Thadford A. Felton

Competition is a constant in every industry, but it doesn’t often raise legal concerns. Most companies win business through better pricing, stronger relationships, or more effective service. The problems begin when a competitor’s tactics start to interfere with the contracts or commitments your business relies on.

Many business owners instinctively know when something feels off—a salesperson leaves and immediately solicits customers, or a distributor unexpectedly stops honoring an agreement. But knowing whether a competitor has actually crossed a legal boundary is a different question, and the answer almost always turns on contracts or anticipation of business, intent, and what each party knew at the time.

What the law protects

Even in a competitive environment, the law expects businesses to honor valid agreements. Non-competes, non-solicitation clauses, non-disclosure agreements, and supply or service contracts all create obligations that remain in place regardless of new business opportunities. Competitors are free to pursue growth, but they are not free to encourage someone else to break a contract or unlawfully interfere with a business relation.

Employment agreements are commonly at the heart of these disputes. A non-competition clause may restrict a former employee from competing against his or her current employer, a non-solicitation clause may restrict a former employee from soliciting or even contacting certain customers, and a confidentiality provision may limit what information they can use in a new role. Issues arise when a competitor hires someone who is bound by these obligations and then places them in roles where violating the agreement becomes difficult to avoid. If the competitor knows about the restrictions and moves forward anyway, the situation can evolve into a claim for inducing a breach and interfering with a contract.

Interference is not limited to employment relationships. Many companies depend on exclusive supply or distribution agreements, where consistency and performance are important. When a third party pressures one side to abandon those obligations, that conduct can cross from competitive strategy into improper interference.

Where competitive behavior becomes risky

Most problems do not start with dramatic misconduct. They begin with incremental changes: an employee’s sudden shift in behavior, a vendor who stops communicating, or a customer who unexpectedly moves their account. On their own, none of these developments signal wrongdoing. What matters is whether a competitor is knowingly interfering with an agreement for its own advantage.

The law draws a clear distinction here. Competing for customers and talent is acceptable. Competing by undermining or interfering with another company’s contractual rights is not. Because of this, the same action, such as hiring an employee or approaching a customer, may be lawful in one circumstance and problematic in another, depending on existing obligations.

Warning signs worth paying attention to

Although many situations resolve without legal action, certain developments should prompt a closer look:

• A new hire begins contacting customers or vendors they are contractually restricted from soliciting
• A competitor appears unusually informed about your pricing, internal strategy, or other confidential information
• A vendor abruptly changes course despite clear contractual obligations that remain in place

While none of these may automatically signal improper conduct, they are meaningful indicators that a competitor’s behavior may be edging towards conduct that the law does not permit.

Protecting your business before problems escalate

Clear, well-drafted agreements remain one of the best safeguards businesses have. Restrictive covenants should be reviewed regularly to ensure they are enforceable and tailored to current roles. Confidentiality expectations should be reinforced so departing employees understand what information they cannot use or disclose.

Monitoring key contracts helps businesses respond quickly when circumstances shift. Understanding the terms, particularly exclusivity provisions, notice requirements, and termination rights, allows companies to evaluate whether a competitor’s involvement is legitimate or cause for concern.

When issues arise, early and measured outreach is often the most effective next step. Addressing misunderstandings before positions harden can preserve relationships, protect contractual rights, and prevent the unnecessary escalation of disputes. Seeking early legal advice will help ensure the response is both strategic and proportionate.

Conclusion

Competition is necessary for business growth, but it does not eliminate the legal requirement prohibiting the interference with another’s contractual obligations. A competitor crosses the line when it knowingly disrupts those obligations for its benefit. By understanding how restrictive covenants work, monitoring key relationships, and responding promptly when concerns arise, businesses can protect themselves without stepping back from healthy competition.

If you believe a competitor’s conduct may be affecting your business relationships or employment agreements, contact your UBG attorney or Thad Felton at tfelton@ubglaw.com.

The information provided in this article speaks only to the information and guidance we have available as of the date of publication and is subject to change. This legal update was created by UB Greensfelder LLP and is not intended as a substitute for professional legal advice. Receipt, by itself, does not create an attorney-client relationship. For any questions, or for further information, please contact your UB Greensfelder attorney.