Distribution Agreement
Also known as: Exclusive Distribution Agreement, Dealership Agreement, Sole Distributorship, Distribütörlük Sözleşmesi, Bayilik
Author Ali Gül
In short
A continuous contract, not regulated by statute, under which the distributor buys the supplier's goods in its own name and for its own account and undertakes to resell and promote them in a territory or customer group.
A distribution agreement governs the sale of a supplier’s goods by a distributor in a territory or customer segment. The distributor buys the goods in its own name and for its own account and resells them, earning the margin between purchase and resale prices. Under Turkish law it is an unregulated (innominate) contract, also referred to in practice as “dealership” or “sole distributorship”.
Difference from Agency
An agent acts for the principal’s account, the principal bears the commercial risk, and the agent earns commission. A distributor bears the commercial risk (stock, collection, pricing) itself. This difference has consequences for competition law and compensation claims.
Key Terms
- Territory, customer group and scope of exclusivity
- Minimum purchase or sales targets
- Pricing, payment and delivery terms
- Use of trademarks and promotional obligations
- Non-compete and post-termination obligations
- Term, termination and treatment of stock on expiry
Competition Law Limits
Distribution agreements are vertical agreements. Exclusive distribution and territorial and customer restrictions are permitted under certain conditions within the block exemption. However, resale price maintenance and bans on passive sales are hardcore restrictions. Non-compete obligations during and after the agreement are also limited in duration and scope.
Termination and Goodwill Indemnity
Termination must follow the contractual notice and grounds. Wrongful termination may give rise to liability for the distributor’s investments and lost profits. For exclusive distributors, a goodwill indemnity may also arise under TCC Article 122(5), unless inequitable.
Frequently Asked Questions
Can the supplier set the distributor's resale prices?
The supplier may set maximum or recommended prices, but fixing the distributor's resale price or a minimum price violates competition law. Turning recommended prices into fixed prices through pressure or incentives is also prohibited.
How is an indefinite-term distribution agreement terminated?
There is no statutory notice period; the contractual period applies. If the contract is silent, reasonable notice must be given considering the length of the relationship and the distributor's investments. The three-month period for agency is often taken into account by analogy.
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