An inseparable part of all M&A transactions, non-compete clauses may also be perceived as breaches of the cartel prohibition (Art. 101 of the TFEU and Art. 15, para. 1 of the PCA). Restricting competition by means of agreements between economic operators, even if only as a purpose, without having an anti-competitive result, is one of the most significant infringements of the antitrust laws. Such conduct results in the annulment of the relevant clauses and the imposition of significant fines by the anti-monopoly authorities.
The comprehensive scope of the antitrust laws encompasses limitless number of scenarios. The competition limitation prohibition extends to all possible market participants, regardless of their legal or organizational form; it encompasses legal entities as well as individuals. In spite of the lack of a concrete legal definition of the term “agreements,” its main purpose can be defined as comprehensiveness. According to the European legal practice , as well as the established practice of the SAC of Bulgaria, ‘’agreement’’ is considered any case where the wills of at least two undertakings, regardless of its form or name, are met and of ultimate importance is the nature and not the form. The term ”concerted practices” is legally defined in the PCA Additional Provisions as the coordinated action or inaction of two or more undertakings. As per the CEU “concerted practice” is any form of coordination between undertakings, which without agreeing so, intentionally replace the competition risk with bilateral cooperation. To have a breach of the competition law it is enough for a direct or indirect communication between competitors with a purpose or result of influence on another competitor’s future behavior to exist. The aforementioned coordination and cooperation between two or more parties on the market, necessary for the “concerted practice” to be at hand, does not require development of а joint plan, but should be seen from the point of effective competition status where each undertaking determines its own market policy independently. The last scenario which qualifies as a breach is the existence of any anti-competitive purposes or results, leading to prevention, restriction or distortion of competition on the relevant market. The authorities will not take into consideration the particular, actual or potential effect of the respective covenants on the market. It is also not necessary for l the anti-competitive aim to be expressed explicitly by undertakings if it might be proven by construing the agreement or by the mere market behavior of undertakings. Last but not least, it is not necessary for the market behavior of the undertakings to be intentional. A proof of their knowledge that their actions restrict the competition suffices for a breach of the antitrust laws.
Not only do antitrust laws take care of fairness towards the competition, but they also protect the buyer (at least temporarily) to support the economic rationale of the transaction in M & A contracts. Buying a business implies a desire to increase market shares, acquisition of know-how, acquisition of trained and capable staff, including retainment of the sellers/founders with the aim for them to continue developing the newly acquired business. It seems then reasonable to anticipate that the buyer will want to limit the seller’s competitive activities after the conclusion of the transaction and this will be justified by and reflected in the price paid for that transaction.
Antitrust law and regulators around Europe recognize the possibility of creating the aforementioned legal restraints if they are balanced. It is essential that there is a parity between protection of competition in a single market and safeguarding the interests of economic operators, insofar as M&A activities develop those same markets. The tool that is used to establish legitimate restrictions on competition in the form of agreements is the “ancillary restraints doctrine” (the doctrine) which is also is, subject to certain conditions. The restraints should be: (i) directly related to; (ii) objectively necessary for achieving the transaction goal; and (iii) proportionate to this same goal.
Restraints that are included in the main SPA, that support achievement of the transaction goal and its financial effect, that allow smooth and efficient means for transition projected by the transaction are considered “directly related to”. These will allow actual consumption of the parties of the fruits of the M&A.
The fact that a restraint is “objectively necessary” should be proven as а fact not only as a statement made by either of the parties. The test is objective and considers if the transaction would be acceptable for both parties and therefore viable without the implementation of the ancillary restraints clauses. If the economical effect of the transaction would have been achievable without the limiting provisions they would be considered an infringement of the PCA and TFEU.
Proportionality is the third requirement for the competition limitations to be considered legitimate and to be accepted by the antitrust legislations. The requirements have different dimensions: in subject matter, geographical and temporal aspects.
Looking into the subject matter we should be able to answer simple questions:
Who is barred from competition activity and why? Sellers, who very often are also the founders of the company. The main purpose of competition prohibition is to maintain and secure the achievement of the economic effect of the M&A. These individuals carry the good business practices, goodwill, know-how, clients’ relationships, standards and relations within the company which in fact provide the added value to the target company. Therefore, these individuals fall within the scope of the contract’s non-compete clauses after the closing of the transaction.
What is the acceptable geographical scope of the non-compete clauses? The limitative covenants should cover only the markets that are operational for the target company.
The acceptable temporal limitations are those that are logically and legitimately necessary for the buyer to redeem their investment in know-how and goodwill. The European Commission is rather instructive in this respect in its Notice (see footnote 8) as it confirms that “non-competition clauses are justified for periods up to three years, when then transfer of the undertaking includes the transfer of customer loyalty in the form of both goodwill and know-how. When only goodwill is included, they are justified for periods up to two years”.
Finally, non-compete covenants are not subject to regulatory scrutiny prior to the transfer, neither are the parties obliged to notify the respective M&A. It is rather up to the parties to conduct the evaluation. In case of regulatory revision, however, the controlling bodies shall look into and evaluate not only the goal and the result of the limitation as they are created by the parties, but also the factual restraints imposed unintentionally. In conclusion, after Telefónica, SA vs. European Commission and Portugal Telecom SGPS vs. European Commission decisions show that certain drafting cannot serve as absolute caveat against illegality. The decisions depict clearly the position of the Commission that inclusion of “to the extent permitted by law” wording does not provide the protection expected and sought unless that parties can prove that they actually aimed at application of this wording.
 §1, point 7 AR PCA
 Case T-7/89 SA Hercules Chemicals NV v Commission  ECR II- 1711, Case T-41/96 Bayer AG v. Commission  ECR II- 3383, Case 28/ 77 Tepea Bv v. Commission  ECR 1391 и др.
 Resolution № 10623/20.08.2018, Case № 3881 / 2018 of SAC; Resolution № 193/12.02.2018 Case № 2303 / 2016 of SC
 Case 48/69 Imperial Chemical Industries Ltd. v Commission of the European Communities  ECR 619,  CMLR 557, par. 64; Case C- 8/08 T- Mobile Netherlands BV v Raad van bestuur van de Nederlandse Mededingingsautoriteit  ECR I- 4529,  5 CMLR 1701, par. 26.
 Case C-40/73 Suiker Unie and Others v Commission  ECR 1663, пар. 174; Case C-199 /1992 P, Huls AG v Commission /1999; Case 246/86 BELASCO v Commission; Resolution № 11522/16.09.2013 Case 3940/2013 г. of SAC and Resolution № 11427/30.09.2014 Case 8662/2014 of SAC
 Case C-199 /1992 P, Huls AG v Commission /1999; Case 246/86 BELASCO v Commission; Resolution № 11522/16.09.2013 Case 3940/2013 г. of SAC and Resolution № 11427/30.09.2014 Case 8662/2014 of SAC
 “Ancillary Restraints Doctrine”
 Case T-216/13 Telefónica, SA vs. European Commission and Case T-208/13 Portugal Telecom SGPS vs. European Commission
 Commission Notice on restrictions directly related and necessary to concentrations (2005/C 56/03)