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Sales Territory Agreement

The allocation of territorial protection in a distribution agreement is not considered a “characterized restriction” provided that five conditions are met. In this case, the category exemption may give an advantage. The cumulative conditions are: 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. Distribution agreements are an integrated instrument for establishing a relationship between a distributor and a supplier. A well-written agreement can help develop this relationship. The agreement cannot extend the life of a relationship as soon as the relationship expires. A poorly written agreement often results in legal litigation, which in turn consumes management time, financial resources and the involvement of lawyers, courts and arbitration proceedings. A well-written agreement can eliminate resource expenditures for these non-productive activities and encourage the distributor and manufacturer to do their business at the end of the relationship.

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