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Author Sues Publisher for Restraint of Trade

30 August 2011

A thoughtful reader forwarded Passive Guy a most interesting tidbit from the UK.

Charles Saatchi, co-founder of what was the world’s largest advertising agency, art collector and general wealthy Brit signed a publishing contract with Phaidon Press. Evidently this contract included a clause PG, Kris Rusch and others have ranted about prohibiting Saatchi from working with any other publisher on a title that might compete with his Phaidon book.

Excerpts from The Telegraph:

[Charles Saatchi] has issued a writ at the High Court in London against his publishers, Phaidon Press.

Saatchi . . .  claims that part of his agreement with the publisher is void and unenforceable.

His contract with Phaidon is, he claims, a restraint of trade because it seeks to ban him from working on other projects with different publishers. The owner of the Saatchi Gallery in Chelsea says he made two agreements with Phaidon in 2009 for books provisionally called The More You Like Art The More Art You Like and Questions by Charles Saatchi.

According to the writ, a section of the agreement prevents him from preparing, editing or licensing any work which forms part of the two books, or which might compete with the titles, for the life of the agreement. A judge is due to decide whether this amounts to an unreasonable restraint of trade.

Link to the rest at The Telegraph

PG is definitely not any kind of expert on UK law, but restraint of trade sounds like an interesting attack. In the US, this is a species of anti-trust violation that often involves a combination of companies who get together to reduce competition. The suit over Apple and Big Publishing fixing prices is an example. Restraint of trade is prohibited by Section 1 of The Sherman Antitrust Act in the U.S., passed in 1890.

The Sherman Act generally generally defines restraint of trade as acts, which can include contracts, that interfere with free competition in business and commercial transactions. Such restraint tends to restrict production, affect prices, or otherwise control the market to the detriment of purchasers or consumers of goods and services.

However, restraint of trade is a much older concept under English common law, going back to the Middle Ages. This is also relevant to the United States because the the English common law is incorporated into the laws of 49 of the 50 American states, usually via the state constitution.

Just as the Sherman Act has partially pre-empted common law restraint of trade in the US, Competition Laws in other countries, including the EU, have done the same thing elsewhere.

On a different note, if a wealthy guy like Saatchi could make a mistake and sign a publishing contract that ties him up for the rest of his life, it could happen to anybody. PG wonders whether Saatchi’s solicitors were asleep when they reviewed the contract.

Contracts, Non-US

8 Comments to “Author Sues Publisher for Restraint of Trade”

  1. In the UK law, restraint of trade was a common law precursor to anti-trust law. Most anti-trust law has been taken onto a statutory basis.

    The application of restraint of trade, these days, is generally found in employment law.

    Basically, the principal is that as a matter of public policy, a contract can not prevent you working for another person unless there is a clear business interest, and the restraint is limited to a defined geographical area and no more than necessary to reasonably protect that interest.

    There are anti-trust issues, arguable under statute, but this case isn’t an anti-trust one. It is a case in equity.

    Saatchi will win the case.

    I mentioned these arguments in a prior post http://www.thepassivevoice.com/06/2011/how-to-read-a-book-contract-%E2%80%93-non-competition/

  2. I’ve come across this clause in a couple of my book contracts and I’ve always been able to get it removed. The term “competing titles” is so vague that it can stop a specialist historian like me (Civil War and Missouri history) from building a career.

    I also get the “right of first refusal” clause removed. This allows the publisher to have first dibs on whether to accept or reject your next book project, and you can’t say no if they give you a “reasonable offer”. The clause is worded vaguely enough to cause no end of headaches.

  3. Louisiana Legal Trivia for 500, PG? :)

  4. While it will be interesting to see what the UK decision is, we really need a big court case here in the US on the same subject. THAT is what I’m really looking forward to.

  5. Sorry I missed all the comments on this post.

    Thomas E – Thanks for the education on UK law. California has a flat prohibition against non-compete agreements. A former employee or contractor can be prohibited from revealing confidential information, but not from working for a competing company.

    Sean – You’re right about those clauses being some of the vaguest you’ll find in a publishing agreement. Good for you for getting them out.

    Christian K – You got 500

    J.A. – It’s bound to happen sooner or later. From a tactical standpoint, the author has to be careful not to run out of money before he/she files suit.

  6. On a different note, if a wealthy guy like Saatchi could make a mistake and sign a publishing contract that ties him up for the rest of his life, it could happen to anybody. PG wonders whether Saatchi’s solicitors were asleep when they reviewed the contract.

    I thought the same thing.

    His solicitors must have been sleeping. Or maybe Saatchi thought no one would dare screw him?

    • Nancy – Nobody but Saatchi and his lawyers knows what happened and what cautions were communicated. He may have felt he was a big enough deal so a mere publisher would never try to cross him.

  7. [...] Passive Guy has a blog post up about an author’s lawsuit against a publisher charging restraint of trade due to a nasty non-compete clause in a publishing contract. Read and learn. We all need to [...]

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