The clause gets written before anyone questions it. The European distributor receives the territory, the territory is protected, and online selling either stays with the brand or is simply forbidden. In a domestic Chinese network that sentence is ordinary, and it is often the condition on which a territory is granted at all. Put the same sentence into a European distribution contract and you have not organised a channel: you have written the one kind of clause that European competition law treats as serious enough to remove the protection the rest of the agreement was relying on.
Why European law reads an online sale as a passive sale
European competition law has long separated selling that goes out to find a customer from selling that answers a customer who came of their own accord. Going out is visiting, calling, advertising aimed at a named territory or customer group, paying to be found by people who never asked — and a supplier may lawfully reserve a territory or a customer group against that. Answering is a different thing, and a supplier may not stop a distributor from serving a customer who approached it. A website sits on the answering side: it is a shop open to whoever finds it. Which is why a general ban on selling online is read as a ban on passive selling, not as a decision about a channel.
That reading carries a consequence out of all proportion to the clause. Agreements between a supplier and its distributors are protected by a block exemption: as long as the parties stay under the market share threshold it sets and the contract contains none of the restrictions it lists as severe, the agreement is presumed lawful and nobody has to argue about it. A severe restriction removes that protection — and it removes it from the agreement, not from the offending sentence alone. What was a safe harbour becomes a contract you have to justify on its own merits before a competition authority or a judge, which is a very different conversation and a far more expensive one.
What you may still require of a distributor's online shop
- Quality criteria for the shop itself. How the product is presented, the images, the information that must accompany it, secure payment, customer service reachable in the language of the country, no competing counterfeit sitting next to it. Requirements about how the selling is done are a different object from a prohibition on selling.
- A physical outlet, inside a selective network. Requiring members to operate a real point of sale has been accepted where the nature of the product justifies it and where the requirement applies to every member. It is a condition of membership, not a restriction on what a member may then do online.
- A ban on third-party marketplaces, under conditions. Prohibiting visible sales through outside platforms has been accepted within a genuinely selective network, for products whose image justifies it, provided the clause applies to all members and leaves the distributor free to sell on its own site and to be found through advertising.
- A territory protected against active prospecting. You can forbid advertising targeted at a territory reserved for someone else, campaigns in its language aimed at it, a local domain name bought to address it. Name the acts you are forbidding, and say in the same clause that answering a customer from there stays free.
- Rules on your trademark and your brand material. Which name, which logo, which claims, which images, and what must be removed when the contract ends. Those are intellectual property terms, they are not a restriction of competition, and they do far more for an image than any channel ban.
What no clause achieves, however it is drafted
- Stopping a distributor from answering a customer who came to it. An order arriving from another member state is a passive sale, and refusing to let it be filled is the restriction itself. Obtaining the same result by technical means — blocking foreign payment cards, refusing visitors from certain addresses, rerouting them to another distributor's site — falls under the same prohibition.
- A supply price for the online channel designed to discourage it. Charging the distributor more for goods it will sell online, so that the channel stops being viable, is read as the prohibition obtained by another route. A difference has to reflect a real difference in the cost of serving the channel, and that justification is examined strictly.
- Prior authorisation for each sale outside the territory. An authorisation you are free to refuse is a prohibition with a form attached. The same goes for an obligation to report every such order before shipping it, where the reporting exists so that it can be stopped.
- Requiring the online price to match the shop price. That is a resale price clause wearing a channel argument, and it is treated as a price clause. The same applies to an obligation not to show a price online at all when the point is to keep the shelf price from being undercut.
- Handing over the margin on a sale to a customer from elsewhere. An obligation to pass the profit to the distributor of the territory the customer came from makes answering that customer pointless, which is the same restriction obtained by accounting rather than by a prohibition.
What the whole agreement risks when one clause is judged severe
The exemption goes, and it goes for the agreement rather than for the sentence. The clause itself is void and unenforceable, which has an irony worth noticing: the territorial protection you were granting becomes worth nothing on the day you need it, because the contract that contained it has become the weak document in the room. A competition authority may then open a file — the Commission and the authority of each member state can both apply the same prohibition — and a fine on a supplier is calculated from turnover, not from the margin of the contract that caused it. A supplier without a single employee in Europe is not out of reach: what matters is where the effect of the agreement is felt.
Then comes the part Chinese suppliers rarely anticipate: the distributor. A party harmed by a prohibited restriction can claim damages before a national court, and the person most likely to do it is the distributor you have just stopped working with. Its file is your correspondence — the message asking it to take a listing down, the mail refusing an order from abroad, the reminder about its online price. Which is why the useful question about an awkward clause is never whether it is in the contract. It is whether it was ever applied, and in writing.
What to write instead
- Decide whether the network is exclusive or selective, because the clauses available to you differ, and a contract that borrows from both constructions defends neither.
- Write the quality criteria for the online shop from the product, and make them apply to every member including any entity of yours that sells there.
- Reserve active selling where you want to, naming the acts you forbid, and state in the same clause that answering a customer who comes on their own is free.
- Take the price out of the channel discussion entirely. A recommended price, a maximum price, nothing else — and no follow-up on either.
- Have the draft read by a competition lawyer in the country whose courts would hear a dispute, before the distributor signs rather than when the relationship turns.
The clause that costs you the most is never the one you negotiated; it is the one you copied from a contract that worked at home. Before the European draft goes out, take out every sentence that forbids, authorises or prices the online channel, and rebuild that part from the product: what the shop must look like, what the service must be, who may be a member at all. Then have it read locally — the prohibition is European, but the court that applies it and the procedure that gets you there are national, and a particular clause is confirmed with a lawyer in the country concerned rather than from a general description.