Outsourced Online Marketing Agencies and Non-Compete Agreements

Posted on3 CommentsCategoriesAffiliate Program Management, General Discussion

Definitions first:

Non-Competition Agreement — A legal agreement in which one party is restricted from working as a direct rival to the employer for a specific time and place. The purpose of non-competition agreements is to prevent an ex-employee from exploiting resources, knowledge and/or leads that were gained from a previous employer. [source: Investopedia]

Now, whether it is an NCA (non-compete or non-competition agreement) or a CNC (covenant not to compete, or a respective term in the overall contract) this is, basically, an agreement which (a) between employer and employee, which (b) “limits an employee’s right to work for an employer’s competitor or open a competing business” [source].

While I do understand the reasoning behind NCAs in traditional HR contexts, I am not entirely sure these are even appropriate (at least not in their traditional form) when a company hires an outsourced marketing agency to handle any of their online marketing efforts (be it social, affiliate, search, or any other form or shape of Internet marketing).

As an OPM agency we’ve always had a non-competition clause in our contract with clients (between us, not all OPM companies do) whereby we agree that as long as we are under contract with the client we’re not going to manage an immediately competing affiliate program. And this has worked for us for over a decade. Recently, however, we have received requests to sign Non-Compete Agreements with two clients — whereby we’d be restricted from working with their direct competitors for 12 months after parting ways with them.

The paradox of the situation is multifold. Here are just 3 points to ponder on:

  1. When negotiating with both of these clients (before entering into the marketing management agreements) we were asked if we have previous experience managing affiliate programs in their niches. Of course they should be asking (and looking for) that!
  2. It is common for NCAs to include a clause on not contacting the employer’s/company’s partners that you’ve worked with while under contract with the company. Wait a minute! Affiliate marketing is a closely-knit industry; and it is impossible for any OPM to agree not to contact the affiliates (i.e. the company’s marketing partners) they’ve worked while promoting the company’s affiliate program unless, of course, they’ve come to know these affiliates directly through the company.
  3. Finally, a clause on not contacting vendors is also normal for NCAs. And here again: it is impossible for a paid search consultant, or a social media marketer, or an outsourced affiliate manager to stop contacting (and/or utilizing) the tools and vendors they’ve always been using (even before coming in contact with the client in question). As in point 2 above, this may apply to the client’s proprietary tools (and/or contacts), but not to all industry’s (be it search, social, mobile, affiliate, or any other channel) vendors across the board.

With one of the two clients we’ve already removed the verbiage about non-solicitation of their competitors (as long as we don’t disclose any company-specific information, trade secrets, etc) for 12 months, and tweaked the clauses about not contacting affiliates, vendors, tool and software providers. With the other one: we’re still working…

As mentioned above, I believe there should be a CNC (covenant not to compete) clause in agreements with agencies to which you’re outsourcing your online marketing. But it is apparent that the standard wording of an employer-employee NCAs just won’t fly in these contexts.

As always, I’d love to hear what you think about it. That “Comments” area under this post is all yours!

3 thoughts on “Outsourced Online Marketing Agencies and Non-Compete Agreements

  1. I agree regarding non-compete’s with existing clients. In the same way if you were an employee you can’t work a second job for a competitor. In my view though that should be the end point of any non-competitive arrangement in contracts. I would walk away from any contract with a non-compete after contract expiry clause. I can never understand anyone who would agree to it.

  2. Timely article and well said. There is not a lot of information out there on this for company to company non-competes. Thanks for validating my suspicions.

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