SHORT ANSWER TO THE MAIN QUESTION

An exclusive representation agreement may describe several legally different relationships.

In the case of exclusive commercial agency, Czech law directly regulates exclusivity: within the agreed scope, the principal may not appoint another commercial agent, while the commercial agent may not represent other persons or conduct competing business within that same scope.

The principal may still conclude transactions directly, although the agent may remain entitled to commission.

Alongside commercial agency, businesses may also agree on:

• exclusive distribution,
• exclusive purchasing,
• exclusive supply,
• sole-source arrangements,
• or mutual exclusivity.

These relationships do not necessarily constitute commercial agency and must be structured according to the actual business model.

Exclusive arrangements between businesses may also qualify as vertical agreements under EU competition law. Commission Regulation (EU) 2022/720 provides a safe harbour for many vertical agreements where both the supplier’s and buyer’s market shares remain within the applicable 30% thresholds, but certain restrictions remain problematic regardless of those thresholds.

The first question is therefore not “how do we draft an exclusivity clause?” but “what type of exclusivity do the parties actually need?”

YOU MAY BE THINKING…

“If I appoint someone as my exclusive representative for the Czech Republic, can I still sell there directly?”

“Can a supplier appoint one exclusive distributor?”

“Can I prevent the distributor from selling outside its territory?”

“Can we agree that I will buy only from one supplier?”

“Can the supplier agree to sell only to me?”

“Does an exclusive buyer have to guarantee minimum purchases?”

“What if the exclusive distributor underperforms?”

“Can exclusivity last for ten years?”

“What about online sales into another country?”

These are different questions.

And some of them are no longer matters of contract drafting alone.

CLIENTS OFTEN ASK…

Is exclusive representation the same as exclusive distribution?

No.

A commercial agent typically seeks out customers and negotiates or, depending on the agreement, may conclude transactions for the principal.

A distributor, by contrast, usually purchases products from the supplier in its own name and for its own account and then resells them to customers.

Economically, both may appear to be “selling the product in the Czech Republic”.

Legally, however, they operate differently.

That affects, among other things:

• remuneration,
• commercial risk,
• ownership of goods,
• the relationship with the end customer,
• termination,
• certain statutory rights after the relationship ends.

What does “exclusive buyer” actually mean?

It depends on what the parties have agreed.

It may mean:

The supplier may sell a particular product in the Czech Republic only to Buyer A.

That is exclusivity on the supplier’s side.

But it may also mean:

Buyer A must purchase that product only from Supplier X.

That is exclusivity on the buyer’s side.

Or both restrictions may apply at the same time.

“Exclusive buyer” is therefore not a sufficiently precise contractual mechanism until it is clear who is actually restricted by the exclusivity.

Does exclusivity mean that the supplier cannot sell directly to customers?

Not automatically.

For example, in exclusive commercial agency, Czech law expressly contemplates that the principal may conclude transactions without the agent’s involvement. The agent may nevertheless remain entitled to commission.

In a distribution agreement, direct sales must be addressed contractually.

The parties may agree, for example, that:

• the supplier may not sell directly at all,
• certain key accounts remain reserved,
• the supplier may serve specific categories of customers,
• the supplier may accept certain orders through its own website,
• or the distributor receives commission on direct sales within its territory.

Can exclusivity be linked to minimum purchase obligations?

Yes, and commercially this often makes sense.

The supplier grants exclusivity.

In return, the partner may undertake to:

• purchase a minimum volume,
• achieve minimum turnover,
• acquire a defined number of customers,
• invest in marketing,
• maintain stock levels.

If the partner fails to meet those targets, the consequences may include:

• loss of exclusivity,
• conversion to a non-exclusive arrangement,
• a right to terminate the agreement.

In exclusive commercial agency, Czech law also contains a specific rule addressing insufficient business volume.

Is exclusivity always permitted under competition law?

No rule says that every exclusive arrangement is unlawful.

Vertical restrictions may have legitimate economic reasons. A distributor entering a new market, for example, may need some protection for the investment it makes in developing the brand.

