Exclusive distribution of goods in the EU

Wednesday, 25. 07. 2018

In the new article, we will bring you closer to our experiences from a few cases we have encountered during our practice when selling goods to consumers.

So how is it?

Precise, or the correct answer to this question will give hardly anyone. Every such case must be considered separately. Everything also depends on the specific agreement of the exclusive distributor for the territory with the manufacturer. European legislation, on the other hand, talks about the free movement of goods and competition.

Some exclusive distributors still benefit from contracts and agreements concluded several decades ago and from their long-term relationships with manufacturers.

Is it right on your side?

In cases where an exclusive distributor begins to "apply" his claims on the import of goods, it is first and foremost necessary to consider your options and perhaps to seek a compromise. If you decide to respond to a distributor's claims, ask him / her for the legal documentation under which they apply them. In many cases, in the light of European law, the free movement of goods and competition, it is likely that you would succeed in the trial and the exclusive distributor would have to withdraw his claim. However, it is doubtful whether you want to invest your energy and time for this fight.

One example

From the experience of our client, Expandeco can tell you more about the impact of long-standing exclusive distributor relationships with the manufacturer. While selling products on foreign market, we found a supplier with better prices for some products, we've changed the original supplier for a new one. However, we did not know about the excellent relationships of the original one with the manufacturer, who pushed the manufacturer against the new supplier to cancel our agreement. It was not worthy for him to break his good relationship with the manufacturer just because of the small company as our client was.

Competition and violations of laws

Globally active manufacturers can operate in countries where they distribute goods in the form of their own companies. For example, if a manufacturer is from Germany and has companies based in each country in the EU, the sole distributor for France is a company belonging to the manufacturer. This company provides both wholesale and retail. It has its various purchasers, for example, shops and online stores with contracts. Its purchasers must comply with the terms and conditions set out in the agreement. However, in the event of their breach, there should be no sanctions. In many cases, violations of competition and antitrust laws have been fined thousands of euros. Similar violations are under the spotlight of the EU.

For example, an online store from Hungary, which buys goods from a local exclusive distributor, does not prevent anyone from selling goods to the surrounding countries even though the manufacturer has their exclusive representation. If the onlone store from Germany interrupts cooperation with the german subsidiary of the manufacturer, no one will prevent him from contacting a subsidiary from Switzerland and distribute goods to Germany. In such cases, the contracts and the parent company should decide about the situation, and they must very carefully determine the rules so they dont break the competition and the free movement of goods laws. Many manufacturers have made mistakes in these steps and therefore lost at court to their purchasers.

Exclusive distributors often claim their position because of the energy and cost consumed to create brand awareness on the given territory. An exclusive manufacturer contract often binds a distributor to comply with a certain marketing strategy and spends on specified marketing activities to increase product sales. These are the reasons why "exclusive" distributors are trying to protect their investments.

Opinion of Expandeco

We brought you closer to our experience when helping our customers in expansion to foreign countries. We are neither experts in European law nor in competition or exclusive distribution contracts. Each case has its own specifications and is required to judge separately.