The claimant, Mr Jones, was the founder of CMP Group Limited
(CMP), which, prior to its liquidation, assisted companies in
acquiring and managing their photocopying equipment. CMP
negotiated on behalf of its clients with third parties and had
developed a relationship with Ricoh UK Limited ("Ricoh")
a manufacturer of multi-functional office automation devices
("MFDs"). Ricoh and CMP entered into a trading
agreement in 1998 and a confidentiality agreement in 1999, the aim
of the latter being to protect CMP's relationship with its
clients so that it could not be cut out of the relationship by
Ricoh dealing with them directly.
One of CMP's major clients was ADtranz, which was acquired by
Bombardier in 2000. Following the acquisition, Bombardier
considered extending its UK model used for the procurement of MFDs
to Europe and issued invitations to tender to CMP and Ricoh in 2003
and to, amongst others, Ricoh in 2007. Whilst CMP and Ricoh
submitted separate bids in response to the 2003 ITT, CMP was not
involved in the 2007 bid and the related contract was awarded to
Ricoh in 2008.
Mr Jones brought an action in the High Court against Ricoh claiming
that its submission of tenders to Bombardier and the supply of MFDs
to the group after June 2008 were in breach of certain provisions
of the 1999 confidentiality agreement. In response, Ricoh
made an application for summary judgment of the breach of contract
proceedings brought by Mr Jones which included, amongst other
points, the allegation that clause 7 of the agreement (on which Mr
Jones relied heavily) was in breach of Article 101 of TFEU.
Clause 7 of the 1999 agreement provided that:
"no approach or contact direct or indirect in connection with
or during our discussions or whilst any Confidential
Information remains in the possession or under the control of
any Relevant Person [and connected company] shall be
initiated, accepted or made by or on behalf of any Relevant
Person to or with any employee, client or supplier of yours or
any government body or regulatory or other authority or to
or with any other person who to our knowledge has any actual
prospective connection with you without your prior written
consent."
This was interpreted to mean that for as long as any confidential
information remained in the possession of Ricoh, Ricoh would be in
breach of contract if any of its group companies made or accepted
any approach to or from or any contact with any client of CMP, any
government body or regulatory or other authority or any other
person to Ricoh's knowledge "has any actual prospective
connection" with CMP.
There were found to be a number of weaknesses in the drafting of
the confidentiality agreement with the commercial justification for
the breadth and extent of the prohibitions it contained being
questionable. The clause's reach was very broad with no
limit in terms of geography or time; it also applied to dealings by
Ricoh and its associated companies that were very likely to
occur. The wide definitions of "confidential
information" and "relevant person" meant that if
Ricoh remained in possession of any private information relating to
CMP or its business practices, finances, dealings and clients that
was received from CMP it would be in breach of contract if any of
the companies in its group made any contact with any of CMP's
existing or prospective clients or any government body or
authority.
In relation to the application of Article 101 the High Court noted
that:
- the restriction in Clause 7 may affect trade between EU member
states; Mr Jones wished to apply the clause in relation to supplies
to Germany and Sweden (2003 ITT) and the whole of the EU (2007
ITT);
- the object of the clause appeared to be to protect confidential
information disclosed to Ricoh, however it went further than
required for that purpose in restricting over 150 Ricoh companies
from dealing with any of CMP's clients for as long as Ricoh had
any of a wide range of confidential information. Therefore,
although very unusual for this type of agreement, the
confidentiality agreement was regarded as anti-competitive in its
object; and
- Clause 7 also resulted in the agreement having an
anti-competitive effect. If the clause was to be given
effect, Ricoh, one of the world's major manufacturers and
suppliers of MFDs which competes with a small number of other major
suppliers, would be prohibited from bidding in a large number of
instances. Enforcing Clause 7 would mean that international
groups such as Bombardier would be precluded from receiving a
competitive bid from one of the world's leading suppliers but
could receive bids from other major suppliers.
It followed that the restriction was deemed to
amount to a prohibition under Article 101 and as CMP was not acting
as Ricoh's distributor or as a re-seller, Ricoh and CMP were
not operating at different levels of the distribution chain and the
block exemption relied upon by Mr Jones did not apply.
Additionally, the High court also held that as both the 2003 ITT
and the 2007 ITT sought offers to supply Bombardier in territories
including the EU, and as the claim was brought as regards
Ricoh's responses to those invitations to tender, there was no
scope for reliance on Clause 7 in this action in respect of
potential dealings by Ricoh with customers wholly outside the EU,
in respect of which Article 101 may not apply.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 02 August 2010.