472 16 Key Provisions of the Acquisition Agreement
sary to the implementation of the concentration under the same conditions, unless
they prevent the vendor from purchasing or holding shares purely for financial in-
vestment purposes.^38
Non-competition clauses are not considered necessary “when the transfer is in
fact limited to physical assets (such as land, buildings or machinery) or to exclu-
sive industrial and commercial property rights”.^39 There are even restrictions as to
geographical scope, products, and parties.^40
Where the concentration as a whole falls within the scope of the EC Merger
Regulation, even non-competition clauses are covered by the EC Merger Regula-
tion. According to the Regulation, a decision declaring a concentration compatible
with the common market “shall be deemed to cover restrictions directly related
and necessary to the implementation of the concentration” (ancillary restraints).^41
Non-competition clauses under Member States’ national laws. As a rule, non-
competition clauses must be permitted under the national provisions of Member
States laws where they are necessary for the attainment of the purpose of an oth-
erwise legal contract. For example, the application of § 1 of the German Cartel
Act (GWB), which resembles Article 81(1) of the EC Treaty and prohibits agree-
ments that restrict competition, is constrained by the “theory of immanence” (Im-
manenztheorie) to that effect.^42
16.4 Remedies (Indemnities)
Indemnities provide the buyer with remedies for: (a) breaches of representations,
warranties, and covenants; and (b) specific, known liabilities that the seller has
agreed to continue to bear.^43 As explained earlier, it is in the interests of both par-
ties to agree on remedies for breach of representations and warranties and breach
of contract in general. Furthermore, all statutory remedies cannot easily be applied
to a business acquisition contract. For example, it is notoriously difficult to rescind
a business acquisition contract.
The agreed remedies contain at least damages and/or the adjustment of the pur-
chase price (section 16.5.3). The choice of remedies depends on the balance of the
parties’ bargaining power. For example, the vendor may try to resist broad general
indemnities (as it can be difficult to assess their cost, see Volume II) but may be
willing to accept specific indemnities against specific losses arising from identi-
fied, concrete, precompletion exposures (which the vendor may be in a better posi-
(^38) Commission Notice, paragraph 25.
(^39) Commission Notice, paragraph 21.
(^40) Commission Notice, paragraphs 22–24.
(^41) Article 6(1)(b), second subparagraph, Article 8(1), second subparagraph, and Article
8(2), third subparagraph of Regulation 139/2004 (EC Merger Regulation).
(^42) For some comparative remarks, see Lüscher C, Konkurrenzverbote bei Unternehmens-
verkäufen - ein Problembereich der Wertabstimmung zwischen Privatrecht und Kartell-
recht? ZSR 2002 pp 345–386 at pp 354–355.
(^43) Goldberg L, op cit, pp 218–219.