Confidentiality agreement broke EU competition rules, says High Court

Robert Jones founded CMP, a company which helped companies meet their photocopying and printing needs. It mainly recommended and helped to supply machines made by Ricoh and signed a confidentiality agreement with Ricoh in 1999.

When the pair of companies was asked by one of its UK clients, Bombardier Transportation, to bid for its business in other countries, Ricoh chose to submit a bid without CMP.

CMP sued Ricoh, claiming that in submitting that bid it broke the terms of the confidentiality agreement, which said that Ricoh must not contact any CMP client or company with a "prospective connection" with it without CMP's permission.

The High Court has ruled that the agreement was so widely framed that it broke EU rules on restriction of trade, as contained in the Treaty on the Functioning of the European Union (TFEU), the document which governs the EU. It allowed summary judgment on that point, though other claims will proceed to trial.

Mr Justice Roth said that clause seven of the confidentiality agreement was too restrictive of Ricoh's ability to carry out legitimate business.

"So long as any confidential information remains in the possession of Ricoh, the prohibition in clause 7 would place Ricoh in breach of contract if any of the over 150 companies in the Ricoh group made or accepted any approach to or from or any contact with anyone in the following categories: [...] any client of CMP; or) any government body or regulatory or other authority; or any other person who to Ricoh's knowledge 'has any actual prospective [sic] connection' with CMP," said his ruling.

"Thus the prohibition [...] is not restricted to persons who were clients of CMP during the currency of CMP's dealing with Ricoh; nor is it limited to clients in respect of whom Ricoh has confidential information regarding CMP's business dealings," said Mr Justice Roth. "Given the breadth of the definition of 'confidential information', Ricoh would clearly continue to have such information for an extensive period after relations between Ricoh and CMP should come to an end."

"Hence, if several years after CMP ceased to work with Ricoh, a client of CMP went out to tender for its [copying machines], Ricoh would be precluded from participating without CMP's permission. That would apply even if this was a client that CMP had acquired after CMP's relationship with Ricoh had come to an end," said the ruling.

The High Court said that the agreement's prohibition in relation to 'any government body or regulatory or other authority' was also far too wide.

"[It] is completely unrestricted. It means that Ricoh would be in breach if any company in the Ricoh group contracts with (or even makes contact with) any such body anywhere in the world. [CMP] was unable to offer any commercial justification for this prohibition," said the judgment.

Article 101 of the TFEU says that activities are incompatible with the workings of the internal market if they involve collusion between companies to restrict trade between member states or distort or restrict competition.

"Any agreements or decisions prohibited pursuant to this Article shall be automatically void," it says.

The High Court said that the agreement broke the terms of Article 101.

"It seems to me clear that [the agreement] has a very broad reach, unlimited in place, of uncertain and extensive ambit in time, and applying to dealings by Ricoh and its associated companies that are not only plausible but very likely to occur," said Mr Justice Roth. "There are many arrangements which clearly fall within that prohibition and which could not possibly involve use of CMP's 'confidential information' or client connection."

"In its range and scope, it is a naked restriction on any of the more than 150 Ricoh companies dealing with or seeking to deal with a client of CMP, whenever that client was acquired for so long as Ricoh has any of the wide category of 'confidential information'," the ruling said. "Although the context of the Confidentiality Agreement is not one which is normally held to give rise to an agreement regarded as anti-competitive by object, in my judgment this agreement exceptionally comes within that category."

The judge said that the facts of the case were clear enough that no full trial would be necessary.

"If clause 7 were enforceable, an international group like Bombardier in its centralised procurement would be precluded from receiving a competitive bid from one of the world's leading suppliers of [copying machines] whereas other major suppliers such as Canon could take part," he said. "Accordingly, whatever the precise definition of the relevant market, it seems to me that this provision has the potential effect of appreciably restricting competition. This conclusion is, in my judgment, so clear on the undisputed facts that I see no basis on which further evidence at trial could lead to a different conclusion."