China: Non-Compete Clauses in the Transactional Context

Non-compete clauses in agreements between competitors can be problematic under antitrust rules. China is no exception. A sub-set of non-compete arrangements between competitors – those entered into within the context of a structural transaction – has received very little attention by legislators and regulators in China. There is a lack of explicit rules as to whether and how non-compete obligations can be justified in the transactional context. Against this background, this paper attempts to analyze non-compete clauses under the general antitrust framework and looks at four judgments by Chinese courts from 2019 and 2020.

By Adrian Emch¹

I. INTRODUCTION

Non-compete clauses in agreements between competitors can be problematic under antitrust rules. China is no exception. A large part of the enforcement cases brought by Chinese antitrust regulators since the Anti-Monopoly Law (“AML”)² came into effect close to 12 years ago concerned agreements where competitors decided not to compete on certain parameters of competition (such as price), or not to compete at all. Before Chinese courts too, a good number of cases concerned cartel agreements,³ even though there are the odd cases where judges greenlighted seemingly hardcore cartel conduct.⁴

A sub-set of non-compete arrangements between competitors – those entered into within the context of a structural transaction (using the AML’s terminology, a “concentration between business operators”) – has received ver