Anonymised, illustrative composite. A logistics company sold its warehousing arm and kept its trucking arm. Both businesses served the same shippers. The tidy-looking mutual non-solicit that followed was not a clean-exit covenant — it was two ongoing competitors dividing customers between them.
At a glance
A mid-sized logistics group operated two related lines of business: third-party warehousing and long-haul trucking, serving many of the same manufacturing and retail shippers. The group agreed to sell the warehousing division to a buyer for $19,000,000, while keeping the trucking division for itself. Because the two divisions shared customers, the parties signed a side letter alongside the asset purchase agreement: for three years, neither would actively solicit accounts the other had served in the twelve months before closing.
The side letter was drafted and treated as an ordinary transition-protection mechanism — the kind of mutual courtesy that keeps a carve-out sale from turning into a customer-poaching fight in its first year. Nobody on either side's deal team treated it as a competition-law question, because nothing about it looked like a cartel: no pricing, no output limits, just a temporary truce on solicitation.
The distinguishing fact is that the seller kept operating. In the sale non-compete that needed the ancillary restraints defence, the vendor exited the market entirely and the restraint ran one way, on the party leaving. Here, both the seller's trucking business and the buyer's newly acquired warehousing business remain live competitors in overlapping shipping services after closing, and the restraint runs on both of them, for three years, over specific named accounts.
That is the fact pattern s.45(1)(b) targets directly: “Every person commits an offence who, with a competitor of that person with respect to a product, conspires, agrees or arranges…to allocate sales, territories, customers or markets for the production or supply of the product.” A mutual agreement between two ongoing competitors not to solicit each other's named customers is, on its face, an allocation of customers between them — whatever the deal documents call it.
Division sale price $19,000,000. The overlapping customer base — shippers using both warehousing and trucking from the group before the sale — represented roughly $6,400,000 of combined annual revenue across both divisions, about a third of the warehousing division's own revenue and a smaller share of the retained trucking business. The side letter's three-year, no-sunset structure covered that entire overlap indefinitely in practical terms, since either party could plausibly re-serve those accounts long after closing.
Read the unit. s.45(1)(b) does not require the parties to have agreed on price. Allocation of customers is its own, independent limb of the offence, separate from s.45(1)(a)'s price-fixing limb and s.45(1)(c)'s output-restriction limb — and separate again from the ancillary-restraints question that decides a one-way vendor non-compete. The question is not whether the restraint is reasonable; it is whether it allocates customers between competitors, full stop, subject only to the s.45(4) defence.
The s.45(4) ancillary-restraints defence discussed in the sibling file is available here too — the asset purchase agreement is a genuine broader agreement, and a properly scoped transition covenant can be ancillary to it. The difficulty is the “reasonably necessary” branch: a mutual, open-ended, three-year allocation between two parties who both keep competing is a materially harder fit for “reasonably necessary for giving effect to” a one-time asset sale than a one-way covenant tied to the goodwill actually purchased. The broader the ongoing rivalry the restraint preserves, the harder that branch of the defence is to satisfy.
The practical marker worth carrying forward: a restraint that runs on the party selling and stops when it exits the market looks like protecting purchased goodwill. A restraint that runs on the party that keeps operating, indefinitely renewable in substance and mutual in form, looks like a standing truce between rivals — and s.45(1)(b) does not care that the truce originated inside a sale agreement rather than a separate side deal.
Counsel restructured the arrangement into a one-way, time-limited transition covenant: the buyer alone agreed not to solicit a specific, named list of trucking accounts the seller had serviced in the prior twelve months, for eighteen months, tied expressly to protecting the transition goodwill the sale had actually paid for. The seller's reciprocal promise not to solicit the buyer's new warehousing accounts was dropped — there was no purchased goodwill on that side to justify it, and dropping it removed the mutual-allocation structure that made the original letter look like s.45(1)(b) in substance.
The narrower covenant still gave the seller the practical protection it wanted for its retained trucking relationships during the handover, without leaving both ongoing competitors bound to an indefinite customer truce.
A market-allocation conviction under s.45(1)(b) carries the same s.45(2) penalty as the price-fixing and output-restriction limbs — up to 14 years' imprisonment or a fine at the court's discretion, or both — for the individuals who negotiated the side letter, not just a civil dispute over an unenforceable non-solicit.
The tell was mutuality combined with continuation. A restraint that binds only the party leaving the market is a transition covenant. A restraint that binds both parties, where both keep competing, is an allocation — and calling it a “transition side letter” in the closing checklist does not change which one it is.
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