Agency and distribution
Part 6 - setting up a business in the UK
When considering how to market, sell or distribute products in the UK it is important to understand the difference between appointing an agent and a distributor:
Agents
An agent is appointed by the principal to negotiate and, if authorised, to conclude contracts with customers on the principal's behalf. Agents are paid a commission on the sales they make, usually on a percentage basis. The contract for sale of the products is made between the principal and the customer.
Agents can be appointed on an exclusive basis or have sole or non-exclusive rights.
Where an agent is to be appointed, an assessment should be made as to whether the Commercial Agents (Council Directive) Regulations 1993 (CARs) will apply. The CARs apply to a commercial agent, defined as a self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person (the principal), or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that principal. If the CARs apply, then certain provisions of the CARs are incorporated into the agency agreement including that the agent has the right to "compensation" or an "indemnity" on termination of the agency agreement in certain circumstances.
Distributors
A distributor is a reseller. A distributor buys goods from a manufacturer or supplier and resells them to others either at the wholesale or retail level. The distributor’s profit is generated by adding a margin to the purchase price of the goods. Title to the goods supplied will pass to and from the distributor. In reselling the goods, a distributor will assume liability for the goods and incurs a greater degree of risk than an agent.
Distributors are often granted the exclusive right to resell goods within a stated territory or to a particular customer group but can be appointed on a sole or non- exclusive basis.
Care will need to be taken to ensure the distribution agreement does not contravene UK competition law and to understand if there are any competition concerns at the EU level.
Commissionaires
The concept of a commissionaire, which exists in certain European jurisdictions, does not exist in the UK.
Meet our team
Philippa Dempster
Senior Partner & London Office Managing Partner
Lisa Gilligan
Leicester Office Managing Partner
Simon Barker
Partner & Head of Intellectual Property
Contact us today
Whatever your legal needs, our wide ranging expertise is here to support you and your business, so let’s start your legal journey today and get you in touch with the right lawyer to get you started.
Get in touch
For general enquiries, please complete this form and we will direct your message to the most appropriate person.