Selective Distribution Agreement Example

A selective distribution agreement allows suppliers to designate certain distributors based on their specific needs. Suppliers agree to deliver only to licensed distributors that meet certain minimum criteria and distributors agree to supply only end consumers or other distributors or distributors in the authorized network. These specific minimum criteria are often set out in a timetable at the end of the agreement. These criteria may include appropriate space, adequate sales staff training and adequate after-sales service. The guidelines were intended to update the definitions of active and passive sales in light of the growth of e-commerce. Internet use is generally considered a passive sale. Specifically, policies provide that the use of a website is considered a passive sale as long as it is not directed towards specific customers. B, for example, by using online banner ads and unwanted emails to customers. These practices are considered an active sale.13 This distinction is less relevant in the context of selective distribution systems, since active and passive sales to end customers (and other authorized distributors) must be authorized. The 2010 Commission guidelines (point 225) show some weakening of the strict traditional position in this area and recognize that maintaining resale prices can, in certain circumstances, generate economic efficiency gains and thus satisfy the review of the section 101 exemption, paragraph 3.

The guidelines state that resale prices may be justified during a first phase of product launch or for coordinated short-term promotions on a franchise or distribution network. In the context of selective distribution, the „freeriding“ argument referred to above presents the observations that maintaining the resale price may be justified to prevent outdoor driving, since retailers investing in additional after-sales services may reduce these services if they are underestimated by retailers who do not provide such services. However, there will be a high burden of proof to justify these provisional derogations under Article 101, paragraph 3, and caution is essential. The benefits of VABER are generally not available for distribution agreements made by real or potential competitors. A potential competitor in this case is a party that, in response to a small but lasting price increase, could and would be likely to enter the market quickly (within about 12 months). There is an important condition for the exclusion of competing parties under the category exemption. The category exemption applies when competitors enter into a non-reciprocal distribution agreement (i.e. only one party is distributed for the other) and since 1 May 2004, the parties must draw their own conclusions about the compatibility of their trade agreements with EU competition law. Although many selective distribution agreements are considered to be free of competition, there are strict conditions that must be met and the conditions of these agreements must be reviewed on a case-by-case basis.

If you have kept abreast of EU competition law, you have probably heard of the Coty case. In 2017, the European Court of Justice has confirmed that luxury brands can prevent distributors operating in a selective distribution network from selling their products via online platforms of third parties, such as Amazon and eBay, if: – distributors are selected on the basis of objective and qualitative criteria; The criteria are applied in a uniform and non-discriminatory manner; The criteria do not go beyond what is necessary; The limitation of the preservation of the luxury image of the goods.