Joint Venture Agreement Non-Competition Clause

[9] We use the term “manager” to refer to persons who are directors or the non-corporate equivalent (e.g.B managers or complements) of the joint venture. These clauses may be included in the following types of contracts: from the point of view of the merger control system, a NCC is reviewed by the Ministry of Commerce of the PRC (“MOFCOM”) under a JV contract when the JV transaction triggers the threshold for notification of cartels under the AML. In accordance with the amendment to the merger notification form[ii], the party to the notification should indicate whether the relevant transaction documents contain non-competition clauses or clauses between the parties to the joint venture and/or between the parties to the joint venture and the joint venture where applicable. In our experience, MOFCOM will generally verify, as part of its audit, whether such clauses are ancillary to transactions. If CCNs are only ancillary restrictions, these clauses are considered not to affect the restriction of competition in the market and are therefore permitted, provided that MoFCOM itself finds that it does not restrict or does not want to restrict competition and that it is not authorised. Therefore, the NCCs do not in themselves expose infringements of the AML under the PRC`s merger control regime. Our analysis shows that product restrictions and geographic restrictions are by far the most common types of exclusivity in joint ventures, with 70% of agreements including both types of restrictions. Terms that restrict the freedom to sell to certain groups of customers were the least prevalent in our dataset and are only present in 8% of agreements. It is more complex to mix and compare geographies by describing who acts where rather than saying that one or more parents cannot compete with the JV…