Are ancillary restraints covered by the authority’s clearance decision?

Merger Control (3rd edition)

Austria Small Flag Austria

Regarding ancillary restraints, there are no clear rules in Austria. In practice, the European Commission’s Ancillary Restraints Notice is used as guidance.

It should be noted that, according to jurisprudence, a parallel examination of facts under antitrust (prohibition of cartels) and merger aspects (creation of a dominant position) does not take place in Austrian merger control proceedings. Outside the scope of merger control, the behaviour in question must comply with the prohibition on cartels (which is to be evaluated by the undertakings concerned in a self-assessment).

Chile Small Flag Chile

Although the Competition Act is silent on this, it can be assumed that a decision clearing an operation of concentration automatically covers ancillary restrictions, without the FNE or TDLC having to assess such restrictions in individual cases. By contrast, for restrictions that cannot be regarded as directly related and necessary for the operation, the general prohibition on restrictive acts and agreements remains potentially applicable. The FNE’s Notification Form also requires the notifying parties to specify whether there are agreements “related” to the operation that may proportionally restrict competition, like non-competition clauses, exclusivity clauses, etc.

There is almost no doctrine or decision practice in Chile regarding ancillary restraints. It is therefore likely that the FNE will seek guidance from especially the practice of the European Commission, as provided for in the Commission’s decisions and its Notice on Ancillary Restraints.

Turkey Small Flag Turkey

Article 13(5) of the Communique provides that the approval granted by the Board concerning the transaction shall also cover those restraints which are directly related and necessary to the implementation of the transaction. The parties may engage in self-assessment as to whether a particular restriction could be deemed as ancillary. In case the transaction involves restraints
with a novel aspect which have not been addressed in the Guideline on Undertakings Concerned and the Board’s previous decisions, upon the parties’ request, the Board may assess the restraints in question. In the event the ancillary restrictions are not compliant, the parties may face an Article 4 investigation.

Denmark Small Flag Denmark

Ancillary restraints are covered by the DCCA’s clearance decisions, but the DCCA is not obliged to carry out an assessment of such restraints. Consequently, the parties themselves must assess whether the individual terms of the merger agreement can be categorized as ancillary restraints. Practice in Danish and EU merger decisions as well as the Commission’s Notice on ancillary restraints serve as guidance.

The Council may, upon request from the parties, carry out an assessment of ancillary restraints when assessing the merger itself if the merger involves restraints giving rise to actual uncertainty, and such restraints have not been dealt with either in practice or by the Commission’s Notice. If the Council carries out an assessment of the ancillary restraints, the merger notification cannot be processed under the simplified procedure.

Depending on the circumstances, permissible ancillary restraints may include certain non-competition clauses, licence agreements, and purchase and supply obligations.

Ireland Small Flag Ireland

The CCPC notification form contains a specific section in relation to ancillary restraints and the CCPC will assess the impact of notified restraints in its determination. Ancillary restraints which are referred to in the notification, and which constitute restrictions that are directly related to the implementation of the transaction approved by the CCPC, will also benefit from the approval of the transaction.

The CCPC generally follows the approach of the European Commission to the assessment of ancillary restraints as set out in the European Commission’s Notice on Ancillary Restraints.

Cyprus Small Flag Cyprus

Ancillary restraints can be covered by the CPC’s clearance decision. Ancillary restraints are notified to the CPC within the context of a Phase II investigation in the manner and within the timeframe prescribed by the Law. Any such restraints should evidence the removal of any significant impediment of effective competition, as identified by the CPC in the context of a Phase I assessment.

Italy Small Flag Italy

Parties are required to include in the notification a description of the ancillary restraints. Unlike the EU Commission, in the clearance decision, the ICA expressly indicates if such restrictions qualify as “ancillary” to the concentration and, thus, if they are covered by the clearance decision. In its assessment, the ICA fully applies the criteria laid down in the relating EU Commission Notice.

