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Selling in the EU

John Cassels
19/09/2014

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United Kingdom

For businesses looking to start selling into the EU, there is a variety of models that can be used.

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
  • Costly to establish

 

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

 

If you are interested in these issues, please do not hesitate to contact John Cassels at john.cassels@fieldfisher.com