Selling goods in The Netherlands: a sales model overview

There are various sales models that can be considered by manufacturers and traders that want to bring goods to market in The Netherlands. This article focuses on practical considerations and characteristics related to distribution, agency and direct-to-consumer (DTC) sales (click here to read a previous article by BUREN covering the topic of franchising).
 
Distribution

• A distribution model is a sales model whereby a supplier sells and delivers goods to a distribution partner (B2B) who in turn sells and delivers goods in his own name and for his own account to end-customers (B2B or B2C). In some sectors, such as the automotive sector, a distribution model is traditionally very common.
• Dutch statutory law does not provide for specific provisions related to distribution agreements. Rules of EU and Dutch competition law do apply, and limit what parties to a distribution agreement can legally agree to (click here to read a previous article by BUREN on this topic).
• For example, and importantly, the supplier and the distribution partner are always prohibited to directly or indirectly fix minimum prices vis-à-vis end-customers. Agreements infringing competition law are void and may expose companies to fines by competition authorities as well as civil damage claims. 
• A supplier is permitted (1) to assign up to five distribution partners in one territory or to one customer group (exclusivity) and (2) prohibit distribution partners from making active sales outside their territory provided that both the supplier and the distribution partner have a less than 30 per cent market share on the market for the sale and purchase of the goods, respectively. It is always prohibited to restrict passive sales outside the territory granted to the distributor.
• Other provisions often found in distribution agreements are, for example, minimum volume commitments, minimum inventory commitments, commitments regarding advertising (budget) and market specific investments by the distribution partner, local service and warranty provided by the distribution partner, reporting on the activities carried out by the distribution partner, choice of law and forum clauses, termination clauses, IP clauses and confidentiality clauses.
• Specific rules for exchanging information between the supplier and the distribution partner apply in the case of so-called ‘dual distribution’ models, i.e. models in which a supplier brings products to market directly, as well as through a distributor.

Agency

• An agency model is a model whereby an agent is entrusted with the power to negotiate and/or conclude an agreement on behalf of the supplier (in this context named principal) in exchange for a fixed and/or variable commission, without assuming any economic risk in relation to that transaction. This means that the agreement, from a legal point of view, is executed directly between the principal and the end-customer and the principal is directly responsible for any claims by end-customers.
• Genuine agency relationships are not governed by competition law restrictions. Consequently, unlike in a distribution model and amongst other things, the principal can determine the price charged to customers (in addition to determining the geographic area and customer groups that may be covered by the agent). 
• The agent may not bear any or only insignificant contract specific risks in relation to the contracts negotiated or concluded and in relation to market-specific investments for that field of activity, because this would result in the legal relationship being qualified as a distribution relationship, and – as such – be subject to the prohibitions stemming from competition law (as well as the sanctions for potentially violating these prohibitions).
• Dutch law provides for specific statutory rules related to agency, implemented into Dutch law further to an EU Directive. Most of these provisions are of a (semi)binding nature, meaning that parties cannot deviate from the statutory regime to the detriment of the agent.  It is nonetheless strongly recommendable to structure principal-agency relationships on the basis of a clear written agreement.
• A natural person acting as an agent has many similarities with an employee, and therefore it is important to properly steer away from an employment relation in the agency agreement. 

DTC/ecommerce

• A DTC model is a model whereby a manufacturer sells goods online, directly to end-customers (including consumers). This sales model reflects the ongoing trend of increasing digitization of the economy and movement away from brick-and-mortar stores. The trader in a DTC model is directly responsible for any aftersales activities and claims by customers.
• From a legal point of view, ecommerce sales qualify as ‘distance selling’. Distance selling is subject to a substantial body of statutory rules, which are implemented into Dutch law further to multiple EU Directives and will be covered more exhaustively in a separate article.
• Firstly, these rules relate to the information that a trader should provide to consumers, how and when this information should be provided in the consumer’s online sales journey and subsequently, on a durable medium, and the consequences if the information is not provided. For example, general sales conditions will only be applicable if made available before or at the same time as the conclusion of the contract in a way that consumers are able to save the conditions for later reading (a PDF-file, for example). These rules are quite specific and the margin for error is small, so it is strongly recommendable to ensure compliance when designing the sales journey. 
• For example, Courts will assess ex officio whether traders have fulfilled all essential information obligations vis-à-vis consumers, and – based on their Guidelines – will deduct up to 50 per cent of the purchase price in collection cases brought by the trader if multiple essential information obligations have not been performed. In addition, from a civil law perspective and depending on the obligation that is breached, provisions or agreements can be subjected to nullification or void, and the consumer’s statutory withdrawal period can be extended by a year. In addition, the Dutch Consumer Authority can impose (theoretically substantial) administrative fines for (structural) non-compliance. Practically speaking, risks resulting from non-compliance are particularly elevated when the goods sold have higher unit costs (auto’s, electric bikes, electronic devices, etc.) and/or the trader sells goods on credit. 
• Secondly, consumers that have ordered exclusively through means of distance communication in the EU have the right to cancel their purchases up until 14 days after delivery of the goods (the so called ‘cooling-off’ period), subject to a few limited exceptions (deductions for usage, return costs, and exceptions for limited categories of goods). This cooling-off period can be a limiting factor, or at least a consideration, for certain types of goods.

If you have any questions related to identifying and setting up an appropriate and legally compliant sales model in The Netherlands, we are gladly available to exchange views on this.