Q&As

Can a non-exclusive distributor appointed to a territory be prevented from selling outside that territory?

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Published on LexisPSL on 21/05/2019

The following Commercial Q&A provides comprehensive and up to date legal information covering:

  • Can a non-exclusive distributor appointed to a territory be prevented from selling outside that territory?
  • Article 101 TFEU and the vertical restraints block exemption
  • Territorial restrictions in distribution arrangements

In this Q&A we are referring to restrictions on sales into territories within EEA.

Agreements between companies operating at different levels in the supply chain are often called ‘vertical agreements’. Vertical agreements may also be described as distribution agreements, although this does not reflect their full range and diversity. However, certain types of distribution arrangement may be prohibited under competition law, some examples of which include:

  1. exclusive distribution—where the supplier agrees to sell to only one distributor for resale in a particular territory (see Practice Note: Competition law and exclusive distribution agreements)

  2. selective distribution—where the supplier agrees to supply only specified approved distributors, who in return agree to sell on only to other approved distributors and end users (see Practice Note: EU competition law and selective distribution)

  3. exclusive customer allocation—where the supplier agrees to sell to each distributor for resale only to an exclusive class of customers

Article 101 TFEU and the vertical restraints block exemption

Article 101 of the Treaty on the Functioning of the European Union (TFEU) prohibits agreements which have as their object or effect the prevention, restriction or distortion of competition within the internal market. It does not apply to agreements within the same corporate group so that agreements between a company and its subsidiaries who may act as distributors will not be caught by Article 101 TFEU. See further Practice Note: The

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