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Selective distribution meaning

What does Selective distribution mean?
Selective distribution describes a distribution model in which a supplier appoints only distributors or retailers that meet specified qualitative (and sometimes quantitative) criteria, and requires them not to sell to unauthorised resellers in the territory where the system operates. It is a descriptive competition law concept, reflected in the UK Vertical Agreements Block Exemption Order 2022 (VABEO) and CMA guidance, and in Ireland in the EU Vertical Block Exemption Regulation 2022 (VBER) and Guidelines. Key legal features include: selection criteria applied consistently; the ability to restrict active and passive sales by authorised distributors to unauthorised dealers; a prohibition on restricting cross‑supplies between authorised members; and, at retail level, a prohibition on restricting sales to end‑users. It is commonly used for branded or technically complex goods to protect quality and brand image, including online channels. Exemption typically depends on market shares (generally ≤30% under VABEO/VBER) and the absence of hardcore restrictions (for example, resale price maintenance or outright online sales bans). Non‑compliance risks antitrust infringement, unenforceable clauses and fines. Usage is broadly consistent across England & Wales, Scotland, Northern Ireland and Ireland, though the applicable block exemption differs (VABEO in the UK; VBER in Ireland).
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View the related Checklists about Selective distribution

CHECKLISTS
Assessing non‑competes in vertical agreements under the UK VABEO 2022: practitioner checklist on buyer exclusivity, post‑termination restraints, agency status, selective distribution, severability and Chapter I self‑assessment

This Checklist sets out the key considerations when evaluating non‑compete provisions in vertical arrangements (such as supply contracts) under the UK’s vertical block exemption: The Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022, SI 2022/516 (VABEO). For a general overview of the VABEO, see Introduction to the application of Chapter I to vertical agreements and, for full guidance (including on non‑compete clauses), see The Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022. For a checklist covering non‑compete provisions under the EU’s corresponding regime, the Vertical Block Exemption Regulation 2022/720, see Assessing non–compete clauses in vertical agreements under the EU’s Vertical Block Exemption Regulation 2022/720—checklist Is there a 'vertical agreement' and would the VABEO apply? For the purposes of this Checklist, we proceed on the basis that a vertical agreement is in place...

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CHECKLISTS
EU VBER 2022/720: Checklist for assessing non-compete obligations in vertical agreements, including buyer and post-termination restrictions, agency status, selective distribution, severability, and Article 101 TFEU self-assessment

This Checklist sets out the key points to weigh when reviewing non-compete provisions in vertical arrangements (including supply arrangements) under the EU’s Vertical Block Exemption Regulation 2022/720 (VBER 2022). It keeps the focus on how such restrictions are treated within the VBER 2022 framework and where to find further guidance... For a general overview of VBER 2022, see Introduction to the application of Article 101 TFEU to vertical agreements. For comprehensive detail (covering non-compete clauses), refer to The Vertical Block Exemption Regulation 2022/720. For the UK’s parallel regime and a dedicated Checklist, see Assessing non–compete clauses in vertical agreements under The Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022—checklist. Is there a 'vertical agreement' and would the VBER 2022 apply? For the purposes of this Checklist, it is assumed that a vertical agreement is in place...

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NEWS
UK Competition Appeal Tribunal grants interim injunction ordering Porsche to continue supplying spare parts to Eurospares; reseller ban challenged under Chapters I and II; fast-track refused, expedited trial

Private actions CAT grants interim injunction requiring Porsche to continue supply of spare parts to Eurospares The CAT has delivered its judgment in Eurospares (Continental Parts) Limited v (1) Porsche Cars Great Britain Limited (2) Porsche Retail Group Limited, following an application by Eurospares (Continental Parts) Ltd (Eurospares) for an interim injunction. Eurospares sought an order restraining Porsche Cars Great Britain Limited (PCGB) and Porsche Retail Group Limited (PRG) (together, Porsche) from stopping or refusing to supply Eurospares with Porsche spare parts pending determination of its claim. That claim alleges that the design of Porsche’s selective distribution system infringes the Chapter I and Chapter II prohibitions in the Competition Act 1998. In response, the CAT granted interim relief, directing Porsche to maintain the supply of Porsche spare parts to Eurospares until the dispute is resolved...

