{"id":3658,"date":"2023-07-19T12:30:16","date_gmt":"2023-07-19T16:30:16","guid":{"rendered":"https:\/\/www2.law.temple.edu\/10q\/?p=3658"},"modified":"2023-07-19T12:30:16","modified_gmt":"2023-07-19T16:30:16","slug":"goodwill-noncompete-provisions-and-the-ftc","status":"publish","type":"post","link":"https:\/\/law.temple.edu\/10q\/goodwill-noncompete-provisions-and-the-ftc\/","title":{"rendered":"Goodwill, Noncompete Provisions, and the FTC"},"content":{"rendered":"

July 19, 2023<\/p>\n

On June 13, as a condition to allowing ARKO Corp. to acquire indirectly certain retail fuel assets, including 60 Express Stop retail locations from Corrigan Oil Company, the Federal Trade Commission (FTC) reduced the duration of the noncompetition provision. In addition to duration, the FTC challenged the geographic scope of the noncompete. The proposed consent decree also required the parties to rescind parts of their asset purchase agreement so as to release back to Corrigan five local retail fuel locations in Michigan. The vote of the commissioners was unanimous.<\/p>\n

Although commissioners expressly acknowledged that noncompete clauses may protect a legitimate business interest, such as the goodwill acquired in a transaction, they made clear that such clauses must be \u201cappropriately limited in geographic scope and duration.\u201d They further noted \u201cthat noncompete clauses in a merger agreement may unduly and illegitimately restrain competition when both of the parties remain competitors in other markets.\u201d<\/p>\n

The FTC consent decree limited the ARKO\/Corrigan noncompete to a duration of no longer than three years. Additionally, the offending noncompete covered a geography broader than that of the business sold; instead, the scope was coextensive with the buyer\u2019s business. The consent decree, therefore, required that the noncompete cover only the geography of the assets being sold.<\/p>\n

The FTC\u2019s consent decree goes beyond the asset purchase agreement that was the subject of the investigation. The settlement prohibits the buyers from entering into or enforcing any noncompete agreement related to acquisitions of any retail business that restricts competition solely around a retail fuel business already owned or operated by the acquiring company, and it mandates that buyers notify third parties subject to similar noncompete agreements of the acquiring company\u2019s obligations under the consent decree.<\/p>\n

Takeaways<\/strong><\/p>\n