Sales Territory Agreement

There is an exemption by European category (Regulation 330/2010) for vertical agreements, for example. B between a supplier and a distributor. On the basis of this exemption, vertical agreements are exempt from the prohibition of cartels, provided that the conditions set out in the exemption are met. In this way, the regulation provides a safe haven for suppliers and distributors to benefit from. One of the preconditions for granting the category exemption is that a distribution agreement between the supplier and the distributor does not contain any provision that seriously harms competition. These types of restrictive provisions are also referred to as “strict restrictions.” Absolute territorial protection is such a “hardcore restriction.” Therefore, the direct consequence of the allocation of absolute protection of the territory in an agreement is that the whole agreement does not benefit from the safe harbor. The entire agreement will then be subject to the no-agreement test. In general, the element of the agreement, which contains a “characterized restriction,” is quickly considered by the courts and competition authorities to be incompatible with the prohibition of cartels. This element is therefore not valid and cannot be applied. In addition, heavy fines can be imposed on the supplier and distributor, as well as the directors involved. Penalties can reach 900,000 euros, or 10% of the group`s turnover and 80% of the group`s turnover. Third parties may also claim claims against the supplier and distributor for losses they have incurred as a result of exclusive protection of the territory.

Distributor franchises may be exclusive, where there will be no other franchised distributor in the territory; or not exclusively if the new distributor could be one of the distributors of several franchisees in the territory. Distributors sometimes use exclusive territory to argue that, without an exclusive area, the distributor is not encouraged to provide adequate resources to the producer to develop sales. As soon as a vendor accepts an exclusive domain, it loses the ability to franchise an additional distributor for a certain period of time. The allocation of an exclusive distribution in an area is an unnecessary leap of confidence on the part of the supplier. An alternative to the allocation of exclusive territory is to design the distribution agreement so that the distributor is not exclusive, but is only a distributor. An oral agreement would indicate that if a supplier`s objectives were met, no additional distributors would be allowed into the non-exclusive territory. Such an agreement encourages the distributor to promote it without restricting the manufacturer`s options. Any new partnership between a distributor and a manufacturer emerges in a period of radiant optimism. Like marriage, there is a limit for the number of partnerships a supplier or trader can participate in. By moving to a new distributor, a supplier is prohibited from signing an alternative distributor. Referral to a new supplier prevents a distributor from immediately signing an additional supplier. When aligning with a new distributor, it is important to assign an area that is not too large at first.

If a trader is only detected in a small area, it is not advisable to assign a large area and hope for the best. A better policy would be to open a new distribution relationship in the proven area of that distributor and gradually expand the territory after the results obtained in the smaller area indicate that an expanded geography is reasonable.