Distribution and Reseller Agreements

The legal framework

In a distribution agreement, a distributor buys goods from a supplier and resells them in its own name and at its own risk. A reseller does much the same, usually without territorial exclusivity. An agent, by contrast, negotiates or concludes contracts on behalf of the supplier. The distinction matters because different regimes apply.

Contract law is mostly national. There is no EU distribution law. Each member state has its own contract law, and some also have specific rules for distributors. What the EU does harmonise sits around the contract: competition law, the rules for commercial agents, late payment, and the rules on which law and which court apply.

EU competition law. The Vertical Block Exemption Regulation (EU) 2022/720, applicable until 31 May 2034, exempts vertical agreements when the supplier's and the buyer's market shares are each below 30%, provided the agreement contains no hardcore restriction. Hardcore restrictions include fixing the distributor's resale price (a recommended or maximum price is allowed), and restricting the territory or customers to whom the distributor may sell passively. An exclusive distributor can be restricted in active sales into territories reserved to the supplier or other exclusive distributors. Restrictions that prevent the effective use of the internet are hardcore, but a supplier may impose quality criteria for online sales and, subject to the guidelines, restrict the use of certain marketplaces. Different wholesale prices for online and offline sales are no longer hardcore unless they aim to prevent effective online sales.

Commercial agents. The Commercial Agents Directive (86/653/EEC) harmonises the position of self-employed agents across the EU: commission, minimum notice periods and an indemnity or compensation on termination. The protection cannot be waived by contract, and member states have implemented the details differently. It does not cover distributors, who buy and resell.

Which law and which court. Parties can generally choose the governing law (Rome I Regulation) and the courts (Brussels I bis Regulation). Without a choice, Rome I points for a distribution agreement to the law of the distributor's country. A choice does not switch off national rules that are mandatory, and courts have in some cases applied the agents rules despite a non-EU governing law.

Protection for distributors differs per country. Some member states protect distributors on termination by statute, others rely on general contract law or apply the agency rules by analogy. Where a statute applies, the distributor may be entitled to a reasonable notice period or payment in lieu, and to compensation, which can include a goodwill indemnity. Such protection is often mandatory and can survive a foreign governing law. Fixed-term agreements that are repeatedly renewed can be treated as indefinite, so the label in the contract is not decisive.

Late payment and standard terms. The Late Payment Directive (2011/7/EU) gives businesses statutory interest and a fixed recovery cost on late payment between businesses, and limits how far payment terms can stretch. Unfair-terms rules between businesses are national: the EU directive protects consumers only, and some member states have their own business-to-business rules.

In practice

IP provisions that should be in every distribution agreement

A distribution agreement has IP consequences that are easy to overlook. The agreement should include a controlled trademark licence with brand guidelines attached, quality control over how the brand is presented, territory limits consistent with competition law, ownership of any modifications or local adaptations, and what happens to stock, materials and brand use on termination. Each closes a way the relationship can erode your rights. See also licensing agreements.

The authorised-seller list as enforcement tool

A current list of authorised distributors sharpens enforcement. When monitoring finds a seller online, it can be checked against the list, known partners are cleared quickly, and unknown sellers are escalated. Keeping distribution relationships documented therefore serves two purposes: it governs the relationship and it feeds our online brand monitoring and brand policy compliance.

An example

A cosmetics brand appoints a Dutch distributor on an indefinite exclusive basis, with no IP provisions. Sales grow. Two years later, the distributor starts sourcing from a parallel channel and repackaging goods under the brand. The brand wants to terminate. Whether that is cheap or expensive depends on the national law that applies: if the distributor's national law gives it statutory protection, the distributor may claim compensation, so the brand must prepare the notice carefully. Without IP provisions its position on the repackaging is weak either way. An agreement with a clear licence, quality and repackaging rules, and a defined notice would have given more tools.

Frequently asked questions

Does a national distribution law apply to us?

It depends on the countries involved and the contract. Some member states protect exclusive distributors by statute, and that protection can survive a foreign governing law. Check the law of the distributor's country before you choose a law or sign.

Can we stop a distributor from selling online?

Not entirely. A ban on selling online is a hardcore restriction under EU competition law. You can set quality standards for online sales and, within limits, restrict certain platforms.

Can we fix the distributor's resale price?

No. A fixed or minimum resale price is a hardcore restriction. A recommended or maximum price is allowed if it does not operate as a fixed price in practice.

Why does the contract need a trademark licence?

Because the distributor uses your brand. A licence sets the permitted use, the quality standards and what must stop when the relationship ends.

How this connects

Distribution agreements are part of our commercial contracts and transactions work. The brand side is covered by brand policy compliance. We review distribution terms with our contract review and keep notice periods and reporting duties visible through the rights and obligations register.