Exclusive or non-exclusive distributor? Make exclusivity earn its place.

General information, not legal advice. Local law varies; take local counsel.

Exclusive, sole and non-exclusive

• Exclusive: you appoint no other distributor in the territory and, as usually drafted, do not sell there yourself.
• Sole: no other distributor, but you keep the right to sell directly, for example to key accounts.
• Non-exclusive: you can appoint others and sell yourself.

Usage varies, so write the meaning into the contract: who else may sell, to whom, and whether you may.

When exclusivity makes sense, and when not

• The distributor invests heavily: demo sets, a clinical specialist, service engineers, training. Nobody funds that for a line a rival can sell next door.
• It holds or funds the registration. Exclusivity is then part of the price, and the transfer clause matters even more (who holds the registration).
• Tender markets. Where tenders ask for your authorisation letter, two distributors bidding your device against each other only cut your price.

Hold back when you do not know the market or the partner yet, when you sell consumables to many buyers and reach beats depth, when one partner cannot cover every region, or when the distributor carries a competing line.

Make it earn its place

• Minimums with a ramp. A low first-year number that rises each year, set below the agreed target so a normal miss is not a crisis.
• Conversion, not just termination. A missed minimum turns the deal non-exclusive after written notice. You keep the partner and can add another.
• Carve-outs. Named key accounts or hospital groups you serve directly, national tenders, online sales, and customers you already had.
• Commitments first. A dedicated rep, demo sets in use, a specialist hired, a registration filed, each by a date. Exclusivity starts when they are met.
• A yearly review at the business review, not exclusivity for the life of the contract.

Exclusivity and margin are traded together, so settle both at once (distributor margins and pricing).

Define the territory and the customers

Territory disputes come from loose words. Name the countries or regions. Name the customer groups: public hospitals, private hospitals, clinics, laboratories, purchasing bodies. Name the channels: tenders, online, sub-dealers. Say how a hospital group that buys in two territories is handled. Then add one line: anything not expressly granted stays with you. The rest of the contract is in the distribution agreement checklist.

Count the alternatives first

What exclusivity is worth depends on who else could sell your device. The Index lists 11 independent distributors with orthopaedic devices on record in Bahrain, 18 in Saudi Arabia and 287 in Brazil (Bastion Hale Distributor Index, build of 25 October 2026). Where there are few, a bad exclusive deal is hard to replace, so the conditions matter more. Where there are many, you can test partners region by region before you commit.

Worked example: aesthetic lasers in Brazil

A Brazilian distributor offers a maker of aesthetic laser systems (fictional) national exclusivity for five years, with the distributor as registration holder. The Index lists 153 independent distributors with aesthetic devices on record in Brazil. The maker counters, with example numbers:

• An independent registration holder, so exclusivity never decides who can import.
• Exclusive for clinics in the states where the distributor has sales and service staff today. Non-exclusive elsewhere.
• Minimums of 20, 35 and 50 systems in years one to three, with two demo systems in use.
• A missed minimum converts the deal to non-exclusive after 60 days' notice. Hospital tenders and two named clinic chains are carved out.

The distributor is protected where it invested. The rest of the country stays open.

EU competition law

In the EU, supply and distribution agreements fall under Commission Regulation (EU) 2022/720, the vertical block exemption, in force since 1 June 2022.

• The safe harbour applies when the supplier's share of the market where it sells, and the distributor's share of the market where it buys, are each 30 percent or less (Article 3).
• You may protect a territory or customer group reserved to you, or allocated to up to five exclusive distributors, against active sales by your other distributors (Article 4(b)).
• Restricting passive sales, meaning replies to unsolicited orders, is a hardcore restriction, and a general website counts as passive selling. You can stop your French distributor targeting hospitals in a territory you gave exclusively to your German distributor, but not answering one that contacts it.
• Fixing resale prices is also hardcore (Article 4(a)).

Gulf agency law

In the UAE, Federal Law No. 3 of 2022 regulating commercial agencies has applied since 16 June 2023. The Ministry of Economy says agency business is reserved for UAE nationals and for public joint-stock companies with at least 51 percent national capital, and that an agency must be registered to count. A registered agency adds statutory rules to your contract, so decide on purpose whether an exclusive partner is registered as your agent. Other Gulf states have their own agency rules.

General information, not legal advice. Local law varies; take local counsel.