If the restraints do not qualify as “ancillary”, they fall outside the scope of the clearance decision and need to be self-assessed according to Art. 101 TFEU or the relating national provisions (Artt. 2 and 4 of the Law).

Norway Small Flag Norway

Yes.

Philippines Small Flag Philippines

While the PCA and its implementing rules do not contain any references to ancillary restraints, the PCC’s review of mergers and acquisitions, which involves an assessment of whether the transaction would substantially prevent, restrict or lessen competition in the relevant market, would cover ancillary restraints (i.e. non-competition clauses). An ancillary restraint which does not substantially prevent, restrict or lessen competition is generally allowed by the PCC.

Russia Small Flag Russia

The clearance decision usually approves the transaction without mentioning ancillary restrains or other provisions, except for cases when approval is granted subject to the fulfillment of certain conditions. Therefore, the clearance decision can generally not be regarded as covering ancillary restraints with legally binding effect.

However, during the review process the authority normally reviews all relevant arrangements of the parties to the concentration, including non-compete and exclusivity arrangements. Therefore, in practice the approval of a transaction is usually sufficient indication for the parties to believe that all information they have submitted to the FAS has been found satisfactory by the authority as a matter of fact.

France Small Flag France

The FCA’s clearance decision will cover ancillary restraints provided that the restrictions are both necessary and directly related to the completion of the concentration. In this respect, while the notifying parties are not required to disclose such ancillary restraints to the FCA, they may bring them to the FCA's attention if they have concerns as to the compliance of such restraints with competition law.

South Africa Small Flag South Africa

Yes – to the extent that these are set out in the documents submitted to the competition authorities as part of the merger notification. There is no separate application dealing with ancillary restraints.

United States Small Flag United States

In addition to the executed agreement (or contract or letter of intent) relating to the transaction, parties are required to submit any ancillary agreements not to compete or any other agreements between the parties, including side letters or agreements that bear on the terms of the transaction and are binding on the parties (such as those reflecting additional antitrust obligations or agreements) as part of their respective HSR filings. The agencies consider the effects of such agreements when reviewing the competitive effects of the transaction.

Switzerland Small Flag Switzerland

According to the praxis of the ComCo, ancillary restraints such as non-competition clauses, licensing agreements, supply and delivery obligations are also examined in the context of merger control and therefore covered by the ComCo's decision, if they are directly connected with the implementation of a merger project and are necessary for it.

However, agreements that are not directly and necessarily connected with the merger will be examined in a separate antitrust procedure (unlawful agreements affecting competition and unlawful practices by dominant undertakings, see article 5 and 7 Cartel Act).

Germany Small Flag Germany

Ancillary restraints may be considered necessary for a certain merger (Immanenztheorie). The European Commission Notice on restrictions directly related and necessary to concentrations can provide guidance for the German merger control as well. However, the formal clearance of the merger does not necessarily cover ancillary restraints. In most cases they need to be included in a self-assessment which is the sole responsibility of every undertaking. A thorough examination of ancillary restraints is usually advisable, as in most cases the FCO explicitly reserves the right to re-examine any agreements made which are not covered by the formal clearance of the merger. The FCO has, for example, recently announced its intention to do so in its report about the sector inquiry into the cement and ready-mixed-concrete industries.

Greece Small Flag Greece

As far as ancillary restrictions (eg post-consummation non-compete obligations on sellers), the HCC endorses the approaches enunciated in the EC Jurisdictional Notice.

Peru Small Flag Peru

Ancillary restraints are covered by the INDECOPI’s evaluation and decision. They do not require an additional notification, according to Law No. 26876.

The Bills state the same.

Portugal Small Flag Portugal

Restrictions which are directly related to, and necessary for, the implementation of a transaction, and related to the Portuguese territory, are covered by the PCA’s assessment and decision. The PCA’s decisions usually describe the assessment carried out regarding the ancillary restraints, and may determine changes to be incorporated for their implementation in accordance with competition rules (e.g. the duration of a non-compete clause). Although the PCA has no published guidelines on the assessment of ancillary restraints, its decisional practice follows the Commission Notice on restrictions directly related to, and necessary for, concentrations.

