An exclusive distribution agreement is a contract in which the supplier grants sales rights to only one distributor in a specific area. In our practice, we see Dutch manufacturers rapidly opening up international markets using this structure. At the same time, they relinquish commercial control and become bound by strict European competition law. An awkwardly drafted clause can lead to nullity, fines, and costly termination claims.
What is the legal problem?
Exclusive distribution touches upon three legal areas simultaneously: European competition law, the contractual balance, and goodwill upon termination. Exclusivity that is too broad may be contrary to Article 101 TFEU. An awkward termination could result in goodwill compensation in Belgium or parts of the Middle East. At the same time, you desire speed and a grip on the market. This tension makes distribution contracts prone to errors.
What does the law say?
Within the EU, the Group Exemption Regulation on Vertical Contracts (Regulation (EU) 2022/720) applies, published in 2022 and valid until 31 May 2034. Under Article 3 of this regulation, territorial restrictions are permitted for market share below 30 percent. Article 4 prohibits hardcore restrictions such as resale price fixing and restrictions on passive sales.
Under Dutch law, there is no specific distribution law — freedom of contract is the guiding principle. In Belgium, the Law on Unilateral Termination of Exclusive Sales Concessions Granted for an Indefinite Duration (1961, revised 2014) applies, with mandatory compensation upon termination.
What risks do companies face?
Fines under Article 101 TFEU can amount to up to 10 percent of global group turnover. In the event of termination in Belgium, there is a risk of a fair notice period of six to eighteen months plus additional compensation. Awkward minimum selling prices lead to nullity and administrative proceedings by the ACM or the European Commission. Loss of the customer base upon termination makes recruiting a successor expensive. Online sales restrictions have been more strictly regulated since Regulation 2022/720.
Practical example from our practice
We represented a Dutch manufacturer with a French exclusive distributor. The old contract contained a minimum selling price and a prohibition on sales outside France. The Autorité de la Concurrence opened an investigation due to hardcore restriction. We assisted with renegotiation under Regulation 2022/720: recommended prices instead of fixed prices, active sales restriction outside the territory (permitted) but passive sales unrestricted. The proceedings were closed without a penalty. Estimated savings: 4.3 million euros.
What can you do?
Test exclusive distribution contracts against Regulation 2022/720. Clearly define the territory, product portfolio, and customer categories. Agree on measurable sales targets, reporting obligations, and evaluation points. Arrange termination carefully, including notice period and compensation for stock. Align with local protection rules in Belgium, the Middle East, and Latin America. See also our article on Agency or distribution: what is the difference?