Pat is a sales rep who thinks he just came up with a great new way to increase revenue by teaming up with a competing firm. That’s a time to stop, think and ask before acting.
There’s been a lot of discussion about noncompete agreements in the employment context. But what about noncompetes in a regular commercial deal between two companies? And what if the two companies are competitors? That's an area where contracts can intersect with antitrust laws.
As a contracts/corporate lawyer, I rarely get to tell clients when they’re crossing the line on a criminal law, but recently was one of those times.
Pat was considering a noncompete arrangement with one of his company’s competitors. It was a rare time when I had to tell a client NO. Violating competition laws could lead to both civil lawsuits and jailtime. Pat was incredulous to learn about this, but this area of law can be hard for salespeople to understand.
When considering a potential business opportunity that involves a competitor, it’s critical to talk things through with a lawyer before making any agreements – oral or written – with the competitor.
Next time something like that comes up, ask yourself if you’ve considered the customers’ point of view? If an agreement between competitors would result in higher prices, reduce customer choice, or otherwise hurt customers, that should be a giant red flag. Give me a call before you do anything about it.