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Is the supplier allowed to determine for what price the distributor has to sell products or services?

By Ynze Kliphuis, LL.M.
Russell Advocaten, B.V.
Amsterdam, Netherlands

Distribution agreement

A distribution agreement is an agreement between a supplier and a distributor. The distributor buys products or services from the supplier for the purpose of selling them to, for instance, shop owners or consumers. As opposed to agency, this resale is for the account and risk and in the name of the distributor.

A distribution agreement contains various arrangements made between supplier and distributor, for instance including:

  • The prices for the products/services
  • The minimum purchase requirement of the distributor
  • The territory in which the distributor is allowed to sell the products/services
  • The exclusive right of the distributor to distribute products/services of the supplier.

Pricing Agreements in a Distribution Agreement

Sales price

Distribution agreements often contain arrangements about the price the distributor has to pay for the purchase of the products or services of the supplier. These arrangements are not unlawful pricing agreements and therefore can be made.

Resale price

Sometimes the supplier and distributor do not only make arrangements regarding the sales price but also the resale price. This is the price for which the distributor sells the products or services to his buyers. For arrangements regarding the resale price strict requirements are in place. The distributor is allowed to impose a maximum resale price on the distributor or give a recommended price for resale. Arrangements made on minimum prices or fixed resale prices are considered to be unlawful pricing agreements however. 

Vertical Price Fixing

Imposing a fixed or minimum resale price on the distributor is also known as vertical price fixing. Vertical price fixing is prohibited under competition law as it can limit competition on the market, which is unfavourable to consumers.

If the supplier and distributor make unlawful price fixing agreements, the Netherlands Authority for Consumers and Markets (ACM), the Dutch competition authority, can impose a fine or other sanction.

More information

Would you like to get legal advice on (pricing agreements in) distribution agreements? Do you need help drafting or checking a distribution agreement? Please contact us.