The Federal Trade Commission (FTC) has filed at least three administrative complaints in the last year challenging transaction-related noncompete agreements. These actions have important ramifications that antitrust and M&A practitioners must be aware of when drafting such agreements.

Noncompete agreements are quite common and generally enforceable so long as they are reasonable in scope and necessary to protect a legitimate business interest. Yet the FTC alleged that noncompete agreements entered into as part of three separate transactions violated the antitrust laws—namely the FTC and Clayton Acts. Of note, a senior representative at the FTC wrote that while many practitioners assume noncompete agreements are enforceable when they are ancillary to a legitimate business transaction, the FTC nonetheless will evaluate non-compete agreements to ensure they are not overly broad. The FTC’s most recent challenges show that no agreements are immune from scrutiny even when a deal is closed or the transaction value is relatively small.