{"id":4505,"date":"2016-04-13T14:01:25","date_gmt":"2016-04-13T19:01:25","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/business-laws-and-regulations\/restraint-of-trade.html"},"modified":"2023-10-03T09:11:44","modified_gmt":"2023-10-03T14:11:44","slug":"restraint-of-trade","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/business-laws-and-regulations\/restraint-of-trade.html","title":{"rendered":"Restraint of Trade"},"content":{"rendered":"\n
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Restraint of Trade<\/h1>\n
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\n By Jade Chounlamountry, Esq.<\/a> | Legally reviewed by Aviana Cooper, Esq.<\/a>\n | Last updated\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

As a small-business owner, you may have heard the term "restraint of trade." But what does it mean? How does it impact your business?<\/p>\r\n

The idea of "restraint of trade" comes from English common law<\/a>. It is incorporated into U.S. laws, including the Clayton Act<\/a> and other federal antitrust laws<\/a>. Some federal laws, such as the Sherman Antitrust Act<\/a>, treat restraint of trade as a crime, but people who suffer losses because of such actions can also sue for money in civil court.<\/p>\r\n

This article will discuss lawsuits for economic losses due to illegal restraint of trade.<\/p>\r\n

What Is Restraint of Trade?<\/h2>\r\n

"Restraint of trade" refers to any action or agreement restricting free market competition. These restraints can come in various forms. The most common forms are restraint clauses in agreements, particularly employment agreements. These clauses are also known as restrictive covenants<\/a>.<\/p>\r\n

The primary goal of restraint of trade is to protect a company’s interests. Still, it can sometimes hinder the competitive landscape, potentially affecting small businesses disproportionately.<\/p>\r\n

The party harmed by the interference may seek damages<\/a>, especially when these restrictive clauses are included in employment agreements. The damages are limited to the specific transaction by filing a tortious interference<\/a> claim. But if the plaintiff can show the interference messed with their overall business, such as damaging their reputation, they can also file a restraint of trade claim under state laws.<\/p>\r\n

Some acts that give rise to a restraint of trade claim may seem entirely legal. For instance, two competing business owners discussing their pricing plans over a round of golf are exercising their freedom of speech. They may not come out and say they’re using that information to reconsider their pricing. Still, the subtext of the conversation may be construed as a conspiracy to fix prices if that is ultimately the result of the conversation. Thus, a third competitor driven out of business by the resulting price-fixing may file a restraint of trade claim.<\/p>\r\n

Types of Restraint on Trade<\/h2>\r\n

Non-compete clauses are often found in employment contracts and business sales agreements. They stop employees or business owners from starting a similar business in a geographical area and for a length of time.<\/p>\r\n

Non-competition agreements<\/a> serve the same purpose, except they are the whole agreement. They can protect a former employer’s secrets and information. Non-compete agreements can also restrict people’s career and business options, often for a specified period of time. This is particularly an issue for specialized fields.<\/p>\r\n

It’s important to note that the following four states have banned these types of agreements and clauses<\/a> entirely:<\/p>\r\n