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

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

  • Non-compete clauses in commercial agreements
  • Non-compete clauses in distribution agreements etc
  • Example clause
  • Drafting notes
  • Legal issues
  • In agency agreements
  • In joint venture agreements
  • In franchising agreements
  • Non-compete clauses in consultancy agreements
  • Example clause
  • More...

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.

From 1 January 2021, where an agreement affects trade within the UK, the provisions of Chapter I of the Competition Act 1998 (CA 1998) apply. The Chapter I prohibition outlaws anti-competitive agreements and is based on Article 101 of the Treaty on the Functioning of the European Union (TFEU). Although EU competition law no longer directly applies in the UK, activities conducted by a UK business in the EU remain subject to EU competition law and any applicable domestic competition law of EU Member States.

Where the agreement affects trade within the EEA, Article 101 TFEU prohibits all agreements which prevent, restrict or distort competition within the EEA

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