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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3671
Experience:  Solicitors 2 years plus PQE
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We are manufacturers who sell our products at trade prices

Customer Question

We are manufacturers who sell our products at trade prices to various customers (i.e. distributors, wholesalers and retailer chains) in UK/Europe. These customers sell our products either on the Internet or to retail shops.



Question: Is it legal for us, as a manufacturer, to enforce which channel (i.e. Internet, retail or catalogue) our customers are allowed to sell? For example can we exclude the rights of some of our customers, under a terms & Conditions contract, so they are not allowed to sell on the Internet?
Submitted: 4 years ago.
Category: Law
Expert:  Alex J. replied 4 years ago.
Hi

Thank you for your question and welcome to Just Answer.

What is the reason for imposing this restriction?

Kind regards

AJ
Customer: replied 4 years ago.


Hi,


 


The reason is we have too many customers selling on the Internet and they are destroying our brand with low pricing wars.


 


Regards,


 


Mark

Expert:  Alex J. replied 4 years ago.
Hi,

Thank you.

It is not illegal per say, essentially what is illegal is any restriction that at its root restricts trade or fixes prices. The relevant provision for this is Article 101 of the Treaty of the Functioning of the European Union. If the restriction falls foul of this section is may be unenforceable.

You can however include provisions that say fix a minimum price or restrict trading areas if the genuine intention of that provision is to protect goodwill or a trade mark.

The problem is the difference between what is legitimate and what is not is very subtle, therefore I would strongly recommend you ask a local solicitor to help you draft it before you seek to rely on such a clause.

I look forward to hearing from you.

Kind regards

AJ

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Customer: replied 4 years ago.

Hi AJ,


 


Thank you for your answer.


 


Can you confirm: It is ok to choose which channel (i.e. Internet, retail or catalogue) our customers are allowed to sell as long as it is stated in an agreement contract to be overall beneficial to all our customers??? However, technically this could be argued to theoretically restrict their trade because it restricts their selling channels!


 


We want to do this simply to protect our customers (distributors) otherwise they start to compete with each other on price on the Internet and end up with very low profit margins which also damages our brand.


 


Regards,


 


Mark

Expert:  Alex J. replied 4 years ago.
Hi,

Thank you.

You could restrict the sales medium/channel, however bare in mind that this could result in a challange from the party you are supplying to. I would therefore be very careful when drafting the relevant.

If they did try and challange the agreement or not agree to the restriction would you just not supply to them?

Kind regards

AJ
Customer: replied 4 years ago.


Hi AJ,


 


Yes, we would simply stop suppling them. I think this is ok.


 


 


Thanks,


 


 


Mark


 


 

Expert:  Alex J. replied 4 years ago.
Hi

Thank you.

I would strongly recommend you ask a local solicitor to help you draft it to ensure it cannot be interpreted as a pure restraint on trade.

If for whatever reason the clause does contravene competition laws it will be deemed inforceable.

Kind regards

AJ