The European Commission (“EC”) has published a Working Paper on dealing with distributors that also act as agents for certain products for the same supplier. The Working Paper is an attempt by the EC to clarify the current rules regarding agency agreements in the context of the ongoing review of the competition rules on vertical restraints.

Key Points:

..Under EU competition law, the distributor of certain goods of a supplier may also be an agent of that same supplier for the distribution of other goods.

..The difference between agent and distributor is not without consequence. In agency relationships the supplier is the seller vis-à-vis customers and may fix the prices of its products sold by its agent as well as restrict where and to whom its products are sold.

..Determining when a distributor also acts as an agent for the same supplier is a complex exercise. A strict delineation of responsibilities is necessary.

..The Working Paper seeks to clarify which costs should be covered or reimbursed by the principal and puts forward methods for financing such costs. The Working Paper also gives an example illustrating how the principles it describes can be applied practically.