NETHERLANDS: A new case law on termination of distributorship agreements.

Jaap VAN TILL | NETHERLANDS | 2008-10-15


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Eastborn is a supplier of bedroom furniture and mattresses. Selling of the products is done through a network of approx 300 dealers/distributors in The Netherlands. One of those distributors is the company M.F. Design. The distribution relationship between Eastborn and M.F. Design dates back to the early 1990’s. The distribution relationship has not been laid down in a written contract and is therefore considered as a relationship concluded for an indefinite period of time. Eastborn delivers the products to M.F. Design (and all the other distributors) with a discount of 50%. Eastborn furthermore makes use of recommended resale prices which are published in price-catalogues issued by Eastborn and which can also be found on the website of Eastborn.


M.F. Design has been selling the products through its website granting the customers a 20% discount on all purchases of the products.


A large number of the other Eastborn distributors started complaining about M.F. Designs discount practices. Efforts of Eastborn to persuade M.F. Design to put an end to these practices were unsuccessful. Shortly thereafter Eastborn terminated the distribution relationship with M.F. Design. M.F. Design asked the Court to declare the termination unlawful and without effect since there was no legally justifiable reason for the termination as such. Eastborn put up a defense which was mainly based on the argument that although it acknowledged M.F. Design’s right to deviate from the Eastborn recommended resale prices, it could not afford to risk that other important distributors would terminate their distribution relationships with Eastborn due to M.F. Design’s discount practices.


The Court of Appeal ruled that although Eastborn was apparently more or less forced to terminate the relationship with M.F. Design under pressure from the other distributors, such did not take away that the termination qualified as a concerted practice between Eastborn and the other distributors to maintain the recommended resale price and that this concerted practice is not permitted under Art. 6 of the Dutch Competition Act.


Accordingly the Court ruled that the termination of the distribution relationship by Eastborn was unlawful and void. Eastborn was ordered to continue to deliver the products to M.F. Design on the usual conditions and to pay for the damages incurred by M.F. Design as a result of the unlawful termination.



Jaap van Till, IDI country Expert for Netherlands



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