Distributor Contracts in the EU: Guide for Business & Lawyers

Distributor contracts in the EU are not governed by a separate law, but that does not mean legal nuances can be ignored. Instead, relationships between the manufacturer and the distributor in the single market are defined primarily by EU competition rules. In this article, we will examine what entrepreneurs and legal professionals should pay attention to when drafting a distribution agreement: from choosing the type of distribution to the critical restrictions that can strip you of the block exemption from antitrust control.
Below you will find an overview of the main tools (VBER, European Commission guidelines), key concepts (market share, “hardcore” restrictions), and practical advice on how to create a contract that meets all EU legal requirements and protects your business from unnecessary risks. If you operate in the B2B segment and are looking for clear, straightforward recommendations—this article is for you.

Regulation (EU) 2022/720 (hereinafter “the new VBER”) has applied since June 1, 2022, replacing the previous Regulation (EU) No 330/2010, which was in force since 2010. The abbreviation VBER comes from the English name Vertical Block Exemption Regulation. This is the standard designation in the EU for the regulation that sets out the conditions for exemption from the prohibition in Article 101 of the Treaty on the Functioning of the European Union (TFEU) for vertical (i.e., manufacturer–distributor) agreements. The new VBER automatically exempts certain “vertical” agreements (including distribution agreements) from the prohibition in Article 101 TFEU, provided some criteria are met.
Key point: Article 101 TFEU prohibits agreements between independent undertakings that may restrict competition within the single market.

Scope of the new VBER (2022/720):

• “Vertical” agreements, i.e., agreements between parties operating at different levels of the production-distribution chain (for example, manufacturer → distributor; distributor → retailer, etc.);
• The average annual turnover of the two parties in the previous calendar year must not exceed a certain threshold (€30 million for the purchasing party and €100 million for the selling party). If one of the parties exceeds that threshold, the exemption does not apply automatically.

Main conditions for exemption:

1. Market share: Each party’s market share in its respective relevant market must not exceed 30 % (if the share exceeds 30 %, the exemption ceases to apply).
2. “Hardcore” restrictions: Certain restrictions, such as a ban on supplying prohibited products or resale price maintenance, automatically remove the agreement from exemption.
3. Duration of the agreement and other ancillary criteria (for example, the existence of territorial or product exclusivity) are not prohibited, but under certain conditions, may require further analysis.

What is exempted:
1. Exclusive distribution agreements: where the manufacturer grants the distributor the exclusive right to sell its products in a defined geographic area or end-customer segment.
2. Selective distribution: where distributors are chosen based on specific technical or qualitative criteria (for example, authorized points of sale for high-tech equipment).
3. Open (multi-brand) channels: a distributor may sell products from multiple manufacturers without exclusive restrictions.

Attention: If the terms of the agreement fall outside the scope of the VBER (for example, if the manufacturer strictly controls the resale price charged to the distributor’s customers—Resale Price Maintenance), then that agreement loses its exemption and must undergo a separate analysis for compliance with Article 101 TFEU.

Alongside Regulation 2022/720, the European Commission published the “Guidelines on Vertical Restraints” (2022/C 355/01). This document explains in detail:

1. Classification of vertical restraints, including:
   • fixing minimum or maximum resale prices;
   • restrictions on online sales (blocking internet commerce);
   • territorial restrictions (zones of exclusive or selective distribution);
   • requirements to supply competitors (obligation to sell to other distributors, etc.).
2. Practical examples of when certain contractual clauses may be considered prohibited or permissible.
3. Market-share assessment: how to calculate whether a participant exceeds the 30 % threshold.
4. Ongoing market monitoring: The parties’ obligation to ensure that market shares do not exceed the prescribed thresholds during the agreement’s term.

These guidelines help lawyers and businesses draft distribution agreements correctly, thereby retaining block-exemption rights and avoiding scrutiny by the competition authority.

• If the market share of either the manufacturer or the distributor in the relevant market is ≥ 30 %, the block exemption does not apply automatically. In that case, the parties must check whether their agreement requires individual clearance from the Commission (hardcore restrictions may be automatically prohibited).
• If market share rises above 30 % after the agreement is signed, the parties must immediately notify the Commission or cease to rely on the block exemption until market share falls below 30 % again.

