Non-compete clauses in M&A transactions: the EU Telefónica/Portugal Telecom judgments and some best practices

A non-compete obligation which is imposed on the seller in the context of a M&A transaction can be permissible when it is ancillary to the transfer of the relevant business, that is, when it is directly related and necessary to the implementation of the deal.  In order to enjoy the fruits of the purchase of the transferred business, the buyer must be able to benefit from some protection against competition from the seller.  However, non-compete clauses only comply with antitrust/competition laws when their geographical scope, duration, subject matter and the persons subject to them do not exceed what is reasonably necessary to achieve the legitimate objective of implementing the transaction.

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