Distribution & Reseller Agreements
Even if your company does not specialize in e-commerce or maintains no online presence, the effects of unscrupulous resellers are far-reaching and can cut into your bottom line. Unauthorized resellers are a glaring problem, but even authorized resellers and distributors can become an issue if they enable unauthorized sellers, advertise the product too cheaply or tarnish your image.
Although there are legal remedies to some types of reseller problems, resellers receive significant protection from the first sale doctrine, which gives them certain rights in commerce. The team at KJK can help you create an enforceable agreement to protect your brand and profits.
Advising You at Every Turn:
Distribution Agreement vs. Reseller Agreements
While similar, there are some important distinctions between a distribution agreement and a reseller agreement. Our team thoroughly understands both options’ benefits and disadvantages and can advise you on which one is most beneficial to your company and brand image.
A distribution agreement outlines the rights and responsibilities of both the manufacturer and the distributor. Usually, it restricts a distributor to selling within a geographic area (often a country) or specific channels to allow the manufacturer to maintain relationships with multiple distributors.
You can either choose to create an exclusive or non-exclusive distribution agreement. Non-exclusive distribution agreements protect you from becoming tied to an unsuccessful distributor and allow you to reach more markets. However, a non-exclusive distribution agreement could also result in too many of your products on the market, forcing your distributors to offer lower prices.
Exclusive distribution agreements can be beneficial for niche areas or if you only want to distribute your product in one country.
The team at KJK can advise you on which type of agreement is best for your business and ensure that your agreement contains language protecting you if the distributor enters bankruptcy or fails to sell your products.
While similar to distribution agreements, reseller agreements differ in the way the product reaches the consumer. Unlike distributors, resellers don’t purchase and store your product, ready to sell. Instead, they act as a middleman, taking a commission when they sell your product to a customer. You must often ship the product to the customer directly after receiving the reseller’s purchase information and fee.
Don’t be caught off-guard:
Common Components of Distribution & Reseller Agreements
Antitrust laws set restrictions on the provisions that can exist within agreements. It’s important to work with a law firm that has a deep understanding of eCommerce, like KJK, to ensure your agreements fully comply with the law and that the agreement protects your company’s interest.
Prevent Unauthorized Reselling
You must include language to prevent the reseller or distributor from knowingly selling items in bulk to another reseller. It can be difficult to collect damages from an authorized distributor who violates this language since the manufacturer must prove that the distributor knew the buyer intended to resell. However, this language can still be the legal basis for other legal actions, such as a cease and desist letter.
Protect Your Brand
Agreements often contain language preventing abuse of the manufacturer’s name or image. For example, you could prevent a distributor or reseller from disparaging your goods to sell a more profitable competitor’s goods instead.
Minimum Advertised Pricing (MAP) Policies
Companies often have Minimum Advertised Pricing (MAP) policies that prevent resellers from advertising prices below a certain level set by the company. Although resellers can still sell goods for a lower price, they cannot openly advertise that price. At KJK, we offer a complimentary MAP Policy review. Our lawyers review your MAP Policy, ensuring it protects your company.
Minimum Sale Thresholds
Distribution agreements may contain minimum sale thresholds and other requirements to ensure the distributor does their job effectively. This provision gives the manufacturer legal recourse to change distributors if their current one is not selling enough goods to turn a profit.
Trademark and Copyright Protection
An agreement should also address both trademark and copyright issues to give you robust protection with multiple methods of addressing grievances. The eCommerce attorneys at KJK have extensive experience in distribution and reseller agreements, and we can examine all aspects of your company and products to determine exactly what your agreement needs to contain.
Don’t Settle For Less
Importance for eCommerce Companies
It is especially vital for companies that specialize in e-commerce to have strong reseller and distribution agreements in place. Like specialty and niche items, products that are primarily sold online are particularly vulnerable to undercutting from resellers.
Unauthorized reselling can cause your profits to drop and also result in bad reviews and customer experiences. KJK can ensure your agreements protect you on all sites you might sell your products on and with distributors and resellers worldwide.
Distribution & Reseller Agreements:
Enforcement of agreements usually happens through breach of contract lawsuits, but depending on the nature of the infraction, you may be able to pursue other enforcement options. Because a tort lawsuit is so time-consuming, enforcement usually begins with a cease and desist letter or other method of informing the distributor or reseller that they have violated the agreement.
Once an agreement expires, its provisions are not enforceable unless the original language specified that an individual provision persists for longer. For example, an agreement may contain non-disclosure language that prevents the reseller from discussing confidential supply chain knowledge for a set period, but the rest of the agreement will generally be void.
Sometimes, a third party, such as an unauthorized reseller, could be subject to a lawsuit instead. A tortious interference claim can help shut down an unauthorized reseller’s supply chain and allow you to collect damages from that reseller instead of the original distributor.
Knowing all your options:
How KJK Can Help
KJK has extensive experience with eCommerce and helping companies protect their brands. We have brought more than 250 MAP violators into compliance, protecting our clients’ interests and finances. With over 100 federal lawsuits filed and 193 DMCA subpoenas issued, you can rest assured we do everything possible to enforce your agreement.
However, we understand that litigation is expensive and takes time, making our clients hesitant to take their problems to court. Our team has solved 60% of our clients’ brand enforcement problems through other means, including arbitration, negotiation and mediation, with only 40% of the cases involving a formal lawsuit.
We’re Here To Help:
Let KJK Protect your Business
With our extensive experience protecting companies from unscrupulous online resellers and poorly constructed distribution agreements, you can trust the KJK team to always have your company’s best interests in mind. Call us today to schedule a consultation and learn more about how we can help you.
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