Short Reads

Arnhem-Leeuwarden Court of Appeal rules on duration of a non-competition clause in SPA

Arnhem-Leeuwarden Court of Appeal rules on duration of a non-competit

Arnhem-Leeuwarden Court of Appeal rules on duration of a non-competition clause in SPA

01.09.2017

On 10 August 2017, the judgment of the the Arnhem-Leeuwarden Court of Appeal (Court of Appeal) was published which held that a purchaser of all the shares in a Dutch company, Thermagas, could not rely on a non-competition clause with a duration of 5 years in a share purchase agreement (SPA). This decision quashes an earlier District Court judgment, which had allowed the purchaser to invoke this clause against one of the sellers that had gone on to continue business in the same market with a different company.

The Court of Appeal assessed the clause as an "ancillary restraint" necessary for the realisation of the concentration [see the European Commission Notice on ancillary restraints]. As the non-competition clause exceeds the maximum period allowed when transferring customer loyalty in the form of both goodwill and know-how (3 years), the Court of Appeal considered whether special circumstances were present that were not foreseen in the Notice, but that may justify the 5 year duration.

Here, the Court of Appeal's reasoning diverged from the District Court. In reaching its conclusion that there were special circumstances, the District Court relied on a 2014 precedent of the same appellate court (with the same presiding judge). In that case, the Court of Appeal found that a 5 year term was acceptable considering the following circumstances: (i) a high degree of customer loyalty, (ii) a long lifespan of the products concerned, (iii) specific knowledge of the seller regarding procurement and sales channels, and (iv) the (low) speed at which that industry knowledge becomes outdated. The purchaser put similar arguments on the table in the Thermagas case, but to no avail: the Court of Appeal discarded them one by one.

The Court of Appeal held that the judge in the proceedings on the merits was likely to declare the non-competition clause in the SPA null and void. As a result, the purchaser could not rely on the Dutch statutory conversion mechanism to secure the effective application of competition law.

Whilst the outcome is not surprising, the judgment does confirm that Dutch courts are willing – even in summary proceedings – to consider whether special circumstances allow for a non-competition clause in an SPA to exceed the 3 year maximum.

This article was published in the Competition Law Newsletter of September 2017. Other articles in this newsletter:

  1. Dutch Competition Authority publishes market study into online video streaming platforms

Team

Related news

18.02.2019 BE law
Plan-MER voor Vlaams windturbinekader? Raad voor Vergunningsbetwistingen te rade bij Europa

Articles - Het wordt stilaan een traditie van de Belgische rechter om het Hof van Justitie te bevragen over de milieueffectenbeoordeling en -rapportage (MER). Na de Raad van State en het Grondwettelijk Hof is het de beurt aan de Raad voor Vergunningsbetwistingen. In een tussenarrest van 4 december 2018 heeft de Raad voor Vergunningsbetwistingen aan het Hof van Justitie een lijst met prejudiciële vragen gesteld over de plan-MER-plicht van het Vlaamse kader voor de uitbating van windturbines. Mogen we ons verwachten aan een juridische saga "d'Oultremont pt.II"?

Read more

07.02.2019 NL law
Follow-on cartel damages claim dismissed: don't bury courts under paper work

Short Reads - A recent ruling by the Dutch Court of Appeal confirmed that claimants will need to sufficiently substantiate their claim that they suffered loss due to a cartel, even in follow-on cases. Despite a presumption that sales or service contracts concluded during the cartel period have been affected by the cartel, claimants will still need to provide the courts with concrete, detailed and uncluttered information showing (i) which party purchased (ii) which products from (iii) which manufacturer for (iv) which amount, preferably with copies of the relevant agreements.

Read more

18.02.2019 NL law
Brexit and data protection: preparing for a 'no-deal'

Short Reads - As it stands, the UK will exit the European Union at midnight on 29 March 2019. Therefore, businesses within the UK, or with trade relations with the UK, would be best advised to assume that a no-deal Brexit is inevitable. The exchange of personal data  within the EU is governed by the General Data Protection Regulation (GDPR). In a no-deal Brexit, the GDPR will cease to be applicable in the UK upon its EU exit.

Read more

07.02.2019 NL law
The need for speed in mergers is no reason to ignore rights of defence

Short Reads - On 16 January 2019, the European Court of Justice clarified the procedural guarantees the European Commission needs to provide to merging parties during merger reviews. According to the Court of Justice, the General Court (GC) had rightly annulled the Commission's decision to prohibit the merger of UPS and TNT. UPS's right of defence had been infringed because the Commission had failed to share the final version of the econometric model with UPS before adopting its prohibition decision.

Read more

07.02.2019 NL law
The ACM follows EU approach in its first pharmaceutical merger

Short Reads - The Dutch Authority for Consumers and Markets (ACM) recently reviewed its first merger between two pharmaceutical companies. In its conditional clearance of Aurobindo's acquisition of certain European Apotex assets, the ACM followed the European Commission's approach in assessing the merger's impact on competition. Companies will welcome the news that pharma mergers will be reviewed in a similar fashion, irrespective of whether the ACM or the European Commission conducts the review.

Read more

07.02.2019 EU law
Digitisation and competition law: past, present and future

Short Reads - It is nearly time for the European Commission to reveal its course of action in digitisation and competition law. Feedback from a public consultation and the recent conference on 'Shaping competition policy in the era of digitisation' together with the upcoming expert panel's report on the future challenges of digitisation for competition policy are likely to shape the Commission's course of action.

Read more

Our website uses cookies: third party analytics cookies to best adapt our website to your needs & cookies to enable social media functionalities. For more information on the use of cookies, please check our Privacy and Cookie Policy. Please note that you can change your cookie opt-ins at any time via your browser settings.

Privacy – en cookieverklaring