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When would an exclusive dealing contract be legally problematic?

If one of the parties to the agreement is a monopolist or near-monopolist, a challenger could also assert a claim under Section 2 of the Sherman Act by alleging that the exclusive-dealing agreement is exclusionary conduct used to unlawfully acquire or maintain monopoly power.

Are exclusive distribution agreements legal?

Exclusive dealing or requirements contracts between manufacturers and retailers are common and are generally lawful.

What is an exclusive distribution agreement?

Exclusive distribution : In an exclusive distribution agreement, the supplier agrees to sell its products to only one distributor for resale in a particular territory. At the same time, the distributor is usually limited in its active selling into other (exclusively allocated) territories.

What should a distribution agreement include?

Specifying the product and its delivery dates. Specifying whether payment is commission-based or whether there is another type of fee arrangement. Describing the relationship between the parties, such as the distributor being an independent contractor and not an employee of the supplier.

What are the disadvantages of exclusive distribution?

Disadvantages of Exclusive Distribution Agreements This can sometimes be difficult when the supplier has generated an order through its own efforts. An exclusive agreement is often for a minimum of a year a lot can change to both companies in this period which could have a negative effect on sales.

What is an example of exclusive distribution arrangement?

A common example of exclusive distribution is automobiles. Automobiles are distributed through exclusive distributorship, meaning that each distributor is the only one authorized to sell a particular make of car within a specified territory.

Are exclusivity clauses legal?

Exclusivity clauses are legal under federal laws. However, your state may have specific provisions that limit their use.

How do you terminate a distribution agreement?

Without a specified time frame outlined in the agreements termination clause, some states require up to 90 days of advance notice for terminating a distribution agreement. The agreement may also require one party to compensate the other for the income lost because of the termination.

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