Noncompetes: Do they stifle entrepreneurship — or will eliminating them hurt free enterprise?

Chamber CEO Bracken: Eliminating noncompete clauses will bring many (bad) unintended consequences

New Jersey Chamber of Commerce CEO Tom Bracken will always be on the side of business.

When it comes to the potential elimination of noncomplete clauses, Bracken said he has to take a new side: the free enterprise system.

The recent ruling by the Federal Trade Commission — a 3-2 vote that will eliminate most noncompete clauses if it survives court challenges — was based partially on the idea that freeing up workers will create more entrepreneurs.

Bracken suggests the opposite will happen — because eliminating noncompetes will hurt the mergers & acquisitions market, a key reason to go into business.

Why would someone buy a company when they can just hire a key employee?

“The M&A market will be hurt,” Bracken said. “The logical evolution of a company is to be sold; that’s going to be put on hold.”

Bracken said the decision is a classic example of government intrusion into the business world.

“This is part of the continuing overreach of the federal government into our free enterprise system,” he said. “When they do things like this, you have to ask: What’s next? Where does it stop?

“It’s got to stop, because free enterprise made this country great and will continue to make this country great, but not if things that impact the free enterprise system are taken away.”

Bracken’s biggest issue: He doesn’t know why this is happening. And he certainly doesn’t buy the idea that it will spur more companies.

“We’ve had noncompetes forever and ever — and I think we’ve done pretty well,” he said. “My question is: What problem are they trying to cure?

“There are going to be a lot of unintended consequences that people have not even thought of yet because of the opinion of three people. Does that make sense?”