How Far Can You Go In A Non-Compete Agreement?

In these days of radio broadcasting by cluster, some owners find they have more stations than they need and wouldn't mind "thinning the heard." There are buyers for these stations and we may begin to see some more deals. When the seller is staying in the market, however, there is often a fear that the buyer may use the station to compete with the seller, and so some sellers have tried to put restrictions in the sales agreement, sort of like a negative covenant in real estate. "Yes you now own the land, but you cannot use it for an industrial purpose."

To prevent the sold station from biting back after the sale, sellers seek a negative covenant to control the format choice of the station buyers and prevent them from using a particular format in the market. There are more altruistic reasons for such provisions as well, and sometimes the seller wants to assure that a format stays on the station after he's gone. Perhaps it's time to retire but the seller doesn't want the community to lose a unique format he developed for that community. It may be a unique News/Talk format the seller has devoted a career to building in the community. Examples have also included a special approach to music such as maintaining a Classical, Jazz or Easy Lstening outpost. Or, it can be a seller who seeks to protect a remaining station's format by insisting on a separate non-compete agreement to prevent the buyer from competing for the audience demographic of those remaining stations. The question communications lawyers get is, "Can they do that?"

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