Whether a trade restraint was ancillary depended on whether the cov-
enant was subordinate to the transaction’s main lawful purpose, or w-
as the object of the contract and therefore a “naked covenant not to
compete.” As later decisions explained, the interests of the parties and
the public were to be protected. The courts , therefore, inquired: For
what purpose was the restraint imposed? What was the agreement’s effect?
(Could the promisor readily practice his trade elsewhere-and could the
Public receive the benefit of his competition somewhere?) Not surpris-
Ingly, restrictive covenants in employment contracts were scrutinized
more closely than covenants connected to a sale of a business. As courts
became more sophisticated they also asked whether the lawful objective
could be obtained in some less restrictive way. (Was it necessary to bind
an employee’s right to his trade in order to protect business secrets?)
As the philosophy of laissez faire grew more firmly entrenched, first
suggested that the parties themselves could best judge what was reas-
onable, a doctrine familiar to students of contract law (and the pep-
percorn theory of consideration). It followed, then, that courts could
presume that the terms were reasonable and not against the public in-
terest; this presumption became conclusive when courts refused to admit
contrary evidence of market condition. Ultimately the exceptions engulfed
the rule, at least in England, where price-fixing agreements often
withstood challenge by victims of such arrangements, and the House of
Lords went so far as to uphold a worldwide covenant not to compete. C-
Ompare Nordenfelt v. Maxim Nordenfelt Guns & Ammunition Co. (1894) (e-
nforcing ancillary restraint that barred seller of an arms-manufacturing
business from competing with the purchaser anywhere in the world for 25
years) with Mogul Steamship Co. v. McGregor Gow & Co. (1891) (refusing
to ban agreement by loose combination of steamship companies to set p-
redatory would be void at common law as contrary to “public policy” a-
nd unenforceable among the parties to it); see also Tony Freyer, Reg-
ulating Big Business- Antitrust in Great Britain and America 1880-1990,
at 121-32 (1992); Donald Dewey, The Common Law Background of Antitrust
Policy, 41 Va. L. Rev. 759 (1955).
The “common law” was somewhat less receptive to trade restraints
in the United States. One line of decisions banned price-fixing agreements
and other anticompetitive arrangements when the challenged affected an
article of “prime necessity.” See Richardson v. Buhl (1889). A related
branch of rulings dispensed with the distinction between essential and
non-essential items and prohibited naked trade restraints dealing with
commodities and services other than matters of prime necessity.