Fort Lauderdale, Florida competition lawyer Jonathan Pollard presents on Non-Compete Agreements, Antitrust & the Rule of Reason. This presentation covers (1) the antitrust underpinnings of non-compete law (2) the classic antitrust rule of reason framework, which is the basis for all non-compete legitimate business interest tests and (3) antitrust risks in connection with non-compete agreements. This presentation is particularly timely given the Department of Justice's recent statement that it intends to pursue criminal prosecutions of firms engaged in no-poaching agreements. To reach Pollard PLLC, please call their office at 954-332-2380.

1. Non-Compete Agreements
Antitrust & The Rule of Reason
Presented by Jonathan Pollard, Pollard PLLC
November 15, 2017
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2. • The Sherman Antitrust Act, 15 U.S.C. §§ 1–7 passed in 1890.
• America’s foundational antitrust law.
• Section 1 – Contracts in restraint of trade.
• Section 2 – Monopolization & attempted monopolization.
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The Sherman Act
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3. • Per se illegality vs. Rule of Reason
• Primary test for evaluating restraints of trade.
• Basis for state non-compete statutes.
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Rule of Reason
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4. • State-by-state. Tremendous variation.
• State statutes modeled on antitrust Rule of Reason.
• Reasonableness as to time, market and geography.
• Legitimate business interest tests.
• Antitrust as affirmative claim v. antitrust as defense (e.g. illegality,
public policy).
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State Non-Compete Laws
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5. • Foundational non-compete defense: Defendants: Must plead affirmative
defenses of illegality, public policy, competition privilege and others.
Plaintiffs: Must attack affirmative defenses and resolve pre-trial.
• Two lenses: (1) Antitrust and (2) Contract. In that order only.
• Antitrust Lens: Rule of reason analysis. No legitimate business interest =
illegal restraint of trade. Contract disappears or is blue-penciled.
• See Seychelles Organics v. Rose et. al. (9th
Cir. 2017).
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Antitrust as Defense to Non-Compete
Enforcement
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6. Potential antitrust exposure
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7. •No poaching agreements between competitors.
•Likely violate Section 1 Sherman Act.
•Horizontal restraint of trade. Potentially a per se violation.
•Exposure vs. DOJ and private parties. See, e.g., In re High Tech
Employee Antitrust Litigation (N.D. Cal.).
•Note: Settlements in non-compete/tortious interference cases are
not immune from antitrust scrutiny.
•Other variants: Wage-fixing agreements between competitors. See,
e.g., Fleishman v. Albany Medical Center, 728 F. Supp. 2d 130 (S.D.
N.Y. 2010)
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No Poaching Agreements
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8. • Monopoly Power
– < 50 % inadequate
– > 50 % = potential DOJ scrutiny
– > 75% = exposure vs. private litigants
• Market Definition
– Well known monopolists: Google, Waste Management.
– Specific product markets. Eg. Medical devices (Ex: Maquet Cardiovascular
litigation (N.D. Cal. 2017).
– Must be cognizant of market share in national, regional and product markets.
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Monopolists & Non-Competes: Defining
Monopoly Power
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9. • Conduct by monopolists always = higher scrutiny.
• Monopolist use of non-competes = exclusionary conduct & potential
antitrust. Examples:
– BRFHH Sherveport, LLC v. Willis Knighton Medical Center, 176 F. Supp. 3d
606 (W.D. La. 2016) (plaintiff stated antitrust claim against defendant
healthcare provider based, in part, on use of non-compete agreements to
control employee physicians and referral sources).
– ABS Global v. Inguran (W.D. Wisc. 2016) (monopolist supplier’s use of non-
compete provision in contract with customer = exclusionary conduct &
triggered antitrust scrutiny).
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Monopolist Non-Compete Exposure
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10. • Horizontal non-competes = greater scrutiny & possible per se antitrust
violations.
• Vertical non-competes = exclusionary conduct & possible antitrust
under rule of reason analysis.
• Plaintiffs who lack antitrust standing/injury may have other claims (e.g.
state statutes re unfair & deceptive trade practices).
• Note: State unfair trade practice statutes lack the same onerous
standing burdens as antitrust.
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Other Considerations Re Monopolists
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11. • Know your market share in all markets and product lines.
• Monopolists & near monopolists should avoid non-competes
where reasonably possible.
• Utilize non-disclosure provisions and targeted non-solicitation.
• Be mindful of exposure at multiple market levels:
–Vertical / employees.
–Horizontal / competitors / no-poaching
–Hybrid / customers / suppliers
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Strategic Guidance
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12. • Know your market share in all markets and product lines.
• Red flag settlement agreements with competitors in non-
compete, trade secret and tortious interference cases.
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Strategic Guidance (Continued)
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