Distribution

What we do

The distribution relationship is a contractual relationship between a supplier and a distributor. The supplier undertakes to supply products to the distributor over an extended period. The distributor is responsible for the sale of those products at their own risk and expense. The distribution relationship is agreed upon in a distribution agreement. Distribution agreements are special contracts entered into for a long period. The distribution agreement may be characterized by, among other things, exclusivity clauses, intellectual property provisions, and special termination arrangements. We have the experience and expertise to advise or represent you regarding the conclusion of a distribution agreement, the interpretation of a distribution agreement, or conflicts arising therefrom.

Plan of approach

We have the experience and expertise to advise the company on the steps to be taken and can guide the company from start to finish.

Is the company planning to enter into distribution agreements as a supplier to sell products? It is advisable for the organization to be assisted or represented by expert professionals during the negotiation of the agreement. Does the company have a conflict with a distributor? We have the experience and expertise to advise or represent the organization regarding the interpretation of a distribution agreement or conflicts arising therefrom.

Distribution disputes: where the conflicts arise

Within our Litigation / Disputes , a distribution conflict rarely revolves solely around the principal obligation. Most disputes arise concerning the peripheral conditions of the distribution agreement: breach of exclusivity, failure to meet purchase targets or minimum purchase obligations, (too) abrupt termination, disputes regarding sales prices and margins, and the settlement of inventory and intellectual property after termination. Because the law provides no separate regulation for distribution agreements, such a dispute is governed by general contract law and by what the agreement itself stipulates. This makes a sharp reading of the contract and the facts decisive. Our mixed teams of lawyers and in-house counsel litigate for both international corporations and independent distributors, ranging from specialized wholesalers to the local baker who exclusively carries a brand.

Termination of the distribution agreement

The sharpest point of contention is usually termination. A distribution agreement is a long-term contract, and there is no standard statutory regulation governing its termination. If a termination clause is included in the contract, that serves as the starting point; if absent, the court assesses the case against the requirements of reasonableness and fairness set out in Article 6:248, paragraph 1, of the Dutch Civil Code. This standard may entail that termination is only possible on the grounds of sufficient gravity, that a reasonable notice period must be observed, and/or that compensation for termination or damages must be offered. The Supreme Court confirmed this framework in, among others, the judgments in De Ronde Venen/Stedin (2011) and Auping/Beverslaap (2013). The longer the relationship has lasted and the more dependent the distributor has become, the longer the notice period the court deems reasonable; in practice, this ranges from a few months for a short relationship to a year or more following a long-term collaboration. We assess for both the supplier and the distributor whether a termination holds up and what period and compensation are appropriate.

Dissolution, performance and summary proceedings

In addition to termination, dissolution and performance play a major role in distribution disputes. In the event of a failure to perform, the counterparty may dissolve the agreement in whole or in part pursuant to Article 6:265 of the Dutch Civil Code, provided that the failure justifies dissolution and, where performance is still possible, following a notice of default pursuant to Article 6:82 of the Dutch Civil Code. If delivery or acceptance is suddenly suspended, summary proceedings for performance are often the quickest means to temporarily secure the supply or sales. If circumstances change so drastically that maintaining the agreement unchanged is unreasonable, Article 6:258 of the Dutch Civil Code (unforeseen circumstances) offers a avenue to amend or terminate the agreement. We assess on a case-by-case basis which route—performance, dissolution, damages, or a combination—best serves the interests of the enterprise.

Exclusivity, targets and competition

Many distribution disputes revolve around exclusivity and targets. If the supplier breaches the agreed exclusivity by selling directly or through third parties in the assigned territory, this constitutes a breach that may lead to damages or dissolution; conversely, if the distributor fails to meet the agreed minimum purchase volume, this may constitute grounds for termination. At the same time, the limits of competition law apply: exclusive and selective distribution agreements are in principle permitted under the European block exemption for vertical agreements, provided that both the supplier and the distributor generally remain below a market share of 30%, but prohibited hardcore restrictions — such as the imposition of fixed or minimum sales prices or an absolute territorial ban — can render a clause void. We assess the viability of distribution clauses and apply this assessment offensively or defensively in legal proceedings.

Dispute resolution and strategy

Not every distribution dispute belongs in court. Together with the company, we determine the route that serves the business interest: a negotiated solution or settlement agreement to save the relationship, mediation, arbitration where the contract opts for this (think of international chains), or proceedings before the competent court. In the case of cross-border distribution, we first assess jurisdiction and applicable law, as the outcome depends heavily on this. Our mixed teams of lawyers and in-house counsel act as intermediaries between the group defending a global distribution network and the small entrepreneur losing their sole supplier — always with the same commitment to an outcome that holds up legally and works commercially.