How exclusive is exclusivity?
Commonly distributors are appointed on an exclusive, sole, or non-exclusive basis. Indeed, many distributors set great store on being the exclusive distributor for this territory or that product range.
It is as if there is a belief in an overwhelming body of law that means that distributors do not have to consider further if they are appointed on an exclusive basis.
As a matter of English law, the situation is more prosaic. Whilst for some time it had been thought that:
- the appointment of a distributor on an exclusive basis could be distinguished from the position of a sole distributor or that of a non-exclusive distributor; and
- exclusivity meant that only the distributor could be responsible for sales of a particular range of goods in a particular territory,
the body of law on which such thoughts are based is somewhat threadbare.
Instead, increasingly consideration is given to the words contained in the distributorship agreement as a whole – being words which can readily limit the scope of the distributor’s appointment. This can occur in a number of ways.
First, in terms of what is granted to the distributor in respect of territory, products, or customers.
Second, in respect of what is reserved to the supplier. Often this is connected to house accounts, specific types of customer, or order sizes.
Lastly, what is not said. Without express words, the appointment of a distributor to handle a specific range of goods available from the supplier cannot be said to extend to new models or further additions to the product range.
It is the case that a distributor will often be appointed where the nature of the market, goods, or customer base does not merit the supplier’s direct involvement (by the establishment of a subsidiary, the employment of sales representatives, or the appointment of agents). As such, not all is lost for a distributor who might otherwise put itself in a situation where the scope of its appointment is narrower than it first thought. But it remains the case that in the same way that the best instruction for exams is to read the question, so a distributor looking at a distributorship agreement needs to pay particular attention to the scope of its appointment – and then ask itself, what is missing.