Exclusive distribution in the EU: what a brand may restrict
What EU competition law lets a brand restrict when it appoints an exclusive distributor: active and passive sales, territories, online sales and resale prices.
A brand that appoints an exclusive distributor in one EU country often expects that country to be closed to everyone else. Under EU competition law it cannot be fully closed. Commission Regulation (EU) 2022/720 lets a brand stop its other distributors from actively selling into an exclusive territory. It does not let the brand stop them from answering customers who come to them unasked. A contract that tries to seal a territory can lose the protection of the Regulation altogether.
Suppose a kitchenware maker appoints one distributor for Spain and another for France, and supplies both from one stock in Portugal. The details are hypothetical, for the mechanics only. A retailer in Madrid writes to the French distributor and asks for a price. The Spanish distributor asks the brand to forbid the sale. What the brand may do turns on four distinctions: active or passive, contract or silence, offline or online, recommended price or fixed price.
The rule that governs EU distribution agreements
An agreement between a brand and its distributor is a vertical agreement, because the parties work at different levels of the supply chain. Article 101 of the Treaty on the Functioning of the European Union prohibits agreements that restrict competition. Regulation (EU) 2022/720, the Vertical Block Exemption Regulation, exempts most vertical agreements from that prohibition. It entered into force on 1 June 2022 and expires on 31 May 2034.
The exemption has two conditions that matter to a brand appointing distributors. First, the supplier’s market share must not exceed 30 percent. The buyer’s share of the market on which it buys must not exceed 30 percent either. That is Article 3(1). Second, the agreement must not contain a hardcore restriction listed in Article 4.
Article 4 states that the exemption does not apply to an agreement that has one of those restrictions as its object. One hardcore clause can take the whole distribution agreement outside the EU block exemption. Whether a brand sits under the 30 percent threshold depends on how its market is defined. That question belongs with a competition lawyer in the market concerned.
Active sales and passive sales are treated differently
The Regulation draws its main line between two kinds of sale. Active sales mean actively targeting customers by visits, letters, emails, calls or other means of direct communication. They also cover targeted advertising and promotion, offline or online. Article 1(1)(l) names price comparison services and search engine advertising aimed at particular territories or customer groups. It also lists a website with a top-level domain for a particular territory. Website language options count too, where they are commonly used in particular territories and differ from the languages commonly used where the buyer is established.
Passive sales are sales made in response to unsolicited requests from individual customers. Under Article 1(1)(m), delivering goods to those customers counts as passive. So do sales arising from public procurement and replies to private invitations to tender.
Where a brand runs an exclusive distribution system, Article 4(b)(i) allows it to restrict active sales by a distributor and its direct customers. The restriction may cover territories or customer groups reserved to the brand, or allocated exclusively to other distributors. Restricting passive sales is a hardcore restriction. Article 4(b) lists a few narrow exceptions, such as stopping a wholesaler from selling to end users.
A brand may stop a distributor from campaigning in another distributor’s country. It may not stop that distributor from filling an order that arrives unprompted.
An exclusive territory needs matching clauses elsewhere
Article 1(1)(h) defines an exclusive distribution system. The supplier allocates a territory or customer group exclusively to itself or to a maximum of five buyers. It also restricts all its other buyers from actively selling into that territory or group. Exclusivity is therefore a set of clauses across every distribution contract, not a promise made in one.
The Court of Justice applied this in case C-581/23, Beevers Kaas, decided on 8 May 2025. Cono, a Dutch producer of Beemster cheese, had appointed Beevers Kaas as its exclusive distributor in Belgium. Albert Heijn, a supermarket chain buying the cheese for markets outside Belgium, resold it in Belgium, according to Beevers Kaas. Cono’s contracts with its other buyers had no clause restricting active sales into Belgium.
The Court held that the mere absence of sales by other distributors into the territory does not show that a restriction exists. The supplier must be able to show an invitation to its other buyers not to sell actively, and their express or tacit acceptance of it. The case was decided under the 2010 regulation. The 2022 definition in Article 1(1)(h) also requires that the supplier restrict all its other buyers.
Online sales cannot be blocked outright
Under Article 4(e), preventing the effective use of the internet by the buyer or its customers to sell the contract goods is a hardcore restriction. The same point leaves room for other restrictions of online sales. It also allows restrictions of online advertising, provided they do not aim to prevent the use of an entire online advertising channel.
The active and passive line runs online too. A distributor’s own web shop, reached by a customer who searched on their own, may produce passive sales. Search advertising bought to target another distributor’s exclusive country is an active sale, and the brand may restrict it.
The brand may recommend a price but not fix it
Article 4(a) makes it a hardcore restriction to limit a buyer’s ability to determine its own sale price. A supplier may impose a maximum sale price or recommend a sale price. That holds only where pressure or incentives from any party do not turn it into a fixed or minimum price.
A recommended retail price is a tool for the price conversation. It is not a term the brand can enforce. How a recommended shelf price is built, rung by rung, is set out in building a distributor price ladder in Europe.
