Meaning
Contractual freedoms granted to a distributor to fulfill unsolicited orders from customers located outside their assigned territory. Protection of passive sales rights is a core component of European competition law, ensuring that consumers can seek out better prices across borders. A supplier can prevent a distributor from actively marketing in another partner’s zone but cannot stop them from responding to a direct inquiry.
Active Distinction
Specific restrictions on advertising or setting up warehouses in a restricted area qualify as limits on active selling. However, the exercise of passive sales rights means the distributor can still maintain a website that is accessible to all regions. If the website is not specifically targeted at the restricted territory through localized language or paid search, the sales resulting from it are considered passive.
Internet Sale
Online commerce has expanded the scope of what is considered a passive transaction. Regulations surrounding passive sales rights prevent manufacturers from imposing total bans on internet selling or charging higher prices for goods intended for online resale. These rules ensure that the digital channel remains a viable way for distributors to reach customers who find them through general search engines.
Manufacturers are permitted to set quality standards for online presentation as long as these do not effectively kill the channel.
Enforcement Action
Regulatory actions against firms that penalize a distributor for selling to out-of-territory customers are common. Any attempt to obstruct passive sales rights can lead to fines from national competition authorities.
