees will be free to seek employment, start their own 
businesses, or otherwise compete with Respondents upon leaving 
Respondents' companies. These provisions would apply to any business 
that Respondents Greg Wier and Matthew Keywell own or control in the 
future and would also include any future business of Prudential.
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    \27\ Decision and Order Sec.  II.
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    Paragraph III.A of the proposed order requires Respondents to 
promptly send a letter describing the Commission's actions to each 
employee who is or was party to a Non-Compete Restriction at any point 
during the last two years.\28\ The letters state that Respondents will 
not enforce any Non-Compete Restriction against the recipients and 
clarify that Respondents cannot prevent the recipients from ``seeking 
or accepting a job with any company or person,'' ``running your own 
business,'' or ``otherwise competing with companies that provide 
security guard services.'' \29\ The restrictions in the proposed order 
apply to Respondents Greg Wier and Matthew Keywell, the co-owners and 
only officers of Prudential. Mr. Wier and Mr. Keywell continue to 
control other businesses that employ workers and may, in the future, 
come to control other business ventures. For these reasons, the 
proposed order's definition of ``Respondents'' extends to any companies 
or businesses that Mr. Wier or Mr. Keywell control.\30\
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    \28\ Id. ] III.A.
    \29\ Id. App'x A.
    \30\ Decision and Order ]] I.C-E.
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    Paragraph III.B requires Respondents, for the next 10 years, to 
provide a clear and conspicuous notice to any new employees upon hire 
informing them that they may ``seek or accept a job with any company or 
person--even if they compete with [Respondents],'' ``run your own 
business--even if it competes with [Respondents],'' or ``compete with 
[Respondents] at any time following your employment.'' \31\ Paragraph 
IV.A requires Respondents to void and nullify all of their existing 
Non-Compete Restrictions without penalizing the affected employees.\32\ 
In addition, Paragraph IV.B requires the Respondents to provide a copy 
of the complaint and order to any director, officer, or employee of a 
Respondent who is currently responsible for hiring and recruiting, and 
Paragraph IV.C requires Respondents to send the order and the complaint 
to any Person who

[[Page 3742]]

becomes a director, officer, or employee with such responsibility.
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    \31\ Id. ] III.B.
    \32\ Id. ] IV.A.
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    Other paragraphs contain standard provisions regarding compliance 
reports, notice of changes in the Respondents, and access to documents 
and personnel.\33\ The term of the proposed order is twenty years.\34\
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    \33\ Id. Sec. Sec.  IV-VII.
    \34\ Id. Sec.  X.

    By direction of the Commission, Commissioner Wilson dissenting.
April J. Tabor,
Secretary.

Dissenting Statement of Commissioner Christine S. Wilson

    Today, the Commission announced that it has accepted, subject to 
final approval, a consent agreement with Prudential Security, Inc. The 
consent resolves allegations that the use of non-compete agreements in 
employee contracts constitutes an unfair method of competition that 
violates Section 5 of the FTC Act. This case, which alleges a stand-
alone violation of Section 5, is one of the first to employ the 
approach that the recently issued Section 5 Policy Statement \1\ 
describes. For the reasons explained below, I dissent.
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    \1\ Fed. Trade Comm'n, Policy Statement Regarding the Scope of 
Unfair Methods of Competition Under Section 5 of the Federal Trade 
Commission Act (Nov. 10, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/p221202sec5enforcementpolicystatement_002.pdf.
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    One point is worth emphasizing: my vote to oppose issuance of the 
complaint does not mean that I endorse or condone the conduct of 
Prudential Security. The company required its security guards to sign 
non-compete agreements that prohibited employees from accepting 
employment with a competing business for two years following conclusion 
of their employment with Prudential. Moreover, a liquidated damages 
provision required employees to pay Prudential $100,000 for violations 
of the non-compete agreement. Based on these facts, it seems 
appropriate that a Michigan state court found that the non-compete 
agreements were unreasonable and unenforceable under state law.\2\
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    \2\ Complaint ] 22.
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    Instead, my vote reflects my continuing disagreement with the new 
Section 5 Policy Statement and its application to these facts. When it 
was issued, I expressed concern that the Policy Statement would be used 
to condemn conduct summarily as an unfair method of competition based 
on little more than the assignment of adjectives.\3\ Unfortunately, 
that is the approach taken in this case.
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    \3\ See Christine S. Wilson, Comm'r, Fed. Trade Comm'n, 
Dissenting Statement Regarding the ``Policy Statement Regarding the 
Scope of Unfair Methods of Competition Under section 5 of the 
Federal Trade Commission Act'' (Nov. 10, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/P221202Section5PolicyWilsonDissentStmt.pdf.
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    The Complaint offers no evidence of anticompetitive effect in any 
relevant market. According to the Complaint, Prudential's use of non-
compete agreements ``has harmed employees'' by limiting their ability 
to work for other firms in the security guard industry.\4\ It asserts 
that Prudential's use of non-compete agreements is ``coercive and 
exploitative'' and ``tends to negatively affect competition 
conditions'' \5\--but it appears that those ``competition conditions'' 
pertain only to individual employees. Similarly, the Complaint offers 
only a conclusory assertion that ``[a]ny possible legitimate objectives 
. . . could have been achieved through significantly less restrictive 
means, including . . . confidentiality agreements that prohibited 
disclosure of any confidential information.'' \6\ This assertion is 
unsubstantiated.
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    \4\ Complaint ]] 23, 25.
    \5\ Complaint ] 29.
    \6\ Complaint ] 26.
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    Another aspect of the case also concerns me. This enforcement 
action is designed not to provide effective relief but instead to 
signal activity with respect to non-compete agreements in the 
employment arena. As the Complaint describes, Prudential sold the bulk 
of its security guard business to another security guard company, Titan 
Security Group. The former Prudential security guards who now work for 
Titan are not subject to non-compete agreements.\7\ Moreover, now that 
Prudential no longer provides security guard services, there is no 
reason for the company to seek to enforce non-compete agreements 
against former Prudential security guards who did not move to Titan.
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    \7\ Complaint ] 16.
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    I wish it were accurate to say that this case (with apologies to 
Shakespeare) is a tale of sound and fury, signifying nothing. 
Unfortunately, it has great significance: it foreshadows how the 
Commission will apply the new section 5 Policy Statement. Practices 
that three unelected bureaucrats find distasteful will be labeled with 
nefarious adjectives and summarily condemned, with little to no 
evidence of harm to competition. I fear the consequences for our 
economy, and for the FTC as an institution.

[FR Doc. 2023-01093 Filed 1-19-23; 8:45 am]
BILLING CODE 6750-01-P