Japan Small Flag Japan

The JFTC’s primary focus in merger review is whether a notified transaction would substantially restrain any relevant market after its implementation, but the JFTC also examines any related ancillary restraints in its substantive review. However, the JFTC’s decision on a notified transaction does not guarantee that ancillary restraints that do meet thresholds by themselves are immune from the future investigation.

India Small Flag India

Yes, ancillary restraints such as non-compete restrictions are covered within the CCI’s analysis of the filing. Typically, only such ancillary restraints that are directly related and necessary for implementation of the transaction are allowed.

In this regard, the CCI has issued a non-binding Guidance Note on Non-Compete Restrictions (“Guidance Note”) highlighting its approach towards non-compete clauses. The Guidance note clarifies that (i) an ancillary non-compete restriction is one which is directly related to, necessary and reasonably required to implement the proposed combination and (ii) a finding that a covenant is not ancillary to the combination does not automatically imply that the covenant contravenes the Competition Act.

United Kingdom Small Flag United Kingdom

The CMA follows the approach of the European Commission towards ancillary restraints (see the European Union chapter of this guide).

Parties are expected to self-assess their compliance with the Commission's notice on restrictions directly related and necessary to concentrations, although the CMA may provide guidance where a novel or unresolved issue arises.

EU Small Flag EU

Yes. The EUMR provides that a decision declaring a concentration compatible with the common market shall be deemed to cover restrictions directly related and necessary to the implementation of the concentration. The most common ancillary restraints that are covered by this provision include non-compete clauses, licence agreements, and purchase and supply obligations. The Commission notice on restrictions directly related and necessary to concentrations (2005/C 56/03) covers the details of this issue.

Israel Small Flag Israel

Ancillary restraints, such as non-compete clauses, may be considered "restrictive arrangements" and be subject to the general restrictive arrangements chapter of the Israeli Antitrust Law.

A restrictive arrangement is prohibited unless permitted by one of the mechanisms prescribed by the Israeli Antitrust Law, i.e. approval by the specialist Antitrust Tribunal, exemption from such approval by the Commissioner, falling within the boundaries of one of the statutory exemptions set in the Israeli Antitrust Law itself, or block exemptions issued by the Commissioner.

A non-compete commitment by a seller following the sale of a business in its entirety, in as much as it would constitute a "restrictive arrangement", is eligible for a statutory exemption when such commitment is "not contrary to reasonable and accepted practices".

In addition, a specific block exemption has been issued for restraints ancillary to mergers (Antitrust Rules (Block Exemption for Restraints Ancillary to Mergers), 2009), which, under certain conditions, exempts non-compete commitments (for up to four years starting from the decrease in the seller's holdings below 20% and the right to appoint one director); commitments to continued supply under the same terms (for up to three years); and other restraints reasonably required to preserve the value of the acquired business (for a reasonable period of time). This block exemption has several conditions, and inter alia, does not apply to monopolies (defined by the Israeli Antitrust Law as having over a 50% market share).

Other block exemptions may also apply, such as Antitrust Rules (Block Exemption for Arrangements of Minor Importance), 2006, or Antitrust Rules (Block Exemption for Non-Horizontal Agreements Which Do Not Contain Certain Price Restrictions), 2013.

In the event that an ancillary restraint does not come within the boundaries of a block exemption, a specific exemption is required. Israeli merger notification forms include a specific chapter with an exemption request form for ancillary restraints.

China Small Flag China

There are no explicit rules in this regard. Nevertheless, in case of notifications of establishment of joint ventures, other agreements or arrangement, if any, concluded between the parties or their affiliated entities are required to be submitted to SAMR for review. It seems that such agreements or arrangement, which may include restrictions directly related and necessary to the implementation of the concentration, are covered by SAMR’s clearance decision.

Updated: October 25, 2018