A recent decision of the Court of Justice of the European Union reveals the potential dangers to be considered when introducing a non-compete clause in agreements.
The Court held that two undertakings operating in different markets could, under certain conditions, be regarded as potential competitors. It has also been held that a non-compete clause prohibiting one of the parties from entering a national market in which the other is a major player may distort competition if certain conditions are met.
The Court of Justice of the European Union has held that an undertaking operating a network of retailers of consumer products must be regarded as a potential competitor of an electricity supplier on the electricity market where the parties have included a non-compete clause in the agreement and it is shown that there are real and concrete possibilities for that undertaking to enter the market and compete with the supplier.
It has also been held that a non-compete clause prohibiting one of the parties from entering the national electricity market in which the other party is a major player constitutes a distortion of competition in so far as it follows from an analysis of the clause that such clause is sufficiently harmful to competition so as to make it unnecessary to examine its effects.
