# Supplier non-compete clause

Source: https://contracko.com/glossary/supplier-non-compete-clause

# Supplier non-compete clause

A clause restricting a supplier from competing with or supplying competitors of the customer.

## 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.

### How Contracko helps

Contracko's AI analysis identifies non-compete obligations in supplier contracts and extracts their scope, duration, and any conditions, adding them to the obligations summary. This makes it possible to audit across the supplier portfolio which restrictions are active and when they expire.

## Legal references

- [Mw art. 6 Dutch Competition Act: prohibition of restrictive agreements Dutch law](https://wetten.overheid.nl/BWBR0008691)
- [VWEU art. 101 TFEU: prohibition of anti-competitive agreements EU law](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:12012E/TXT)

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.

## Relevant for

[Manufacturing](https://contracko.com/industries/manufacturing)[Retail & Wholesale](https://contracko.com/industries/retail-wholesale)[Logistics & Distribution](https://contracko.com/industries/logistics)

## Related clauses

- [Non-Compete Clause](https://contracko.com/clause-library/non-compete)
- [Exclusivity Clause](https://contracko.com/clause-library/exclusivity)
- [Non-Solicitation Clause](https://contracko.com/clause-library/non-solicitation)

## Related terms

- [Non-compete](https://contracko.com/glossary/non-compete)
- [Non-solicitation clause](https://contracko.com/glossary/non-solicitation-clause)
- [Exclusivity clause](https://contracko.com/glossary/exclusivity-clause)
- [Counterparty](https://contracko.com/glossary/counterparty)

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## Frequently asked questions

Common questions about this term.

- **Q:** Can a supplier non-compete clause last longer than five years?
  **A:** Only in exceptional cases. The vertical block exemption (EU Reg. 2022/720) sets five years as the maximum. Beyond that, the restraint must be individually assessed and justified, which is difficult in practice.

- **Q:** Does a supplier non-compete apply after the contract ends?
  **A:** Post-term non-compete obligations are subject to stricter competition-law scrutiny. Under the vertical block exemption, post-term restrictions are generally only permitted for up to one year and must be limited to the customer's premises or territory.

- **Q:** What is the market-share threshold for the vertical block exemption?
  **A:** Both the supplier and the customer must each hold less than 30% of the relevant market for the block exemption to apply. Above that threshold, the agreement must be individually assessed under Article 101 TFEU.

- **Q:** Is a supplier non-compete void if the market-share threshold is exceeded?
  **A:** Not automatically. Exceeding the threshold means the block exemption no longer applies and the clause must satisfy Article 101(3) TFEU individually. If it cannot, it is void and unenforceable. Legal advice is essential in this scenario.

- **Q:** Can the customer enforce a supplier non-compete by injunction?
  **A:** If the clause is valid and the supplier is in breach, yes: the customer can seek a prohibitory injunction in interlocutory proceedings (kort geding) to stop the competing activity, alongside a damages claim. Speed is important as competitive harm accrues quickly.

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