John W. Terwilleger Attorney, Gunster West Palm Beach, Florida

Transcription

1 John W. Terwilleger Attorney, Gunster West Palm Beach, Florida

2 Violation of General Antitrust Statutes Teaming Agreements that may constitute unreasonable restraints on trade. Restrictive Covenants Teaming Agreements that require some level of exclusive dealing.

3 [A]n arrangement pursuant to which two or more companies combine their talents to perform certain tasks in connection with the pursuit of business opportunities in the Federal marketplace, and the performance of contracts resulting from their joint pursuit of those opportunities. John W. Chierichella & Anne Bluth Perry, Teaming Agreements & Advanced Subcontracting Issues, Section A Teaming Agreements, TAASI GLASS-CLE A, 1

4 Federal statutes require agencies to report potential antitrust violations. 10 U.S.C. 2305(b)(9) ( If the head of an agency considers that a bid or proposal evidences a violation of the antitrust laws, he shall refer the bid or proposal to the Attorney General for appropriate action. )

5 Relationship of the parties to the teaming agreement: Horizontal vs. Vertical relationships. Market sharing agreements. Degree of market control.

6 Horizontal Teaming Agreements: Both parties have the capability to be the prime contractor. Greater risk of antitrust violation. Merely having two potential prime contractors teaming does not automatically constitute a violation. Examples: Alliant Techsystems and Aerojet General. Northrop Corp. v. McDonnell Douglas Corp., 705 F.2d 1030 (9th Cir. 1983).

7 Vertical Teaming Agreements Prime contractor and subcontractor. Subcontractor could not perform the work on its own. Significantly less likely to cause antitrust concerns. Generally increases competition by permitting the involvement of companies that would otherwise be unable to compete.

8 Framing a potential antitrust challenge to a teaming agreement is key. If the teaming agreement is viewed as an agreement that takes two potential competitors and creates a single entity, it appears to be more likely to violate antitrust statutes. If a teaming agreement is viewed as converting two companies who could not effectively compete without the teaming agreement, and allowing them to compete, the teaming agreement actually increases competition.

9 While a market sharing agreement can be considered a per se antitrust violation, with teaming agreements, the court may apply a rule of reason analysis. E.g. Northrop Corp. v. McDonnell Douglas Corp., 705 F.2d 1030 (9th Cir. 1983). The court applied rule of reason analysis to a teaming agreement in which the parties agreed to divide the market for their fighters. Northrop was the prime for sales to the Navy and Foreign Militaries. McDonnell Douglas was the prime for all other sales.

10 When the only two players in a market team, the chances of an antitrust violation are much higher. E.g. Alliant Techsystems and Aerojet General. When a team creates nearly complete control of a market, the chances of an antitrust violation increase. E.g. Orbital Sciences Corp. v. United Launch Alliance, LLC, 2013 WL (Complaint). The FTC investigated, determined that no further action was warranted, but did not make a determination as to whether a violation occurred.

11 Many teaming agreement include some form of excusive dealing agreement. Creates security for both the prime and subcontractor as they work together to prepare a bid. May vary in the level of exclusivity. From right of first refusal to absolute right to the subcontract.

12 Generally, an exclusive dealing arrangement may be evaluated under antitrust law like any other portion of the teaming agreement. Additionally, an exclusive dealing arrangement may violate the law of some states law. Florida statutes is an example.

13 The statute was intended to clarify whether a non-compete agreement is enforceable by clarifying the standard. Previously, courts had evaluated whether a noncompete agreement was reasonable. Although the statute is targeted to employment agreements and contracts for the sale of businesses, it uses the term restrictive covenant, which could include teaming agreements.

14 One of the authors of the bill stated that the statute was intended to apply to all contractual restrictions upon competition, including exclusive dealing agreements. John A. Grant, Jr. & Thomas T. Steele, Restrictive Covenants: Florida Returns to the Original "Unfair Competition" Approach for the 21st Century, Fla. B.J., NOVEMBER 1996 (cited by Henao v. Prof l Shoe Repair, Inc. 929 So. 2d 723, 726 (Fla. 5th DCA 2006)).

15 Restrictive covenants are permitted if they meet the requirements of the statute (1), Fla. Stat. (2014). An enforceable restrictive covenant must: Be reasonable in time, area, and line of business. Be in writing signed by the person against whom enforcement is sought. Be intended to protect a legitimate business interest.

16 Substantial relationship with a specific prospective customer. Confidential or trade secret information. Another legitimate business interest.

17 With a teaming agreement, could be a government agency. Just hoping to win a contract is probably not enough. If the parties have won contracts with the agency before, the relationship may be stronger. Will vary from case-to-case. No cases have address this issue in relation to teaming agreements.

18 Many teaming agreements will require sharing confidential or trade secret information. Practically, while this would probably be a legitimate business interest, given the importance of protecting trade secrets, it is probably safer to have a separate confidentiality agreement.

19 The statute is explicitly not limited to the listed legitimate business interests. Because teaming agreements can address a variety of situations, a party seeking to enforce an exclusive dealing agreement may argue that some other interest satisfies the statute.

20 Florida statutes has not been applied to a teaming agreement at this point. How a court would interpret the statute and legitimate business interest is unclear.

21 Public policy issues can arise with a teaming agreement that designates the law of another state. Even if a contract designates another state s law (e.g. New York), and the parties agree that New York law applies, a court sitting in Florida may refuse to enforce an exclusive dealing agreement that violates the Florida statute. Davis v. Ebsco Industries, Inc., 150 So. 2d 460 (Fla. 3d DCA 1963).

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