Treatment of Non-Compete Clauses in M&A: Finally Clarifying the Indian Position
Shivam Bhardwaj & Samyak Sibasish
Volume 7 Issue 3-4 (2014)
Barring a few legitimate exceptions, most non-compete covenants have been frowned upon by the competition regulating agencies worldwide. While reaching a conclusion, the agencies look at, inter alia, the temporal and geographical impact of the clause in the business transfer agreements in a Merger & Acquisition transaction. Any agreement having the ultimate effect of stifling legitimate competition in the relevant domestic market is condoned by regulating agencies worldwide. The European and American position regarding the treatment of a non-compete clause in an M&A transaction has been clear and well-grounded in their respective economic realities. The position of the Indian authorities, until very recently, has been ambiguous and unpredictable, where glaring inconsistencies have been observed. The Competition Commission of India’s decision in the Hospira Healthcare India Private Limited, Orchid Chemicals and Pharmaceutical Limited case goes a long way in deciphering the intention of the Indian agencies vis-à-vis the legitimacy of a non-compete covenant in M&A transactions. This decision has helped India enter the list of nations where competition restraints are judged with utmost precaution.