Distribution agreement
A wholesaler in Düsseldorf wants to take your trainers for Germany and Austria. Fixed orders every season, its own showroom, sales reps who know the shoe shops. In return the wholesaler wants exclusivity, and ideally for your own webshop to stop delivering there. That last part is not something you can simply promise.
A distribution agreement sets out the terms on which a distributor buys your products and resells them in its own name in a particular territory. What applies is largely in that contract itself. On top of it come the general rules of the Dutch Civil Code and European competition law, and the latter decide how much you can dictate to the distributor about territory, customers and prices.
Need a distribution agreement drafted or checked? Call 020 675 88 21 or get in touch. You will have a reply within one working day.
When a distributor is a better fit than a commercial agent
A distributor buys your collection, pays your invoice and is left with any boxes that don’t sell. The boutique or department store is the distributor’s customer, not yours. You receive the purchase price and the distributor earns the margin.
For a brand opening up a new country, that is attractive: money up front and a partner who already knows the market. You give up control in exchange. Which shops get your collection, how it hangs in the store and who holds the customer data are largely for the distributor to decide.
With a commercial agent the money flows the other way. The agent negotiates sales, you deliver and invoice, and the agent earns commission. Dutch law has its own rules for that relationship, including a goodwill indemnity when it ends (Article 7:442 of the Dutch Civil Code).
More about the commercial agency agreement →
An exclusive distribution agreement: what sales you can prohibit the distributor from making
Exclusivity is usually what a distributor asks for in return for investing in your brand. You promise not to appoint another distributor in the territory, and sometimes not to sell there yourself. The European block exemption for vertical agreements, Regulation (EU) 2022/720, allows you to allocate a territory or a group of customers to yourself or to no more than five buyers (Article 1(1)(h)).
What you can impose on the distributor itself is narrower. You may prohibit it from actively approaching customers in territories you have kept for yourself or given to another exclusive distributor (Article 4(b)). Passive sales you cannot stop. If a boutique in Copenhagen emails your German distributor of its own accord, the distributor is free to deliver.
Active selling covers more than visits and phone calls. Targeted online advertising counts too, as does a webshop in a language not commonly used in the distributor’s own country. A Dutch distributor with a French-language webshop is therefore actively targeting France (Article 1(1)(l)).
A complete ban on online sales goes too far. You may not prevent the distributor from making effective use of the internet to sell your products (Article 4(e)). Other restrictions on online sales are permitted, as long as that is not their object.
A fixed resale price costs the whole agreement its block exemption
A mid-market brand does not want its distributor offering the collection at half price in November. Even so, you may not impose a fixed or minimum resale price. A maximum price or a recommended price is allowed, provided you do not enforce it through pressure or incentives as though it were a fixed price (Article 4(a) of the Regulation).
If the contract contains a fixed or minimum resale price, the entire agreement loses the exemption. Not just that one clause. Under Dutch law, agreements that breach the ban on anti-competitive agreements are void by operation of law (Article 6(2) of the Dutch Competition Act, the Mededingingswet).
The exemption only applies as long as you and the distributor each hold no more than 30% of the relevant market (Article 3). If your share rises above that, you keep the exemption for two more calendar years after the year in which you first crossed the threshold (Article 8(d)).
How long a distributor can be required to sell only your brand
If you want the distributor not to stock competing brands, that is a non-compete obligation. An obligation to buy more than 80% of its purchases in your product category from you counts as one too (Article 1(1)(f) of the Regulation). Such a clause only falls within the exemption if it lasts no longer than five years. One for an indefinite period does not qualify (Article 5(1)(a)).
Once the relationship ends, there is much less room. A ban on selling competing products after that point only falls within the exemption if it is limited to the premises the distributor operated from, is indispensable to protect know-how you transferred, and lasts no more than one year (Article 5(3)). Better to settle what happens on parting to the stock, the customer list and the campaign images.
If the distributor may use your trade mark, photos and product copy in its own webshop and on Instagram, record that in the same contract. Intellectual property provisions fit within the exemption as long as they are ancillary to the sale (Article 2(3)). Register your trade mark in the distributor’s country in your own name, not the distributor’s. More on that under trade mark law.
Terminating a distribution agreement with a reasonable notice period
If the contract sets a notice period, that applies. If there is no termination clause, a distribution agreement for an indefinite period can in principle be terminated. Reasonableness and fairness (Article 6:248(1) of the Dutch Civil Code) may then require a compelling reason, a reasonable notice period or an offer of compensation. The longer the relationship has lasted, the longer that period will generally be.
The district court of Overijssel showed in 2023 how this works out. Since 2018 a Benelux distributor had exclusively sold the rubber boots of a Danish brand, on the basis of oral arrangements. In March 2022 an email announced that another distributor would take over at the end of that month. Barely two weeks. The reason given, a better offer from a competitor with a warehouse in the Netherlands, was too general for so short a period, the court found. The distributor asked for two years. Too long, the court held, as that would leave the brand too little freedom over its own distribution policy. The outcome was six months: enough to wind down and keep selling boots into the winter season. The amount of damages is to be determined in separate proceedings (ECLI:NL:RBOVE:2023:1738).
If you are the distributor, keep a record of what you invest in the brand and agree who keeps the customer data and the images you commission. In the same case the brand was allowed to pass the distributor’s photos on to its successor. Nothing had been agreed about them.
A lawyer to draft or review your distribution agreement
We draft distribution agreements for fashion and design brands and manufacturers, and review the contracts that distributors and importers put forward. If you are unsure whether a clause on prices, online sales or a competing brand will hold up, we check it against the block exemption. If a notice of termination is already on the table, we first work out what period is reasonable and what that means in money.
For the distribution of a film or of music, see the distribution agreement for film or the music distribution deal.
Want a distribution agreement drafted or reviewed, or is a termination under way? Get in touch or call 020 675 88 21.