At the same time, certain restrictions may limit competition.

EU competition rules therefore distinguish, among other things:

• exclusive distribution,
• active sales,
• passive sales,
• non-compete obligations,
• online sales restrictions.

Exclusivity itself is not necessarily the problem. The problem may be the scope of the restriction and the way it limits further sales.

WHAT THE LAW SAYS VS. WHAT HAPPENS IN PRACTICE

Exclusive commercial agency has its own statutory rules

Under the Czech Civil Code, exclusive commercial agency means, in simplified terms, that:

• the principal may not use another commercial agent within the agreed territory or customer group,
• the agent may not represent other persons or trade for its own or another person’s account within the same scope,
• the principal may nevertheless conclude transactions directly,
• the agent may still be entitled to commission on such transactions.

This is a relatively specific statutory model.

Distribution is different

Imagine a cosmetics manufacturer granting Company A:

“exclusive distribution rights for the Czech Republic.”

What exactly does that mean?

Can Company A:

• sell wholesale?
• sell directly to consumers?
• sell online?
• sell to a Slovak customer who approaches it without solicitation?
• supply a Czech customer with branches across the EU?

And can the manufacturer:

• sell directly to major retail chains?
• supply Czech customers through its foreign e-shop?
• appoint another distributor for a specific customer segment?
• sell through a marketplace?

The sentence:

“The Distributor has the exclusive right to sell the Products in the Czech Republic.”

does not answer those questions.

Territory is not the same as a customer group

Exclusivity may be structured by:

territory

• Czech Republic,
• Slovakia,
• DACH,
• European Union,
• a specific region.

Or by:

customer group

• retail,
• hospitals,
• industrial customers,
• public sector,
• a particular chain,
• OEM customers.

Sometimes both concepts are combined.

Exclusive supplier is not automatically the same as exclusive buyer

Imagine a manufacturer of components.

The buyer says:

“We want this product supplied only to us.”

The supplier agrees.

That may provide strong protection for the buyer.

But the supplier should immediately ask:

• What minimum volume does the buyer guarantee?
• What happens if orders fall to one tenth of the original level?
• May I supply a modified version to another customer?
• What counts as the “same product”?
• Is the exclusivity global?
• How long does it last?
• What happens if the buyer stops paying?

Exclusivity without a corresponding commercial obligation from the other side may lock the supplier out of the market without providing adequate value in return.

BIGGEST RISKS AND COMMON MISTAKES

❌ Mistake: “The partner has exclusive representation.”

Consequence

It is unclear:

• whether the partner is an agent or distributor,
• which products are covered,
• which territory applies,
• which customers are covered,
• whether the supplier may still sell directly.

Better approach

First define the commercial model, then define the precise scope of exclusivity.

❌ Mistake: exclusivity without minimum performance

The supplier agrees not to work with anyone else in the Czech Republic.

The distributor, however, has no minimum purchase or sales obligation.

Consequence

The market is effectively blocked, while the distributor has no obligation to generate meaningful sales.

Better approach

Link continued exclusivity to:

• minimum purchases,
• turnover,
• customer targets,
• marketing activity.

❌ Mistake: no consequence for missing the target

The distributor was supposed to purchase CZK 10 million of products.

It purchases CZK 6 million.

What happens?

Does the agreement terminate?

Does only the exclusivity terminate?

Is the territory reduced?

Does the distributor get another year?

Better approach

The agreement should expressly determine whether failure to meet the target results, for example, in:

automatic conversion from exclusive to non-exclusive status.

That is often more practical than automatic termination of the entire relationship.

❌ Mistake: exclusivity is drafted as an absolute prohibition on all outside sales

Consequence

The restriction may create competition-law problems.

EU rules on exclusive distribution distinguish in particular between active sales, where a seller actively targets a protected territory or customer group, and passive sales, where it responds to unsolicited demand.

Certain active-sales restrictions may be permissible within an exclusive distribution system, while restrictions on passive sales are significantly more sensitive.

