Non-compete clauses in commercial agreements
Non-compete clauses in commercial agreements

The following Commercial guidance note provides comprehensive and up to date legal information covering:

  • Non-compete clauses in commercial agreements
  • Non-compete clauses in distribution agreements etc
  • Non-compete clauses in consultancy agreements
  • Exclusive supply obligations
  • Exclusive purchase obligations
  • Minimum spend commitments

This Practice Note considers non-compete clauses in commercial agreements. Non-compete clauses are contractual obligations restricting a party from competing with the business of another. They take a wide range of forms and various terminology is used to describe them; they may also be referred to as exclusivity clauses, exclusivity provisions, non-poaching clauses, non-solicitation clauses, restraint of trade clauses or restrictive covenants.

This Practice Note considers the following common forms of non-compete restriction in standard vertical commercial arrangements between entities that are not actual or potential competitors:

  1. non-compete clauses in distribution agreements etc

  2. non-compete clauses in consultancy agreements

  3. exclusive supply obligations

  4. exclusive purchase obligations

  5. minimum spend commitments

Agreements that potentially restrict competition are subject to domestic and European competition law. Article 101 of the Treaty on the Functioning of the European Union (TFEU) prohibits all agreements that may affect trade between Member States and that have as their object or effect the prevention, restriction or distortion of competition. Restrictive agreements between competitors (whether actual or potential) are particularly at risk.

However, there is a presumption of legality in vertical agreements if the requirements of the Vertical Restraints Block Exemption (VRBE), Regulation (EU) No 330/2010, can be met. The market shares of each of the parties must be no greater than 30% and the agreement must contain no ‘hardcore’ restrictions. There are other requirements and exclusions