Most Read Contributor in Hong Kong, September 2016
Keywords: selective distribution, distribution
What is selective distribution?
Selective distribution is a type of distribution agreement where
a supplier sells goods or services to a limited number of
"authorised distributors" who are selected on the basis
of a set of criteria.
Why distribute selectively?
Selective distribution is an effective way for a supplier to
monitor and control the resale process.
As a retail strategy, selective distribution is not uncommon in
the sale of goods, e.g. high-tech or complex goods, which warrant
technical expertise and responsible selling, or luxury goods where
quality customer service and the retail experience is integral to
What harm could arise from selective distribution
According to the draft implementation guidelines published by
the Hong Kong Competition Commission, selective distribution
arrangements are often economically beneficial and an effective way
of furthering inter-brand competition.
The potential benefits of selective distribution include:
Enabling a supplier to build and maintain the image and
reputation of a luxury brand;
Incentivising retailers to increase marketing efforts;
Encouraging retailers to invest in staff training and improve
customer service; and
Setting and maintaining quality standards.
Where the supplier and/or authorised retailer(s) have market
power, however, there is a risk selective distribution may exclude
the entry of more efficient or "discount" retailers. In
oligopolistic markets, the prevalence of selective distribution
networks may facilitate collusion among suppliers.
What selection criteria are acceptable?
Generally, qualitative and objective criteria
that are fairly and uniformly applied will not be viewed as
Quantitative criteria such as a fixed number of retailers by
locality, the carrying of minimum stock or achievement of minimum
turnover may not be problematic, but a review of the selective
framework would be advisable to rule out any potentially negative
effect on competition.
Next week, we will take a look at franchise agreements.
Mayer Brown is a global legal services organization
comprising legal practices that are separate entities (the Mayer
Brown Practices). The Mayer Brown Practices are: Mayer Brown LLP, a
limited liability partnership established in the United States;
Mayer Brown International LLP, a limited liability partnership
incorporated in England and Wales; Mayer Brown JSM, a Hong Kong
partnership, and its associated entities in Asia; and Tauil &
Chequer Advogados, a Brazilian law partnership with which Mayer
Brown is associated. "Mayer Brown" and the Mayer Brown
logo are the trademarks of the Mayer Brown Practices in their
This article provides information and comments on legal
issues and developments of interest. The foregoing is not a
comprehensive treatment of the subject matter covered and is not
intended to provide legal advice. Readers should seek specific
legal advice before taking any action with respect to the matters
discussed herein. Please also read the JSM legal publications
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
As mentioned in our previous alert in this series, the Hong Kong Competition Commission's investigative process begins with an Initial Assessment to screen suitable cases for further investigation or other action.
The investigative process begins by the Hong Kong Competition Commission (the "Commission") identifying a potential contravention of a competition rule.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).