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.