Exclusive distribution agreements and competition law : an analysis
University of British Columbia
Master of Laws - LLM
A manufacturer or supplier that wishes to distribute its product and/or to expand its selling operations in its own or a foreign country must be concerned with a large body of specific laws and regulations, among others competition law. This thesis focuses on the Canadian Competition Act and its effect on such business relationships, specifically distribution agreements. In the first chapter I briefly define the distribution agreement, discuss its main legal implications, and deal with exclusivity provisions usually included in such agreements. With respect to the distribution of goods and in particular to an exclusive distribution agreement, the provisions of the Competition Act dealing with reviewable matters and resale price maintenance are the most important ones. The second chapter contains an analysis of these provisions in general and in the context of the exclusive distribution agreement in particular. In the third chapter I discuss the impact of these provisions on distribution agreements and the question of whether they are able to serve the main purpose of the Competition Act. In doing so, I concentrate on two major issues: What is the impact of Canada's Competition Act on an exclusive distribution agreement, and why does the Act treat resale price maintenance in a different way than it treats non-price vertical restraints? After having analyzed the most important provisions regarding distribution agreements, I conclude that the impact of competition law on the process of product distribution, especially with respect to exclusive distribution agreements, is not as significant as it may seem. This is true at least with respect to reviewable practices. Many of the practices a manufacturer or supplier uses to distribute its products are common and not illegal per se. Moreover, the provisions with respect to reviewable matters do not present a significant barrier for a supplier who promotes and sells its product through a vertical distribution system. This is mainly due to the requirements of the different provisions which narrow the scope of their applications significantly. Only where a supplier has a strong position in the market and deals with a particular product which cannot be substituted easily, competition law might have a major impact. However, the situation is different for the practice of resale price maintenance. A per se offence, the resale price maintenance provision applies to any supplier regardless of its size or position in the market. For this reason and because of the fact that an attempt to influence prices upward is sufficient for a prohibition, this provision is of significant importance for distribution agreements. In consequence, I argue that these conclusions with respect to both reviewable matters and the practice of resale price maintenance do not collide with the objectives of competition policy that are predominant in Canada in the present day; they rather support this finding.
Law, Peter A. Allard School of