Two railroads serving three important points in common, and at an average distance of 8 miles from each other, are parallel and within the prohibitions of Const. (1891), sec. 201. Commonwealth v. Louisville & N. R. R. Co., 144 Ky. 324, 138 S. W. 291 (1911).

Const. (1891) sec. 201 is inapplicable in a penal action against a railroad for owning and operating two bridges across a boundary river more than 200 miles apart, one bridge running east and west and the other north and south, and each serving a population having no community of interest with that served by the other. Commonwealth v. L. & N. R. R. Co., 148 Ky. 94, 146 S. W. 767 (1912).

Const. (1891) sec. 210 does not prevent a railroad from owning a hotel or park operated as a nonprofit venture, used principally for the accommodation of its passengers and employees. Louisville Property Co. v. Commonwealth, 146 Ky. 827, 143 S. W. 412 (1912). Telephone Company.

A contract between a municipality and a telephone company, authorizing the company to consolidate with a competitor and giving the city power to fix rates for a certain period of time was held a valid exercise of the city's authority, and not in violation of Const. (1891) sec. 201. Southern Bell Telephone & Telegraph Co. v. Louisville, 265 Ky. 286, 96 S. W. (2d) 695 (1936).

Transfer Companies.

The two competing transfer companies in a city contracted that one engage exclusively as the carrier of passengers and that the other engage exclusively as a carrier of freight. In dismissing an action for specific performance of this contract, the court held that such companies were "common carriers," that their lines were "parallel lines" within the meaning of Const. 1891, sec. 201, and that such a contract. was void. Fields & Son v. Holland & Son, 158 Ky. 544, 165 S. W. 699 (1914).

II. CONTRACTS NOT TO COMPETE

No statutory provisions.

Judicial Decisions

Restrictive Covenants Ancillary to the Sale of a Business.

A covenant by the seller of a tobacco warehouse and its good will not to engage in the said business for a period of 10 years in the same city was upheld as a reasonable restraint and necessary to protect the interest of the vendee. Western District Warehouse Co. v. Hobson, 96 Ky. 550, 29 S. W. 308 (1895). See also Royer Wheel Co. v. Miller, 20 Ky. L. R. 1831, 50 S. W. 62 (1899).

The covenant of a seller of marble and tombstones not to reengage in the business for 3 years at the place of sale was held valid. Skaggs v. Simpson, 33 Ky. L. R. 410, 110 S. W. 251 (1908).

The seller of a livery business agreed not to engage in the same business within 50 miles of the place where the business was located, for a period of 10 years. The contract was held to be a reasonable restraint and valid. Linneman & Moore v. Allison & Yates, 142 Ky. 309, 134 S. W. 134 (1911).

A contract whereby the seller of a livery business agreed not to reengage in the same business in the same town so long as the buyer was engaged in such business in that town was upheld. Breeding v. Tandy, 148 Ky. 345, 146 S. W. 742 (1912).

An undertaker sold his equipment to a member of a competing firm and agreed not to reengage in the business in that county so long as the buyer was engaged therein. The covenant was held valid. Elkins v. Barclay, 243 Ky. 144, 47 S. W. (2d) 945 (1932).

A covenant by a seller of a tan-yard not to erect or carry on a tanyard in the city or county was held valid. Grundy v. Edwards, 7 J. J. M. 368 (1832).

That the seller of a buggy business will not sell buggies in a particular county was upheld. Davis v. Brown, 98 Ky. 475, 32 S. W. 614 (1895) aff'd on rehearing, 98 Ky. 475, 36 S. W. 534 (1896).

The seller of a grocery business agreed not to reengage in the grocery business in a specified town in competition with the buyer. The covenant was held valid even though unlimited in time. Long v. O'Bryan, 28 Ky. L. R. 1062, 91 S. W. 659 (1906).

A covenant by the seller of a grocery business agreed not to reengage in the grocery business in the same city was held reasonable and valid although unlimited as to time. Gunther Grocery Co. v. Koll, 153 Ky. 446, 155 S. W. 1145 (1913).

An agreement by the vendor when selling to a competitor certain portions of a laundry machinery business to abandon that line of sales within a prescribed territory was held valid. Barrone v. Moseley Bros., 144 Ky. 698, 139 S. W. 869 (1911).

An agreement that the seller of a stage line will not reengage in that business between points covered by the carrier, and will not compete with the buyer in any manner whatsoever, was held valid. Nickell v. Johnson, 162 Ky. 520, 172 S. W. 938 (1915).

An agreement by a vendor not to own or operate a hospital in the same county for a period of 10 years was upheld as reasonable in its operation. The court indicated that it would treat contracts restricting professional services under the same rules as governed tradesmen's contracts. Johnson v. Stumbo, 277 Ky. 301, 126 S. W. (2d) 165 (1939). Restrictive Covenants Not Ancillary to the Sale of a Business Interest.

