Exclusive distribution is the case where the supplier agrees to sell the goods under the agreement only to the trader in a given territory and undertakes not to enter into contracts with other distributors or, importantly, not to sell the corresponding goods directly to other customers located in the same territory. If your company is considering an international distribution agreement, it is important that you take professional advice. ▪ the agreement is not an agreement between competitors within the meaning of the vertical regulation; Selective distribution is the case when the supplier designates a distributor under a “selective distribution system,” in which it appoints additional distributors only if they meet certain criteria. It is a unique system specifically used to allow the supplier to retain control of its distribution network, particularly with regard to quality control, while working with EU and UK competition rules. Selective distribution agreements are often used by luxury brands to ensure the maintenance of the quality of the product and the commercial will of the brand. Some of the rules for distribution agreements differ with respect to the application of a selective distribution model. The Competition Council launches the Guide to Vertical Agreements – The Competition Council has developed the “Guide to Vertical Agreements” to support companies that, on a case-by-case basis, must assess the compatibility of vertical agreements (…) Some international distribution agreements contain exclusivity clauses. While not all of these agreements are exclusive, this is an issue that should be addressed in the treaty negotiations. A distribution agreement is usually used when a supplier of goods does not have a presence or representation in a particular market or country. Suppliers are generally looking for distributors because they can help in the field with invaluable knowledge and know-how and provide access to well-established distribution channels. A merchant can be either a simple “re-deployment” or a “VAR” (a value-added reseller) that offers end-users additional services such as tracking and repairs. Exclusive distribution: In an exclusive distribution agreement, the supplier undertakes to sell its products to only one distributor for resale in a specific territory. At the same time, the distributor is generally limited in its active sale in other areas (exclusively allocated).
Potential competitive risks include reduced intra-brand competition and market lockdown, which can facilitate price discrimination. If most or all suppliers apply exclusive distribution, this can soften competition and facilitate agreements at both supplier and distributor level. Finally, exclusive distribution can lead to the closure of other distributors and, therefore, to hinder competition at this level. All distribution agreements are potentially contrary to EU competition law and UK competition law. Designated distributors should carefully consider the type of agreements they wish to enter into and possibly ensure that they are covered by an appropriate de minimis exemption or other specific exemption. A distribution contract is a commercial contract between a supplier of goods and a distributor of goods. The supplier may be a manufacturer or reseller of the products. In the modern business world, more and more companies are participating in distribution agreements that transcend international borders. According to the World Bank, international trade accounted for nearly a third of U.S. gross domestic product (DPG) in 2017. Companies active in this type of cross-border activity need well-structured international distribution agreements.