One of the more routine tasks of a competition lawyer is to review commercial agreements, or parts of agreements, in order to determine whether they unlawfully restrict competition. The Court of Justice in Commission v Anic Partecipazioni [1999] ECR I-4125 confirmed that the concept of agreements, decisions by associations or concerted practices is ‘intended to apply to all collusion… whatever form it takes’. There is therefore no requirement that any agreement complies with contractual formalities in order for it to be subject to competition law. However, where the analysis centres on a written contract, a recent case demonstrates that domestic rules of contractual interpretation may be relevant.

In the recent summary judgment application in Jones v Ricoh [2010] EWHC 1743 (Ch), the High Court was tasked with deciding, among other things, whether a form of non-compete clause contained in a non-disclosure agreement infringed competition law. In determining ‘the scope of the restriction’, Mr Justice Roth’s analysis began by focusing on the interpretation of the clause under the English law. He cited the leading case of Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28 at 912-913. The principles of interpretation set out by Lord Hoffman in that case can be distilled as follows:

  • Interpretation of a contract under English law may exclude prior negotiation and evidence of subjective intent (for example, how one of the parties has subsequently implemented the contract).
  • Taking an approach to competition restrictions based on contractual interpretation could lead to different results depending on the rules of interpretation in the jurisdiction in which the agreement is analysed.
  • Any lawyer engaging in competition analysis of a contract under English law will do well to familiarise themselves with the law in relation to the interpretation of contracts, in part summarised above.
  • An approach based on the agreement from a competition law perspective might conceivably include aspects of the parties’ relationship which would not be considered under a contract law analysis, for example prior negotiations, declarations of subjective intention, or representations that were expressly excluded from the contract by an ‘entire agreement’ clause.
  • Practitioners should ideally make clear what information is and is not being taking into account in analysing an agreement and the approach to the analysis that has been adopted. In particular, is the practitioner advising on the contract or any wider agreement?

  • Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge, which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
  • The background includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man, but does not include previous negotiations and declarations of subjective intent.
  • The meaning of the document is not merely the ordinary meaning of words but rather what those words mean in their background context, accepting, but not expecting that linguistic mistakes may be made, and where necessary, yielding to business common sense.
    • In Jones the court concluded, based on its interpretation of the contract, that the clause in question had both the object and effect of unlawfully restricting competition.* Such a conclusion may not have been unreasonable given how widely the clause was drafted. Nor was an approach based on contractual interpretation particularly surprising: where the competition issues are part of a contractual dispute, the focus naturally falls on the contract. The court’s analysis emphasises that there may be a role for ‘domestic’ contract law principles in competition law analysis.Notwithstanding the approach in Jones, practitioners and business people will do well to remember that competition law will generally take a wider view of arrangements than an approach based purely on contractual interpretation. The Court of First Instance judgment in Case T-18/03 CD-Contact Data GmbH v Commission of the European Communities, judgment of 30 April 2009, is currently on appeal to the Court of Justice. In that case, the existence of a written agreement that expressly allowed passive sales and therefore did not unlawfully restrict competition, could not prevent the conclusion that the wider arrangements did. Likewise the Office of Fair Trading’s Tobacco decision dated 15 April 2010, which is currently on appeal to the Competition Appeal Tribunal, concerns a number of trading agreements between manufacturers and retailers that were benign when viewed in isolation. However, the OFT considered that these agreements, when viewed in the context of the parties’ wider conduct, had the anti-competitive object of restricting price competition.In light of the potential for courts and competition authorities to take different views on the approach to agreements in a competition context, the following points should be borne in mind:

*Although the non-compete clause considered in Jones was found unenforceable, the application for summary judgment was dismissed in respect of the claims for breach of two other clauses in the non-disclosure agreement. These claims, which involve substantial damages for loss of a chance, will now proceed to trial.

Gustaf Duhs is a senior associate at Stevens & Bolton LLP specialising in EU, competition and commercial law.