Non-compete for an E-commerce brand

April 19, 2024

by a searcher from Tulane University - A. B. Freeman School of Business in Brooklyn, NY, USA

How would you suggest crafting a non-compete for an e-commerce brand that is the essentially with no physical location. Anyone have experience with this? Any lessons learned, you’d be willing to share?

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Reply by a searcher
from Duquesne University in Pittsburgh, PA, USA

In my experience, non-compete agreements are not enforceable in a court of law. We are working on a joint venture agreement for an eComm collaboration. Here is what we wrote in the agreement about the issue to keep everyone above board. Exclusivity and Business Integrity: During the term of this agreement and for a period of x years after its expiration or termination (the “Restricted Period”), the participants agree not to engage in any business or activity that directly or indirectly competes with the Company’s products or services. The Participants further agree to work in the best interest of the Venture and to refrain from any actions that could potentially harm the Company’s core brick-and-mortar business, its intellectual property, or reputation.

Reply by a searcher
from University of Michigan in Bay City, MI, USA

DTC ecom is different than a B2B relationship-based business in a variety of ways. Important for this discussion is customer acquisition. Unless this is some sort of pseudo-celebrity brand where the owner is front-and-center, customers are buying from the brand, not the owner. It would be way more difficult to quickly spin up a competitor and take all of your clients like one could do in a B2B professional services business.

As has been said by others, it's theoretically possible for the seller to compete covertly to make enforcement of an agreement more difficult. My take on that, though, is that if it's that easy for a competitor to just pop up and take business, that's a core problem with the business more so than something that could be solved with a non-compete.

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