Antitrust Advisory: Golf Superstore Falls into Trap with Non-Compete Agreement

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On October 9, 2008, the Federal Trade Commission (?FTC?) announced a consent agreement with Golf Galaxy, a subsidiary of Dick?s Sporting Goods Inc., in In the Matter of Dick?s Sporting Goods, Inc., a Corporation (FTC File No. 071 0196), which settled charges of illegal territorial market division. The consent agreement prohibits Golf Galaxy from enforcing a non-compete agreement with Golf Town Canada Inc. (?Golf Canada?), a potential competitor in the retail golf merchandise market.

Why This Case Is Important

This case serves as a reminder that the FTC is vigilant in challenging non-compete provisions that serve no pro-competitive purpose. Agreements between competitors to stay out of each others? markets are treated by the courts as presumptively anticompetitive, or inherently suspect, even when part of a larger set of agreements. Failure to advance a legitimate efficiency justification for such non-compete agreements will likely result in antitrust liability. As discussed below, an initial non-compete tied to a consulting agreement was not challenged by the FTC, who recognized it as reasonably necessary. However, when the consulting arrangement ended but the non-compete was extended, without being connected to other efficiency-enhancing activities, the FTC stepped in to condemn it.

See full advisory for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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