Supplier non-compete clause

Definition

A supplier non-compete clause restricts a supplier from competing with the customer or from supplying defined competitors during, and sometimes after, the contract. Because such restraints can foreclose markets, they are assessed under competition law: the Dutch cartel prohibition and the EU equivalent limit their permissible scope and duration. Overly broad or long restraints risk being void as anti-competitive.

Example

A two-year supplier non-compete covering a whole continent is struck down as a disproportionate restraint of competition.

Why this is a business risk

A supplier non-compete that is too broad in geographic scope, product coverage, or duration risks being void under competition law, leaving the customer with no protection. If it is valid but the supplier breaches it, proving and quantifying the damage is complex and expensive. Customers that rely on these clauses without understanding their legal limits may discover they are unenforceable precisely when they need them most.

How to manage it

• Define the prohibited activity precisely: competing as supplier to defined customers, or supplying a named list of competitors, rather than a general market restriction.
• Keep the duration within competition-law safe harbours: under the vertical block exemption, non-compete obligations generally cannot exceed five years.
• Conduct a market-share check: the vertical block exemption requires both parties to be below 30% market share.
• Take legal advice before including a broad supplier non-compete, especially in contracts with a significant duration or geographic scope.

Legal references

• Mw art. 6 Dutch Competition Act: prohibition of restrictive agreements Dutch law
• VWEU art. 101 TFEU: prohibition of anti-competitive agreements EU law

Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.