‘Non-Compete Clauses' As Ancillary Restraints And Implications Under Indian Competition Law

Introduction

Non-compete clauses ('NCCs') make their way into most contracts/agreements between transacting parties. Competition regulators such as the European Commission ('EC') and the Competition Commission of India ('CCI') consider and analyze NCCs as "ancillary" restraints. Ancillary restraints are restrictions directly related and necessary to transactions, which are entered into by parties to a transaction (i.e. a merger, acquisition or joint venture), simultaneously or in close connection with the main agreement. Such NCCs introduce contractual restrictions to the parties' commercial freedom of action that may be viewed as anti-competitive if considered in isolation, but such restraints are crucial for attaining the transaction's economic objectives. Examples of ancillary restrictions include non-compete and non-solicitation clauses, licensing agreements, and exclusive purchase and supply obligations.¹