Are ancillary restraints covered by the authority’s clearance decision?
Merger Control (4th edition)
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).
There are no explicit rules in this regard. Nevertheless, in case of notifications of establishment of joint ventures, other agreements or arrangements, 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 arrangements, which may include restrictions directly related to and necessary to the implementation of the concentration, are covered by SAMR’s clearance decision.
The Law is silent on ancillary restraints.
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 in-clude certain non competition clauses, licence agreements, and purchase and supply obligations.
Yes, ancillary restraints are covered under the authority’s decision.
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.
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.
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.
Ancillary restraints/restrictive provisions such as non-compete covenants are typically addressed during the review of the transaction by the CCI. The CCI will only clear a transaction if such restraints are justified or have been removed or amended in a case where such restraints are not justifiable. Where a non-compete restriction is justified as per the parameters set out in the CCI’s guidance on non-compete restrictions(https://www.cci.gov.in/sites/default/files/Non-Compete/Guidance_Note.pdf) , the CCI’s decision approving the combination is deemed to cover the non-compete restriction.
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.
Ancillary restraints, such as non-compete clauses, may be considered "restrictive arrangements" and be subject to the general restrictive arrangements chapter of the Israeli Competition Law.
A restrictive arrangement is prohibited unless permitted by one of the mechanisms prescribed by the Israeli Competition Law, i.e. approval by the specialist Competition Tribunal, exemption from such approval by the Commissioner, falling within the boundaries of one of the statutory exemptions set in the Israeli Competition 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 establishes a self-assessment mechanism exempting agreements:
- Where the main objective is not reducing or preventing competition, and the agreements have no restraints which are unnecessary to achieve their main objective; AND
- Where the restraints do not limit competition in a significant part of the affected market; OR the restraints do limit competition in a significant part of the market but do not have the potential to significantly harm competition in such market.
Under certain conditions, including having 50% or lower market shares in the relevant market or an adjacent market, safe harbours exist for some restraints, including:
- Non-compete commitments, for up to four years starting from the moment when the seller’s share of the acquired business decreases below 20%; or the seller no longer has the right to appoint at least one board member;
- Commitments to continued supply under the same terms (for up to three years).
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. Nonetheless, the ICA’s current
There are no provisions regarding this issue provided in the MRFTA nor in any KFTC guidelines. Accordingly, a clearance decision by the KFTC for a particular business combination does not necessarily mean approval of the ancillary restraints as being lawful. As such, the possibility cannot be completely excluded that the KFTC will raise an issue in the future regarding whether the ancillary constraints are lawful.
Ancillary restraints such as non-compete clauses are reviewed by the authority, which has published guidelines that must be followed in order to obtain an approval. For instance, a term of 3 years is normally approved, if duly supported.
While the PCA and its IRR do not contain any reference 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.
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.
The clearance decision usually approves the transaction without mentioning ancillary re-strains or other provisions, except for cases when approval is granted subject to the ful-fillment of certain conditions. Therefore, the clearance decision can generally not be re-garded as covering ancillary restraints with legally binding effect.
However, during the review process the authority normally reviews all relevant arrange-ments of the parties to the concentration, including non-compete and exclusivity ar-rangements. Therefore, in practice the approval of a transaction is usually sufficient indi-cation 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.
The SCA’s decision to clear a certain concentration includes restrictions directly related and necessary to the concentration.
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).
Ancillary restraints are covered by the INDECOPI’s evaluation and decision. They do not require an additional notification, according to Law N° 26876.
The Bill states the same.
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.
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.
Ancillary restraints can be covered by the decision of the Antimonopoly Committee of Ukraine.
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.
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 Commission Notice on restrictions directly related and necessary to concentrations.
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 Articles 2 and 4 of the Law and/or Article 101 TFEU.
The HCC follows the principles in the European Notice on restrictions directly related and necessary to concentrations (OJ 2005 C56/03). Thus, a clearance decision covers ancillary restraints that are directly related to and necessary for the concentration.