Exclusivity is the contractual agreement whereby one party grants specific rights — market, customers, products — exclusively to another party. In our practice, we regularly work with exclusivity in distribution, licensing, and cooperation. The instrument confers commercial power but also imposes restrictions on both parties. Exclusivity that is too broad touches upon EU competition law; one that is too narrow offers no commercial advantage. When well-structured, exclusivity is a powerful growth engine.
What is the legal problem?
Exclusivity agreements touch upon competition law, contractual obligations, and risk allocation. Exclusivity that is too broad may conflict with Article 101 TFEU. One that is too narrow offers little benefit. In the event of underperformance by your exclusive partner, it is difficult to switch. Internationally, legal frameworks vary, making exclusivity different by market.
What does the law say?
Regulation (EU) 2022/720 (vertical agreements) permits exclusivity within the EU, provided that market shares remain below 30 percent (Article 3) and hardcore restrictions are absent (Article 4). The Vertical Guidelines 2022 clarify application. Outside the EU, specific competition rules apply. For agency agreements, exclusivity is often useful to secure commission rights under Article 7:431 of the Dutch Civil Code.
Since 2022, Regulation 2022/720 also regulates online sales restrictions. Dual distribution (where the supplier also sells directly) is permitted under conditions. Under Article 5, some non-compete and single branding restrictions are permitted.
What risks do companies face?
You risk being stuck with a non-performing partner. Competition fines under Article 101 TFEU can accumulate in the event of ill-considered exclusivity. Without targets, exclusivity is costly. Upon termination, claims for lost profits threaten. Online sales and parallel imports undermine exclusivity if it is not properly regulated contractually. An awkward clause regarding hardcore restrictions leads to the nullity of the entire exclusivity.
Practical example from our practice
We advised a Dutch brand manufacturer that granted exclusivity to a Spanish distributor for the Iberian Peninsula without targets and without a termination clause in the event of underperformance. The distributor performed consistently poorly, but the manufacturer could not switch without a claim for damages. Upon renegotiation, we incorporated: annual targets with objective KPIs, an annual evaluation, automatic exclusivity termination upon a 25 percent miss of the target, and a voluntary transitional arrangement. Underperformance was addressed without a claim.
What can you do?
Always combine exclusivity with measurable targets and evaluation moments. Limit exclusivity to territory, products, or channels where this makes sense. Explicitly keep online sales open or regulate them contractually. Align with Regulation 2022/720 and Article 101 TFEU. Incorporate reasonable termination in the event of underperformance. See also our article on Exclusive distribution agreements: the legal considerations.