EC Commission’s new policy on ''ancillary restraints''

The EC Commission has adopted a new Notice on restrictions directly related and necessary to concentrations, which replaces a previous notice of 1990.

Restrictions directly related and necessary to the implementation of concentrations (so-called "ancillary restraints") are contractual agreements which companies frequently enter into in the context of mergers. Commons examples of such restrictions are: non-competition clauses, licence agreements or purchase and supply obligations.

For the past 11 years, the Commission has assessed these "ancillary restraints" in its merger decisions to determine whether they are in fact "ancillary" to the merger and therefore automatically benefit from the effect of the clearance decision, or whether they need to be independently assessed under Article 81 EC.

Under the new policy, the Commission will no longer assess whether restrictions entered into by parties within the context of a merger are "ancillary". Instead, companies and their lawyers will have to make the assessment whether any such restraints can be covered by the merger decision, by a relevant block exemption or whether they might fall under Article 81 EC Treaty. The new Notice provides guidance to the legal and business communities based on past Commission practice and experience in this field.

The most important changes in the Commission’s new policy are: (i) the duration of non-competition clauses which are to be considered "ancillary" has been limited to two years for cases involving the protection of goodwill only, and to three years for cases involving the protection of both know-how and goodwill; (ii) the duration of non-competition clauses in the case of joint ventures has been limited to five years in general and may, in any event, not exceed the lifetime of the joint venture in order to be considered "ancillary". However, durations which exceed three years need to be duly justified, based on the particular circumstances of the case; (iii) the new Notice now also deals with clauses such as service and distribution agreements, non-solicitation and confidentiality clauses, and it also refers to licences of trademarks, business names, design rights, copyrights and similar rights.

The Commission has published the text of its new Notice on its website.

For further information, please contact Susan Hankey by e-mail at [email protected] or by telephone on +44 (0)20 7367 2960.