With a selective distribution, the supplier undertakes to sell its products only to selected distributors, which in turn undertake not to sell the relevant products to other unauthorised distributors.

With an exclusive distribution, the supplier agrees to sell its products to only one distributor for resale in a particular territory, while the exclusive distributor undertakes not to actively sell into the territory reserved to another distributor.

In both cases, there are no antitrust concerns where the market share of each the supplier and the distributor does not exceed 30%, provided that the agreements do not contain the following forbidden restrictions (and our antitrust experts can certainly let you know more about that!).

As for the selective distribution forbidden restrictions:

  • resale price restrictions;
  • active or passive sales restrictions on authorized dealers (except for the restrictions on the wholesalers not to sell to end-users);
  • restrictions on cross supplies between members of the same selective distribution system.

As for the allowed restrictions:

  • restrictions on the place of establishment of the distributor;
  • restrictions on the active sales to a territory where an exclusive distribution system is operated.

As for the exclusive distribution forbidden restrictions:

  • resale price restrictions;
  • general sales restrictions, other than restrictions on the wholesalers not to sell to end-users;
  • restrictions on passive sales (responding to unsolicited requests) from other territories.

As for the allowed restrictions:

  • restrictions on the place of establishment of the distributor;
  • exclusive purchasing obligations from the supplier.

We have read many interesting articles and blogs on how to devise a distribution strategy or how to choose the right distributor. There are a lot of common sense suggestions, including doing the homework with a prior study of relevant market, not to depend upon a single (and too powerful) distributor in a new market when no clear exit strategy is devised at the inception of the relationship, etc.