Selling In The EU
For businesses looking to start selling into the EU, there is a variety of models that can be used. Each option has pros and cons, and choices will be driven by commercial priorities.
European Union
Antitrust/Competition Law
For businesses looking to start selling into the EU, there is a
variety of models that can be used. Each option has pros and cons,
and choices will be driven by commercial priorities. A summary of
the most common models, together with pros and cons, is set out
below:
Establish owned network
Features |
- Physical presence in relevant territories
|
Pros |
- Territories can be served exactly as wanted—customer and
territory allocation possible
- Competition law on restrictive agreements does not apply to
internal company arrangements
- Pricing to customers set by supplier
|
Cons |
|
Agency
Features |
- Agent authorised to sell on behalf of supplier (principal)
- Agent generally contracts with customer in name of
supplier
- Terms and conditions of sale to customer and price can be set
by supplier
- For sale of goods, commercial agency rules provide various
rights/ protections including to compensation on termination
|
Pros |
- Supplier can set selling price and allocate customers
- Competition law on restrictive agreements generally does not
apply to agency relationships
|
Cons |
- Supplier must bear commercial and financial risks
- Potentially substantial liabilities on termination
|
Selective distribution
Features |
- Often used for luxury items, cosmetics and electrical
goods
- Distributors selected according to "specified
criteria" – usually relating to quality of premises,
staff training, service support etc.
- Restrictions on sales by members of the system to unauthorised
distributors are permitted, but... Every distributor must be free
to sell actively and passively to other members of the system
wherever they are located and, in the case of retail distributors,
to end users anywhere in the EU
|
Pros |
- Goods only circulate within the network of authorised
distributors and to end users
|
Cons |
- Cannot allocate customers or territories between
distributors
|
Exclusive distribution
Features |
- One distributor appointed per territory/customer group
- Territories/customer groups not allocated to a distributor may
be reserved to supplier
- Wholesalers may be prevented from selling direct to end
users
- No requirement to justify choice of customer group –
possible to cherry-pick the best customers
- Sales restrictions on downstream buyers are prohibited
|
Pros |
- Tighter exclusivity for immediate buyers
- Customer and territorial allocation possible
|
Cons |
- Cannot prevent free circulation of goods within EU once sold by
the immediate buyers of goods Cannot prevent passive sales by
immediate buyers
|
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.