What happens when a clause goes too far
The European Commission enforces these lines with fines. On 17 December 2018 it fined the clothing company Guess EUR 39,821,000 over its selective distribution system. Guess’s agreements stopped authorised retailers from using the Guess trademarks in online search advertising. They required Guess’s prior authorisation to sell online, barred sales to consumers outside allocated territories and barred retailers from setting their own retail prices. The Commission reduced the fine by 50 percent for cooperation.
The Guess system was selective rather than exclusive, but the point carries over. A clause that seals a territory or switches off online selling is a risk to the whole agreement, not a detail of it.
One EU stock serving several distributors
Stock does not decide territory. Goods released for free circulation in Portugal can be sold to a distributor in Spain, another in France and another in Germany. A seller generally charges no VAT on goods shipped to a business in another EU country with a valid EU VAT number. Exceptions apply. That rule is explained in zero-rated B2B sales from stock in Portugal.
A warehouse ships to the address on the order. It cannot tell whether the sale behind the order was active or passive. The contracts decide that, and the brand enforces them.
Back to the kitchenware maker. The Madrid retailer wrote to the French distributor unprompted, so the sale is passive and the brand cannot forbid it. The brand could have barred the French distributor from advertising in Spain. That works only if every other distributor contract carries the same restriction. Under Article 1(1)(h) the brand may also reserve a territory or customer group to itself. Supplying it from the same stock is covered in one EU stock pool for B2B and B2C buyers.
How EFC handles territory in distributor work
EFC is a Portuguese company. Its business development division works as one team, from market strategy to delivery. EFC develops the market, identifies and approaches the distributors and chains, and once orders follow, handles customs clearance, VAT, warehousing and fulfillment from Portugal. How EFC helps brands find distributors in Europe is set out market by market.
The client decides territory before the first approach. The approach material states which markets are offered exclusively, to how many distributors, for how long and against which targets. The client signs its own contracts, drafted by its own lawyer. EFC does not buy or sell the goods and is not a distributor or a commercial agent.
On the operating side, one stock in Portugal serves every distributor’s orders. The goods are imported under the client’s own EU VAT and EORI numbers, or EFC’s operation provides the importer of record where needed (not for medical devices).
What this article does not settle
This is a summary of the EU rules, not legal advice. Market definition, selective distribution, non-compete clauses and national contract law can all change the answer. A distributor is also not a commercial agent, whose exit terms are set by law, as covered in commercial agent, or a managed route?. The questions a distributor raises before signing, exclusivity among them, are in what European distributors ask before signing.
Sources
| Label | Value | Source |
|---|---|---|
| Vertical Block Exemption Regulation | Commission Regulation (EU) 2022/720 of 10 May 2022; enters into force 1 June 2022, expires 31 May 2034 (Article 11) | Regulation (EU) 2022/720, official text, Publications Office of the EU, opened 2026-10-19 |
| Legal basis and publication | applies to vertical agreements under Article 101(3) TFEU; entered into force 1 June 2022; OJ L 134, 11.5.2022 | European Commission, DG Competition, vertical block exemptions, opened 2026-10-19 |
| Market share threshold | supplier’s share not above 30 percent; buyer’s share of the market on which it purchases not above 30 percent (Article 3(1)) | Regulation (EU) 2022/720, Publications Office of the EU, opened 2026-10-19 |
| Exclusive distribution system | territory or customer group allocated exclusively to the supplier or to a maximum of five buyers; all other buyers restricted from active sales into it (Article 1(1)(h)) | Regulation (EU) 2022/720, Publications Office of the EU, opened 2026-10-19 |
| Active and passive sales | active: direct communication and targeted advertising, including price comparison services, search engine advertising, territory-specific top-level domains and language options (Article 1(1)(l)); passive: sales in response to unsolicited requests from individual customers, including public procurement and private tenders (Article 1(1)(m)) | Regulation (EU) 2022/720, Publications Office of the EU, opened 2026-10-19 |
| Hardcore restrictions | resale price, with maximum and recommended prices allowed (Article 4(a)); territory and customers in an exclusive system, with active-sales and other listed exceptions (Article 4(b)); effective use of the internet (Article 4(e)) | Regulation (EU) 2022/720, Publications Office of the EU, opened 2026-10-19 |
| Beevers Kaas | case C-581/23, judgment of 8 May 2025; absence of sales by other distributors not enough; supplier must show an invitation not to sell actively and the buyers’ express or tacit acceptance (as reported in law-firm summaries) | Ashurst Perkins Coie, CJEU sharpens stance on active sales bans in exclusive distribution (law firm publication), opened 2026-10-19 |
| Guess decision | EUR 39,821,000 fine of 17 December 2018 over its selective distribution system; restrictions on search advertising, online sales and cross-border sales; 50 percent reduction for cooperation | CMS, Guess what? Blocking cross-border sales can be expensive (law firm publication), opened 2026-10-19 |
| Sale to a business in another EU country | no VAT charged if the customer has a valid EU VAT number | Your Europe, cross-border VAT, opened 2026-10-19 |