My competitor is stealing my customers

2016-06-15 06:00
TRACY GOWAR

TRACY GOWAR

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Question:

JUST over two years ago I purchased a brand agency and included a restraint of trade clause in the sale agreement, preventing the seller from also opening up a brand company in the same region.

Now just over two years later, the seller has opened up another brand company in direct competition to me and is actively canvassing my clients to move to his company.

I paid him for his company and now he is trying to take away my customers.

Is there anything I can do to stop him?

Answer:

Firstly, I should commend you for including a restraint of trade clause.

So many owners buy a business without a proper restraint of trade in place and thereby immediately weakening the value of their investment.

Secondly, your concern regarding the conduct of the seller is correct.

The concept of “canvassing clients” is an age-old challenge for business owners – a seller, who has been compensated for the goodwill (client base) he sells, and opens up a directly competiting business and wilfully pursues his old clients.

Competing businesses and the canvassing of clients is a big risk due to the inherent value attached to a business’s clientele and our courts have determined that as long as there is not a clear restraint (such as a valid restraint of trade) prohibiting a person from practising in the same field, a person can compete again in the same field as the business he has sold.

Accordingly, in your case, seeing that the restraint of trade was for two years only and has since lapsed, it is therefore fair to assume that the seller is no longer prohibited from opening a competing brand agency.

That said, even though a person may compete again in the same industry, he is prohibited from canvassing his old clients, as he has received his fair value in the sale and cannot try and regain such afterwards as that would be against the principles of commercial morality.

The prohibition against the canvassing of old clients has, however, been qualified to only apply to the seller of the business and not its former employees as well.

In your case it is clear that the seller is operating unlawfully by canvassing his former clients for which you remunerated him.

We would advise that you seek legal help to consider obtaining an interdict against the seller stopping him from further canvassing, as well as a possible claim for damages suffered by you as a result of his unlawful canvassing.

Tracy Gowar, Associate Phatshoane Henney Attorneys

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