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View the related Practice Notes about Selective distribution

PRACTICE NOTES
Case C‑230/16 Coty Germany: CJEU upholds selective distribution for luxury goods; marketplace bans lawful; not hardcore restrictions under VRBE; clarifies Article 101(1) TFEU and Pierre Fabre

Case hub archived This archived case hub records the position as at the decision of 6 December 2017 and is no longer updated. Further information: timeline, commentary and related/relevant cases. Case facts Outline A reference was made by the Oberlandesgericht Frankfurt am Main (Higher Regional Court of Frankfurt) to the Court of Justice for a preliminary ruling under Article 267 TFEU. The request sought clarification, under Article 101 TFEU, on the lawfulness of prohibitions on sales via online marketplaces within a selective distribution framework. Specifically, the German court asked whether a ‘qualitative’ selective distribution system can validly impose online sales limitations aimed at preserving a luxury brand’s image. The question emerged from proceedings in Germany between Coty Deutschland GmbH and Parfümerie Akzente GmbH, in which Coty Germany brought an action to prevent Akzente from selling Coty Germany products through the online platform ‘amazon.de’...

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PRACTICE NOTES
EU General Court dismisses CEAHR annulment action; Commission lawfully rejected complaint on watch spare parts; selective distribution and refusals to supply unlikely infringements of Articles 101 and 102 TFEU

CASE HUB (NOTE—appeal lodged by CEAHR before the Court of Justice in Case C‑3/18 P) ARCHIVED — this archived case hub records the position as at the date of the judgment of 23 October 2017; it is no longer maintained. See further: timeline commentary relevant/related cases Case facts Outline: An appeal was brought before the General Court challenging the European Commission’s decision to reject a complaint by CEAHR. The complaint alleged infringements of Articles 101 and/or 102 TFEU by several watch manufacturers, arising from their refusal to continue supplying spare parts to independent watch repairers. Outcome On 23 October 2017, the General Court delivered its judgment, dismissing in full the action seeking annulment of the European Commission’s decision to refuse CEAHR’s complaint alleging breaches of Articles 101 and/or 102 TFEU by a number of watch manufacturers in relation to the decision not to continue providing spare parts to independent watch repairers...

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PRACTICE NOTES
UK VABEO 2022: Scope, Safe Harbour, Hardcore/Excluded Restrictions (RPM, Online, Parity, Non-competes), Dual Distribution, CMA Powers, and DMCC 2024 Extraterritorial Chapter I Context

Vertical agreements Under section 2(1) of the Competition Act 1998 (CA 98), vertical agreements are banned. The Digital Markets, Competition and Consumers Act 2024 (DMCC Act) has revised the language in section 2 so that, in specified situations, it captures arrangements carried out beyond the UK. The prohibition covers agreements between undertakings, concerted practices, and decisions of associations of undertakings that have as their object or effect the prevention, restriction or distortion of competition within the UK, or any part of it, and which may influence trade in the UK or a part of it where such agreements, decisions or practices are implemented, or intended to be implemented, in the UK. In all other instances, the ban extends to conduct likely to have an immediate, substantial and foreseeable impact on trade within the UK or a part of the UK. In addition, section 2(3) CA 98 requires that an agreement is implemented, or intended to be implemented, in the UK. As indicated above, the DMCC Act adjusts the scope...

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View the related Precedents about Selective distribution

PRECEDENTS
Non-exclusive EEA distribution agreement (England and Wales law): manufacturer–distributor precedent with VBER-compliant sales restrictions, minimum purchase targets, selective distribution options and optional online marketplace bans

This Agreement is entered into on [ date ]. Parties [ insert name of party ] [ of OR a company incorporated in England and Wales under number [ insert registered number ] whose registered office is at ] [ insert address ] (Manufacturer); [ insert name of party ] [ of OR a company incorporated in [ country ] under number [ insert registered number ] whose registered office is at ] [ insert address ] (Distributor); Each of the Manufacturer and the Distributor is a party, and together they are the parties. Background (A) The Manufacturer produces [ and supplies ] the Products. (B) The Distributor agrees to distribute [ and support ] the Products on a non-exclusive basis within the Territory in accordance with the provisions of this Agreement...

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PRECEDENTS
Precedent Selective Distribution Agreement (Non‑Exclusive): VABEO‑Compliant terms on Active/Passive Sales, Online Marketplaces, Minimum Purchases and Trade Mark Licensing (England and Wales Law)

This Agreement is entered into on [ insert date ] Parties 1 [ insert name of party ] [ of OR a company incorporated in [ England and Wales ] under number [ insert registered number ] whose registered office is at ] [ insert address ] ( Manufacturer ) 2 [ insert name of party ] [ of OR a company incorporated in [ England and Wales ] under number [ insert registered number ] whose registered office is at ] [ insert address ] ( Distributor ) (The Manufacturer and the Distributor are each a party and, collectively, both the parties.) Background (A) The Manufacturer [ manufactures and ] supplies the [ [ luxury OR premium OR top of market ] ] Products, which are [ associated with [ high OR the highest ] standards of quality in their field ]. (B) The image, and the level of service linked to the Products, are of [ the...

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