What Is Restraint of Trade?
The U.S. free market economy, a cornerstone of American business, is widely regarded as a system where competition thrives with minimal government interference. However, in practice, even in the United States, the government plays an active role in regulating businesses to protect both enterprises and consumers. While government intervention may sometimes seem burdensome to businesses, it is typically legal.
However, certain individual conduct that unfairly restricts trade is illegal, particularly in Florida. Businesses affected by unlawful restraint of trade may seek remedies through the courts.
In this article, the business litigation attorneys at Capital Partners Law explore what constitutes restraint of trade, how it impacts Florida businesses, and what legal options are available if your business is harmed.
Defining Restraint of Trade
Restraint of trade refers to activities or agreements that inhibit competition or interfere with the natural flow of commerce. Legally, it can be defined as actions that:
- Eliminate or hinder competition
- Create monopolies
- Artificially manipulate prices
- Otherwise obstruct the natural course of trade and business activities
Common examples of restraint of trade include:
- Wrongful use of contractual provisions
- Price-fixing agreements
- Intimidating competitors to drive them out of business
- Interference in business contracts (tortious interference)
- Coercing competitors into adopting less effective business strategies
For Florida businesses, these illegal activities can significantly disrupt daily operations, leading to both immediate and long-term economic losses.
Florida Antitrust Law
Under the Florida Antitrust Act of 1980, any “contract, combination, or conspiracy in restraint of trade or commerce” is unlawful. Florida law broadly defines trade or commerce as any economic activity involving any goods or services (Fla. Stat. §542.17). This means that Florida businesses affected by illegal restraint of trade may have grounds to pursue legal action.
Contractual Provisions That Could Lead to Restraint of Trade Claims
Many Florida businesses include protective provisions in their contracts, which is perfectly legal when done properly. However, the wrongful use of these provisions may give rise to claims of restraint of trade. Here are some common examples:
- Non-Compete Clauses: Often found in employment contracts or business sale agreements, non-compete clauses prevent an employee or business seller from starting a competing business within a specified area and time period.
- Cascading Clauses: These provisions, common in employment contracts, extend restrictive obligations as the employee moves up in the company, thereby preventing them from working elsewhere for longer periods.
- Non-Solicitation Clauses: These clauses prevent former employees or other parties from soliciting a company’s clients, customers, or employees, effectively prohibiting “poaching.”
Improper use of such provisions can result in legal claims, as can the wrongful enforcement of entire agreements, such as:
- Exclusive Supplier Agreements: Agreements where one party is granted exclusive rights to purchase a supplier’s products or services.
- Non-Disclosure Agreements (NDAs): Agreements that prohibit employees or business partners from sharing confidential information, even after they leave the company.
Reasonable Restrictions vs. Unlawful Restraint of Trade
Not all restrictive contracts violate the law. Florida Statute §542.335(1) allows courts to enforce contracts that reasonably limit competition if they are necessary to protect legitimate business interests. These contracts must be reasonable in terms of duration, geographic scope, and line of business. For example, non-compete agreements lasting six months to several years may be enforced if they are designed to protect a business’s legitimate interests.
If a business challenges the enforcement of such provisions, the court will assess whether the restrictions are:
- Too broad in scope
- Excessively long in duration
- Unnecessary to protect legitimate business interests
If a court finds the restrictions unreasonable, it may modify the contract to limit the scope of relief to what is deemed “reasonably necessary.”
Restraint of Trade: Both a Civil and Criminal Offense in Florida
In Florida, restraint of trade can result in both civil and criminal penalties. Under Florida law, individuals who engage in unlawful restraint of trade may face civil penalties of up to $100,000, while businesses may be fined up to $1 million. Criminal charges can result in a felony conviction, punishable by fines up to $1 million for corporations or $100,000 and/or up to three years in prison for individuals.
However, once a civil action is initiated, any subsequent criminal prosecution for the same conduct is barred, and vice versa. Importantly, civil penalties do not preclude a subsequent lawsuit for damages or injunctive relief.
Businesses affected by restraint of trade can potentially recover treble damages (three times the amount of the actual losses) and attorney’s fees.
Consult with Florida Restraint of Trade Attorneys
If your business has been harmed by unlawful restraint of trade, it is crucial to have an experienced legal team by your side. At Capital Partners Law, our skilled business litigation attorneys are ready to fight for your rights and pursue the compensation you deserve.
Schedule a Free Consultation Today
Contact Capital Partners Law today for a free consultation and let us help protect your business from unlawful practices that hinder competition.
To learn more or speak with a knowledgeable Florida Business Attorney, contact Capital Partners Law today:
- Toll-free at (833) 7-CAPLAW
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This article is provided by Capital Partners Law for informational purposes only. It is not intended as legal advice and does not form the basis for an attorney-client relationship. If you need legal advice, please contact Capital Partners Law or another licensed attorney.