Say cheese! Are your distribution agreements picture-perfect?
Suppliers and their exclusive distributors should review their agreements. The European Court of Justice has ruled that, to prevent other distributors from actively selling in an allocated territory, the supplier or its exclusive distributor must demonstrate that the other distributors have expressly or tacitly agreed to territorial exclusivity. The absence of actual sales in the allocated territory is not sufficient proof that the other distributors have agreed to an active sales ban.
Background
Beevers Kaas has an exclusive distribution agreement with the Dutch cheese supplier Cono for the sale of Beemster cheese in Belgium and Luxembourg. Cono has also concluded distribution agreements with other distributors for markets outside these territories, including the Albert Heijn companies. Beevers Kaas accused the Albert Heijn companies of breaching the exclusive distribution agreement by actively selling Beemster cheese in Belgium.
However, the Albert Heijn companies contested the validity of the active sales ban, claiming that the so-called ‘parallel imposition requirement’ had not been met, as they had not expressly accepted this ban. In response, Beevers Kaas argued that the other distributors had tacitly accepted the active sales ban by refraining from selling Beemster cheese in Belgium. The Belgian Court of Appeal then requested a preliminary ruling from the European Court of Justice (ECJ) on the interpretation of the parallel imposition requirement.
Parallel imposition requirement
The parallel imposition requirement was an implicit condition under the previous Vertical Block Exemption Regulation (VBER), but has now been explicitly incorporated into the current VBER. While the ECJ’s ruling relates to the previous VBER, its guidance remains relevant under the current VBER.
The VBER provides a safe harbour for agreements containing certain vertical restraints that do not constitute hardcore restrictions, provided that the market share of both the supplier and the distributor remains below 30% in the relevant markets. For instance, restrictions on active sales into a territory or to a customer group reserved under an exclusive distribution system are permitted under the VBER, as long as such a sales restriction is imposed on all the supplier’s other distributors simultaneously. This is known as the ‘parallel imposition requirement’.
ECJ ruling
The ECJ ruled that to establish whether other distributors had indeed agreed to the active sales ban, there must be a concurrence of wills between the supplier and these distributors. This concurrence of wills may follow from both an express prohibition against such sales in the distribution contracts of the supplier’s distributors who do not benefit from territorial exclusivity, and from the explicit or tacit conduct of the parties showing that the distributors have accepted the supplier’s invitation not to make such sales.
Given that the distribution agreements between Cono and its distributors did not contain an explicit clause banning active sales in the exclusive territory, the ECJ ruled that the referring court should consider: (1) whether Cono had, in any form, invited its distributors not to engage in such sales in the exclusive territory allocated to Beevers Kaas and (2) whether the distributors had expressly or tacitly accepted that invitation.
The absence of sales in the exclusive territory by the other distributors by itself was insufficient to prove such an agreement. However, this circumstance could have contributed to an inference of tacit consent. The ECJ suggested that if, in addition, the supplier Cono had taken steps to implement the ban in practice, such as a system of monitoring and penalties, this could have constituted proof of tacit consent.
The party relying on the VBER’s safe harbour (in this case Beevers Kaas) must provide proof of the supplier’s invitation to refrain from active sales in the exclusive territory and of the acquiescence of the other distributors. Proof of such an agreement may be provided through direct evidence, as well as through objective and consistent indicia. The benefit of the VBER’s safe harbour is granted for the period for which this proof can be provided.
Takeaways
Active sales restrictions must ideally be expressly included in all agreements throughout the distribution system. Suppliers and distributors are therefore advised to ensure that their agreements explicitly acknowledge these sales restrictions. In addition, suppliers should communicate to the entire distribution system that active sales restrictions are in place (possibly by informing distributors of the territories/customers that have been exclusively allocated), and ensure that all distributors explicitly accept these sales restrictions and any changes to the arrangements. Exclusive distributors are advised to seek confirmation from their suppliers that the other distributors have explicitly agreed to respect the restriction on active sales in the exclusive distributor’s allocated territory or customer group.
Note: Bente Wattel contributed to this article. She is a Legal Assistant at the Competition & Regulated Markets practice group during May-July 2025.
