Distribution and Agency agreements disputes

A distributor or agent can provide businesses looking to enter a new market or territory with access to local market knowledge and potential customers. This avoids the need for a business to incur the expense of opening a new office or recruit its own team.

A distributor will buy the goods from you and will use their existing networks/customers with that market to sell your goods on. It Is likely that a distributor will purchase the goods at wholesale price and sell them on for a profit. In these circumstances, the distributor will be entering into contracts with the customers directly.

Agents on the other hand do not sell goods directly to customers but instead negotiate and conclude sales on your behalf. Agents will make a commission percentage on any sales they achieve and are generally cheaper than selling with a distributor.

What types of distribution agreements are there?

  1. Exclusive distribution agreements
  • This gives the distributor the exclusive right to sell products in the territory covered by the distribution agreement. The supplier will also be prevented from selling goods directly in the territory
  1. Sole distribution agreements
  • The supplier will appoint the distributer as the only party he will contract with in the territory covered by the distribution agreement. The supplier will not be prevented from selling goods in the territory and the distributor will usually agree that the supplier will be the only one it contracts with for that particular good.
  1. Non-exclusive distribution agreements
  • The supplier is essentially permitted to contract with other distributors within that particular territory.
  1. Selective distribution agreements
  • This will limit the number of distributors the supplier will appoint in a particular territory.

Questions of competition law

It is not uncommon for distribution agreements to give rise to anti-competitive behaviours which can contravene both EU and UK competition law. Specifically, anti-competitive agreements can contain the following so called restricted activities.

  • Fixed prices for goods or services
  • Limiting production in a market
  • Dividing up markets and pools of customers
  • Discriminating between prices charged to customers for the same products

Agent regulations

The Commercial Agents (Council Directive) Regulations 1993 govern the relationship between a commercial agent and a supplier (principal) and are implied into all commercial agency contracts. The regulations include provisions relating to remuneration of an agent and termination of agency contracts. The importance of these regulations cannot be overstated as the principal can be liable for a significant sum in the event that the relationship between the parties break down. We recommend that professional advice is sought before entering into a contract to prevent a dispute from arising in the first place.

If your business is experiencing any issues relating to a distribution or agency agreement, we can offer our expertise and skills in dealing with complex disputes. The starting point will be to analyse any agreements and the factual position. We will discuss your goals with you, and provide advice as to next steps with the aim of a speedy resolution.