A number of ice plants controlling the industry in the city of Louisville were merged into a new corporation. In conveying the property of each of the plants to the new corporation, each owner agreed not to compete with the new company for a period of 10 years. In a suit to enjoin the breach of covenant against one of the members, the court held the contract void in violation of the Antitrust Act of 1890, and therefore unenforceable. Merchants' Ice & Cold Storage Co. v. Rohrman, 138 Ky. 530, 128 S. W. 599 (1910).

A stockholder in a produce corporation who has been actively in charge of the business sold his stock, and agreed not to engage in a similar business for 10 years in any of 4 counties. An injunction to restrain a breach of an agreement issued, the court holding that such a covenant was necessary to protect the interest of the purchaser, even though the seller had not sold and could not sell him, the goodwill of the business. Durham v. Lewis, 231 Ky. 601, 21 S. W. (2d) 1004 (1929).

A lessor's agreement not to let any of her property adjacent to that occupied by the lessee to anyone who might set up a store thereon in competition with the lessee was held to be an unreasonable restraint. Vanover v. Justice, 180 Ky. 632, 203 S. W. 321 (1918).

III. TYING CONTRACTS AND EXCLUSIVE DEALING

ARRANGEMENTS

CONSTITUTIONAL PROVISIONS

Railroads

Sections 214 and 217 provide that no railway, transfer, belt line, or railway bridge company shall make any exclusive or preferential contract or arrangement with any individual, association, or corporation, for the receipt, transfer, delivery, transportation, handling, care, or custody of any freight, or for the conduct of any business as a common carrier. Violation subjects the offender to a fine of $2,000 for the first offense, $5,000 for the second offense, and for the third offense, shall, ipso facto, forfeit its franchises, privileges, or charter rights.

STATUTORY PROVISIONS

Stat. Ann. (Baldwin's Carroll, 1936)
Cooperatives

Sections 883f-17 and 883f-28 provide that an agricultural cooperative marketing association organized under sections 883f-1 to 883f-41 may enter into marketing contracts with its members requiring the members to sell, for any period of time not over ten years, all or any specified part of their products to or through the association and that such contracts shall not be considered to be illegal or in restraint of trade. See Exceptions to General Antitrust Laws, supra. See also Cooperatives in projected study.

Stat. Ann. (Baldwin's Carroll, Supp. 1939)

Liquor

Section 2554b-168 (4) provides that no person holding a distiller's or rectifier's or vintner's or wholesaler's license and no employee, servant, or agent of such, shall enter into a contract with any holder of a retail license whereby such licensee agrees to confine his sales to distilled spirits or wine manufactured or sold by one or more such distillers, rectifiers, vintners, or wholesalers. Any such contract shall be void.

Section 2554b-212 provides that it shall be unlawful for any person engaged in business as a manufacturer or brewer, distributor, or shipper of malt beverages directly or indirectly or through an affiliate or subsidiary to require by agreement or otherwise, that any retailer

engaged in the sale of malt beverages, purchase any such products from such person to the exclusion in whole or in part of malt beverages sold or offered for sale by other persons.

Section 2554b-213 provides that it shall be unlawful for any manufacturer, brewer, or distributor to induce through any of the following means any retailer engaged in the sale of malt beverages, to purchase any malt beverages from such person to the exclusion in whole or in part of malt beverages sold or offered for sale by other persons, if such person engages in the practice of using such means, or any of them, to such an extent as substantially to restrain or prevent transactions in commerce in any such products, if the direct effect of such inducement is to prevent, deter, hinder, or restrain other persons from selling or offering for sale any such products to such retailer (a) by acquiring or holding (after the expiration of any existing license) any interest in any license with respect to the premises of the retailer; or (b) by acquiring any interest in real or personal property owned, occupied, or used by the retailer in the conduct of his business; or (c) by furnishing, giving, renting, lending, or selling to the retailer, any equipment, fixtures, signs, supplies, money, services, or other things of value, except as the Malt Beverage Administrator, having due regard for the public health, the quantity and value of the articles involved, the prevention of monopoly and the practice of deception, may by regulation otherwise prescribe; or (d) by paying or crediting the retailer for any advertising, display, or distribution service subject to such exceptions as the Director may by regulation prescribe; or (e) by guaranteeing any loan or the repayment of any financial obligation of the retailer; or (f) by requiring the retailer to take and dispose of a certain quota of any of such products.

Section 2554b-214 provides that it shall be unlawful for any manufacturer or brewer to induce through any of the following means, any retailer engaged in the sale of malt beverages, to purchase any such products from such person to the exclusion in whole or in part of malt beverages sold or offered for sale by other persons, if such persons engaged in the practice of using such means, or any of them, to such an extent as substantially to restrain or prevent transactions in any such products, if the direct effect of such inducement is to prevent, deter, hinder, or restrict other persons from selling or offering for sale any such products to such retailer (a) by commercial bribery; (b) by offering or giving any bonus, premium, or compensation to any officer, or employee, or representative of such retailer; or (c) by making or allowing any rebates or refunds to any officer, employee, or representative of such retailer. See Special Antitrust Laws: Liquor.