Trust Our Experience. Protect Your Position. 

  1. Home
  2.  » 
  3. Asset Protection
  4.  » Feds expand its investigation of non-competes to include business sales

Feds expand its investigation of non-competes to include business sales

President Joe Biden instructed the Federal Trade Commission (FTC) in 2021 to investigate non-compete clauses that are unfairly restrictive in not allowing workers to pursue the best employment opportunities or advance their careers. In 2022, he directed the FTC to move beyond employment agreements to also look at the sale of businesses.

Less scrutinized than post-employment covenants, the business sales often involved language where the seller would need to stay out of the market of the business it sold. It is generally believed that selling the business and then competing against the sold company reduces its value. Courts agreed, often seeing this arrangement as a way to maintain the integrity of the transaction and protect a business’s interests.

The case of Corrigan Oil

The FTC announced that it took action to restore an element of a competitive retail environment after investigating a deal where ARKO Corp. and subsidiary GPM bought 60 Express Stop retail fuel outlets from Corrigan Oil Company in 2021 for $94 million. ARKO owns fuel and convenience outlets in 33 states (plus Washington, DC), and Corrigan is a family-run operation out of Michigan that supplies retail and wholesale fuel to convenience stores. 

The deal involved a sweeping agreement that included the purchased Express Stops as well as 130 GPM locations in Michigan and Ohio that were not involved in the sale. This clause prevented Corrigan from staying out of markets already served by GPM. It quashed competition and allowed ARKO to raise its prices, further harming retail competition in five local markets in Michigan.

According to Holly Vedova, Director of the Bureau of Competition. “By keeping Corrigan from competing to sell gasoline and diesel to consumers in these markets, the agreement not to compete harmed customers who otherwise could benefit from this competition.”

An FTC panel voted 5-0 to issue a complaint to ARKO and accepted the Agreement Containing Consent Order for public comment. It also required the following changes:

  • Return five locations to Corrigan
  • Amend the non-compete involving those five locations
  • Obtain FTC approval before purchasing other retail outlets within three miles of the five outlets
  • Limit the terms of the non-compete
  • Not enforce or enter into similar agreements involving retail fuel outlets
  • Notify others with similar non-competes of this ruling

Others put on notice

The FTC’s actions highlight the restrictive nature of these business covenants and how they impact the free market. Moving forward, businesses involved in mergers and the selling and buying of businesses will need to reevaluate the terms of current and future agreements. Companies with questions can contact an attorney who negotiates, drafts and enforces these agreements.