Trump FTC Targets Law Firm Certifications in Campaign Against DEI

On January 30, 2026, Federal Trade Commission recently circulated a Letter to law firms regarding widespread participation in the Mansfield diversity certification program, administered by a third-party for-profit organization called Diversity Lab.

Background

Last year, upon taking office, the Trump administration did not miss a beat in issuing a series of controversial executive orders (EO’s) making good on campaign promises to directly target and reduce or eliminate various affirmative action programs and policies and related alleged fraud and abuse in the public and private sector. According to the Trump administration, the EO’s are a logical extension of a mandate from voters to crackdown on so-called “woke” ideology in government, but also in schools and the workplace.

To name a few, the EO’s included the following:

• Executive Order 14151 rescinded all DEI-related executive orders, mandated the termination of all DEI and diversity, equity, inclusion, and accessibility (DEIA), and “environmental justice” offices and positions within the federal government.
• Executive Order 14168 mandated that federal agencies recognize sex as an immutable binary classification.
• Executive Order 14173 purported to prohibited private organizations from conducting DEIA employment programs for jobs created by federal contracts and directed federal departments not to issue contracts to private organizations (including nonprofits) that adopt DEIA policies or programs.

We’ve previously discussed these EO’s and what they mean, particularly for government contractors, grant recipients, and organizations, including schools, churches, and hospitals, relying on exemption from federal income taxation under Section 501(c) of the Internal Revenue Code.

As explained previously, the EO’s have widely varied in their degree of detail, forward-looking guidance for affected organizations, and the soundness and validity of legal reasoning they express. The EO’s included undefined terms that permitted various legal and colloquial interpretations. Conclusions of law were sometimes stated without further support or argument. Given their sheer volume, breadth, and speed, it was not surprising that the EO’s left some questions unanswered.

Non-Profit Approach – Loss of Exempt Status

EO 14173 indicated that, in general, any consideration of race or protected characteristics or similar criteria in selecting, awarding, or otherwise benefiting individuals would be viewed as per se discriminatory. If that premise were extended to analyzing eligibility for tax-exempt status under Section 501(c), for example, it would follow that any organization organized or operated for such a discriminatory purpose would fail to meet the requirements for exemption, since an organization must be exclusively organized and operated for exempt purposes, and a discriminatory purpose is not a permitted exempt purpose.

In the wake of the EO’s, many organizations revisited and revised their organizational documents, activities, internal policies, and outside agreements with third parties to ensure compliance with the organizational and operational tests under the Internal Revenue Code.

For-Profit Approach – Competition

Thus, in addition to the new scrutiny of federal grantees and contractors, the EO’s suggested a likely basis on which nonprofits more generally might be considered to violate the law. But for companies not receiving federal grants or contracts, or dealing with such entities, the extension of the EO’s was less clear. Unlike nonprofit organizations, which are subject to relatively strict technical requirements to enjoy the privileges of exempt status, private companies are not subject to the same requirements under Section 501(c).

In this context, some for-profits were unsure about appropriate steps to take to assess, manage, and mitigate potential risks of noncompliance with the EO’s. Of course, as the Letter notes, for-profits are still subject to applicable “requirements of federal law, including Section 1 of the Sherman Act and Section 5 of the FTC Act.”[1] The Letter could be summarized as follows:

1. Federal antitrust laws protect citizens from certain anticompetitive practices in various areas, including consumer agreements for goods and services and employer agreements in the labor market.[2] FTC’s role includes administering and enforcing these laws to protect American workers from unfair and anticompetitive employer labor practices, including collusion or unlawful coordination regarding DEI.[3]
2. Business practices may violate the antitrust laws when they harm the competitive process, especially if they deprive labor markets of independent decision-making or create or abuse monopsony power. By interfering with free and fair competition, these practices can lead to fewer job opportunities, lower wages, and worse working conditions.[4]
3. The following activities may violate federal antitrust laws, whether performed directly or through intermediaries like Diversity Lab or other third-parties.
   1. Anticompetitive collusion, such as agreed quotas to compose panels of job candidates based on race, sex, or other personal characteristics other than the candidate’s merit, or by which law firms agree to make final decisions about hiring and promotions based on those personal characteristics.
   2. Sharing of competitively sensitive information (such as terms and conditions of employment, hiring criteria, internal quotas, employee pay and other benefits).
4. Based on the above, law firms receiving a Letter or engaging in relevant activities should “review [their] relationships with Diversity Lab and any similar organizations, as well as with all of [their] competitor law firms.”

As the Letter was only recently circulated, it has not yet been thoroughly criticized or tested through litigation, but those tests are very likely. While the Letter is addressed to law firms in connection with Diversity Lab’s Mansfield and Mansfield Plus certification and addresses activities and harms in those terms, there are no obvious facts, laws, or legal principles that would limit the Letter’s expressed rationales to law firms or prevent its application more broadly to for-profit entities. Readers should note that we will continue to track the FTC’s activity and what it means for law firms and other professional service firms and affected companies.

For questions about this article or other matters related to these executive orders, please contact Nick Stock...616.726.2255...nstock@fosterswift.com.

[1] FTC Warning Letter dated January 30, 2026, pg. 3.

[2] Id. at 2, citing Nat’l Collegiate Athletic Ass’n v. Alston, 594 U.S. 69 (2021).

[3] Id., quoting Chairman Andrew N. Ferguson, Directive Regarding Labor Market Task Force, FED. TRADE COMM’N (Feb. 26, 2025) (available here).

[4] Id., quoting U.S. Dept. of Justice & Fed. Trade Comm’n, Antitrust Guidelines for Business Activities Affecting Workers (Jan. 16, 2025), 1, (available here).