Selective distribution

 

Institution Definition

Distribution system whereby a supplier enters into (vertical) agreements with a limited number of selected dealers in the same geographic area. Selective distribution agreements, on the one hand, restrict the number of authorised distributors. On the other hand, they prohibit sales to non-authorised distributors, which leaves authorised dealers only other appointed dealers and final customers as possible buyers. Selective distribution is almost always used to distribute branded final products. The possible competition risks are a reduction in intra-brand competition, the facilitation of collusion between suppliers or buyers and the foreclosure of certain type(s) of distributors, especially in case of cumulative effects of parallel networks of selective distribution in a market. Purely qualitative selective distribution is in general considered to fall outside the prohibition of Article 101(1) TFEU, provided three conditions are satisfied: First, the nature of the product in question must necessitate a selective distribution system. Secondly, resellers must be chosen on the basis of objective criteria of a qualitative nature. Thirdly, the criteria laid down must not go beyond what is necessary. © European Commission

See also Vertical agreement

 
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