Also known as: unreasonable restraints of trade · unreasonably restrain trade · unreasonably restraining trade · restraint of trade
Written by attorneys · grounded in primary & secondary sources — see below
A promise to refrain from competition that is ancillary to a valid transaction or relationship but is greater than needed to protect the promisee's legitimate interest or imposes hardship on the promisor that outweighs that interest and likely injures the public.
Usman Uddin withdrew from United Bank after several years as a financial analyst. His withdrawal agreement barred him for three years from any role in lending, investing, or advising anywhere in North America. United Bank claimed the clause protected confidential deal pipelines. A court found the continent-wide ban reached far beyond direct competitors and imposed undue hardship on Uddin while limiting investor choice.
Ulysses Usher and a rival manufacturer signed a side agreement in which each promised not to solicit the other's customers. No sale of business or employment relationship supported the promises. A court held the bare restraint on competition was not ancillary to any valid transaction and therefore unenforceable as an unreasonable restraint of trade.
Select any source to read its text and confirm it supports the definition.
Ugo Uberti sold his small theater to a chain but later challenged a five-year ban on operating any venue within one hundred miles. The chain argued the clause protected goodwill from the sale. The court found the geographic reach exceeded the protected interest and imposed undue hardship, rendering the promise an unreasonable restraint of trade.
A court first confirms the restraint is ancillary to a valid relationship such as employment or partnership withdrawal. It then asks whether the restraint exceeds what is needed to protect the promisee's legitimate interests or whether any need is outweighed by hardship to the promisor and likely public injury.
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No. Ancillary status is necessary but not sufficient. The restraint must still satisfy the reasonableness test. A clause that sweeps beyond legitimate interests remains unenforceable even if tied to employment.
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A restriction is unreasonable when it bars the promisor from an entire profession or region larger than necessary to protect the promisee's specific interests, such as confidential information or customer goodwill.
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Even if a restraint protects a legitimate interest, it is unreasonable if the resulting hardship to the promisor and reduction in competition or consumer choice outweigh that interest.
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…through allegations of parallel conduct, and now reverse. II A Because § 1 of the Sherman Act "does not prohibit [all] unreasonable restraints of trade . . . but only restraints effected by a contract, combination, or conspiracy," Copperweld Corp. v. Independence Tube Corp. , 467 U.S. 752 (1984), "the crucial question" is whether the…