Non-compete agreements in share purchase transactions

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During share purchase transactions between companies in Costa Rica, it is common for buyers and sellers to enter a non-compete agreement. This agreement aims to impose a “negative obligation” on the seller to refrain from participating in the acquired company’s market. Non-compete clauses or agreements represent ancillary restrictions agreed upon by the parties involved in the share purchase transaction. However, it is crucial to highlight that these agreements, by restricting or limiting an agent’s participation in a specific market, may be deemed illegal from the perspective of Competition Law.

In situations where share purchase transactions result in a concentration and certain economic thresholds are met, prior authorization from the Commission for the Promotion of Competition (Coprocom) is required. According to art. 88 of the Strengthening of Competition Authorities Law of Costa Rica, concentrations are defined as:

“The merger, acquisition, sale of the business establishment, strategic alliance or any other act or contract through which companies, associations, shares, social capital, trusts, management powers or assets, in general, are concentrated.”

According to art. 89 of the Strengthening of Competition Authorities Law of Costa Rica, concentrations must be notified in advance if they meet the following concurrent criteria:

1. The participation of at least two economic agents who have carried out activities with an impact in Costa Rica at any time during the two previous fiscal periods before the transaction.
2. The sum of the gross sales or productive assets in Costa Rica of the economic agents involved reaches amounts equal to or greater than the threshold established by Coprocom, that is, thirty thousand base salaries.
3. Individually, at least two economic agents involved have generated gross sales or own productive assets in Costa Rica during the previous fiscal year, in amounts equal to or greater than the threshold established by Coprocom, that is, one thousand five hundred base salaries.

Additionally, in the applications to Coprocom…