How to Set Up a Distribution Agreement
Set up a distribution agreement by defining the products, territory, exclusivity terms, pricing and margins, minimum purchase commitments, marketing obligations, and termination provisions, while ensuring compliance with UK competition law.
Last updated: February 2025
Step-by-Step Guide
Define the products and territory
Specify which products the distributor may sell, the geographic territory, and whether the arrangement is exclusive or non-exclusive.
- •Exclusive distribution within a territory is permitted under the Vertical Agreements Block Exemption.
Set pricing and commercial terms
State wholesale pricing, recommended retail prices (non-binding), payment terms, and minimum order quantities.
- •Do not fix or impose minimum resale prices, as this violates competition law.
Establish performance obligations
Set minimum purchase or sales targets, marketing commitments, and reporting requirements.
- •Link exclusivity renewal to meeting performance targets.
Address IP, branding, and quality
Licence the use of trademarks and marketing materials, set quality standards, and require compliance with brand guidelines.
- •Retain control over how your brand is represented in the market.
Include term and termination provisions
Set the agreement duration, renewal terms, and grounds for termination. Include reasonable notice periods, especially for long-standing relationships.
- •Sudden termination of a long-standing distributor can give rise to claims for compensation under the Commercial Agents Regulations if the distributor qualifies as a commercial agent.
Legal Requirements
Distribution agreements must comply with the Competition Act 1998 and the Vertical Agreements Block Exemption Order. Resale price maintenance is prohibited. Exclusive territorial restrictions are permitted within limits. If the distributor qualifies as a commercial agent under the Commercial Agents (Council Directive) Regulations 1993, additional termination compensation rights apply.
Common Mistakes
Template / Example
When to Get a Solicitor
Recommended for exclusive arrangements, cross-border distribution, or where there is any risk the distributor could be classified as a commercial agent.
FAQ
What is the difference between a distributor and a commercial agent?
Can I set the retail price for my distributor?
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This is guidance, not legal advice. Consult a solicitor for complex matters.
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