12 Apr 2021  • 

Selective Distribution Agreement Meaning

A distribution agreement is usually used when a supplier of goods does not have a presence or representation in a particular market or country. Suppliers are generally looking for distributors because they can help in the field with invaluable knowledge and know-how and provide access to well-established distribution channels. A merchant can be either a simple “re-deployment” or a “VAR” (a value-added reseller) that offers end-users additional services such as tracking and repairs. A selective distribution agreement is generally used by a supplier to maintain greater control over the resale of its products. In such a system, the supplier undertakes to supply only merchants who meet certain minimum criteria. In return, distributors agree to supply only other distributors that are in the selective distribution system or the authorized end user. The selection criteria used generally require that products be sold only through outlets with a particular image or that the distributor assume specific obligations, such as staff training or after-sales service. With regard to selective distribution agreements, the key is to achieve a single standard and a consistent quality of service in the outlets where the products are sold. The short answer is – these companies have distribution agreements with Apple. But what is a distribution agreement and why would a simple written or oral agreement not suffice? In general, the parties are required to conduct their own analysis of whether their agreements benefit from Article 101, paragraph 3, but the Commission has also adopted “category exemption regulations” on certain types of common trade agreements, which contain clear rules on the conditions that must be met and the conditions that can be included in an agreement on Article 101, paragraph 3. The category exemption for distribution (the category exemption for vertical agreements (vABER) is one of the main exemption regulations by category of EU competition law in terms of the number of agreements it applies (distribution agreements and other supply agreements are commonplace).

Since 1 May 2004, the parties must draw their own conclusions on the compatibility of their trade agreements with EU competition law. Although many selective distribution agreements are considered to be free of competition, there are strict conditions that must be met and the conditions of these agreements must be reviewed on a case-by-case basis. With respect to Article 6 of Press Release No. 2005/4, the exceptions do not apply to non-competition prohibitions, direct or indirect, under contracts for the sale, maintenance and repair of new motor vehicles. The selective distribution system is defined as a “distribution system in which the supplier undertakes to sell, directly or indirectly, the goods or services that are the subject of the agreement to distributors chosen by the supplier, on the basis of certain criteria, and in which these distributors agree not to sell the products or services in question to unauthorized distributors,” such as Article 1.