Territorial and Customer Restrictions

Territorial and customer restrictions are clauses by which the supplier limits the geographic area in which, or the customer groups to whom, the buyer may sell the contract goods. They are common in distribution networks but are among the clauses requiring the most careful drafting under the block exemption for vertical agreements.

Active and Passive Sales

• Active sales means the dealer reaching customers in another territory on its own initiative: direct marketing, advertising aimed at that territory or opening a branch or warehouse there.
• Passive sales means responding to customers who approach on their own initiative. As a rule, sales through the dealer’s website are also passive sales.

The supplier may restrict active sales into a territory or customer group allocated exclusively to itself or another dealer. Restricting passive sales is generally a hardcore restriction and prevents the agreement from benefiting from the block exemption at all.

Other Permitted Restrictions

Under the block exemption, the following limited restrictions are also possible:

• Restricting sales to end users by a buyer at the wholesale level,
• Restricting sales by authorised dealers in a selective distribution system to unauthorised dealers,
• Restricting the buyer from selling components supplied for incorporation to the supplier’s competitors.

Parallel Trade and Export Bans

Export bans preventing dealers from selling to other territories or abroad are closely scrutinised by the Competition Board as they lead to market partitioning. Such bans imposed to protect price differences are hardcore restrictions.

Consequences

A hardcore territorial or customer restriction may lead to administrative fines as an infringement of Article 4 of the Law, and the clause is void. If the supplier’s market share exceeds thirty percent, the arrangement should be assessed individually.