Restriction in Confidentiality Agreement Held to be Unenforceable

On 14 July 2010 the High Court ruled that a restrictive provision in a confidentiality agreement was anti-competitive by both object and effect and breached Article 101 of the TFEU. The Court considered the provision in question to have far exceeded what was reasonably necessary to protect the claimant's confidential information and declared the provision void and unenforceable.

The claimant, Mr Jones, founded CMP Group, a company which provides assistance to businesses acquiring photocopying equipment, including multi-functional office automation devices (MFDs). CMP had a trading relationship with Ricoh, one of the worlds leading manufactures of MFDs, and entered into a confidentiality agreement with Ricoh in 1999. As part of the agreement, CMP sought to protect its client relationships by restricting Ricoh from dealing directly with any of CMP's clients for so long as Ricoh held any of CMP's confidential information.

Subsequently however Ricoh tendered for work from one of CMP's major clients, leading to Mr Jones bringing an action in the High Court against Ricoh for breaching the confidentiality agreement. Ricoh defended the claim submitting that the clause in question was void and unenforceable under EU competition law.

Having assessed the provision, the High Court concluded that it amounted to a 'naked restriction', which restricted 150 Ricoh companies from dealing with or seeking to deal with a client of CMP (whenever that client was acquired) for so long as Ricoh held any of a wide range of confidential information. The Court was concerned in particular that the provision was not limited in time or geographic scope, preventing the defendant and all its international affiliates from dealing with a very wide range of customers...