Even if the parties meet the turnover and market-share thresholds, the presence of any of the following automatically disqualifies the agreement from the block exemption:

1. Resale Price Maintenance (RPM)
   Fixing a minimum or recommended resale price by the supplier, obliging the distributor to sell at that price or higher.
2. Prohibition on purchasing/selling goods through independent channels
   Example: the manufacturer forbids the distributor from buying goods from competitors (or forbids third parties from selling the goods in a designated territory).
3. Unjustified restrictions on cross-border online/offline channels
   Example: prohibiting the distributor from selling via online channels when there is no objective justification (e.g., technical or quality reasons).
4. Clauses limiting resale to end consumers (or to prohibited markets)
   For example, the distributor must only sell to a specified customer segment, whereas the product is intended to be sold more broadly.

If even one such clause is present, the entire agreement loses its block-exemption status, and the parties must prove that its provisions do not infringe Article 101 TFEU (the so-called “rule of reason”).

1. Directive 2019/633 (Unfair Trading Practices)
   It prohibits unfair trading practices between large and small participants in the supply chain, especially in the agri-food sector (for example, sudden contract changes, refusal to agree on amendments, unjustified payment delays). It also applies, among other things, to suppliers and distributors of food products.
2. Directive on Commercial Agents (2006/123/EC and 1986/653/EEC)
   These directives regulate agency agreements, where an agent sells goods/services on behalf of a principal. However, the commercial agents directives do not cover distribution agreements (where a distributor buys the goods at its own risk and resells them) within the EU.
3. Special rules for specific sectors
• Pharmaceuticals: There are separate pricing and price-control rules for medicines, but these mainly concern public procurement and pharmacy sales rather than general distribution mechanisms.
• Automotive market: although cars are sold through dealer networks, competition rules (VBER) still apply, along with sector-specific requirements on maintenance, warranties, spare parts, etc.

1. Check the market shares of the parties (previous year).
   • If each partner’s share is < 30 %, you can rely on the block exemption under the VBER.
2. Clearly define the type of distribution:
   • Exclusive Distribution: one distributor for a specific region/channel.
   • Selective Distribution: selecting distributors based on quality or technical criteria.
   • Non-exclusive: allowing multiple distributors in the same territory.
3. Avoid restrictions that fall outside the VBER:
   • Do not include minimum resale price clauses.
   • Do not impose unjustified barriers to online sales without objective technical or safety justification.
   • Do not prohibit purchasing/selling from or to competitors without sufficient grounds.
4. Prepare a model for monitoring market share:
   • If needed, include an obligation for the parties to exchange sales‐volume data and review their market shares at least once a year.
   • Provide mechanisms for adjustment: what to do if the market share exceeds 30 %.
5. Take national specifics into account:
   • Although the VBER applies directly in all Member States, each country may have its own rules regarding confidentiality of information, payment terms, consumer‐protection requirements, etc.
   • For example, in certain states (Germany, France), specific rules protect dealers or distributors from excessive unilateral changes to contract terms by the manufacturer.

1. The main instrument regulating distribution contracts in the EU is competition law (Article 101 TFEU) and block exemptions (VBER 2022/720 together with Guidelines 2022/C 355/01).
2. Additional directives (on commercial agents or unfair trading practices) cover only certain aspects (agency agreements or specific sectors, e.g., agribusiness) but do not replace the VBER.
3. When drafting a contract, monitor market shares, avoid prohibited restrictions, and include control mechanisms to preserve block‐exemption status under Article 101.

Thus, although there is no standalone “distribution” law in the EU, a clear set of rules (VBER + Guidelines) governs all aspects of vertical agreements, including distribution. This framework provides legal certainty and helps parties avoid antitrust risks if their contract meets the prescribed criteria.

If you plan to enter the foreign market and need expert assistance in drafting a distribution contract, our team of lawyers, deeply experienced in international trade and EU competition law, is ready to provide comprehensive support. Contact us, and we will develop a contract that meets all EU legal requirements, minimizes risk, and promotes the successful growth of your business.

📩  Email: kyiv@jvs.law
📞 Phone: +38 (067) 465-77-73