Better approach

Do not use a blanket prohibition on “any sales outside the territory” without competition-law review.

❌ Mistake: nobody addresses online sales

The agreement is based on a simple territorial model:

Czech Republic → Distributor A

Slovakia → Distributor B

Then online sales enter the picture.

A Czech customer orders from the Slovak website.

A Slovak customer finds the Czech distributor through Google.

Consequence

The territorial model no longer reflects how customers actually buy.

Better approach

Address separately:

• own e-shops,
• online advertising,
• marketplaces,
• localised domain names,
• targeted advertising,
• unsolicited orders from outside the territory.

❌ Mistake: the supplier reserves “strategic customers” without defining them

Consequence

The distributor later discovers that the most valuable potential customers are actually reserved for the supplier.

Better approach

Define clearly:

• reserved accounts,
• key accounts,
• existing customers,
• specific customer categories.

❌ Mistake: long-term exclusivity without review

A market may change significantly over five years.

Consequence

A party may remain tied to a commercial model that no longer works.

Better approach

Use:

• a fixed term,
• performance conditions,
• periodic review,
• mechanisms for removing exclusivity.

For certain vertical non-compete obligations, duration is also relevant for the application of the EU block exemption.

HOW TO APPROACH IT – REALITY, NOT THEORY

I would not begin with:

“How should we draft the exclusivity clause?”

I would begin with:

“What does the partner receive exclusivity in return for, and what must it provide in exchange?”

1. Identify the underlying relationship

Is the partner:

• a commercial agent,
• distributor,
• reseller,
• buyer,
• supplier,
• manufacturer?

That distinction is fundamental.

2. Define the subject matter of exclusivity

Exclusivity may apply only to:

• a specific product,
• a product line,
• a brand,
• a type of service,
• a specific technology.

Be careful with wording such as:

“all products of the supplier”.

Two years later, the supplier may develop an entirely new product that nobody contemplated when the agreement was signed.

3. Define the territory or customer group

For example:

Czech Republic – retail segment.

That is much more precise than:

“exclusive partner for the Czech Republic”.

4. Define who is restricted

Exclusive agency

The supplier/principal may not appoint another agent.

Exclusive purchasing

The buyer may not purchase from competing suppliers.

Exclusive supply

The supplier may not supply other customers.

Mutual exclusivity

Both sides accept restrictions.

Each model has different commercial consequences.

5. Define the price of exclusivity

This does not need to be a separate monetary fee.

The commercial consideration may consist of:

• minimum purchases,
• minimum turnover,
• marketing budget,
• stock commitments,
• customer support,
• local service infrastructure,
• investment in market development.

Exclusivity should not be a commercial gift with no reciprocal commitment.

6. Set KPIs and consequences for failure

For example:

The actual model depends on the product and market.

7. Address direct sales

The supplier may want to retain:

• global customers,
• existing customers,
• public tenders,
• strategic accounts,
• sales through its own channels.

The agreement should then determine whether:

• those accounts are excluded from exclusivity,
• the distributor receives commission,
• those sales count towards the distributor’s targets.

8. Address online and cross-border sales

It is not enough to write:

“The Distributor may not sell outside the Czech Republic.”

Competition-law rules may require a distinction between different forms of active and passive sales.

9. Prepare the exit

Exclusive relationships create dependency.

The distributor may:

• build a team,
• rent warehouse space,
• invest in advertising,
• build a customer network.

The supplier may:

• adapt production,
• reserve capacity,
• reject alternative customers.

The agreement should therefore address:

• duration,
• ordinary termination,
• material breach,
• conversion to non-exclusive status,
• sell-off of remaining stock,
• existing orders,
• customer data,
• marketing materials,
• trademarks,
• receivables and commissions.

PRACTICAL EXAMPLES

The following examples are illustrative.

👉 “You have exclusivity for the Czech Republic”

A manufacturer gives a distributor exclusive rights for the Czech Republic.

The distributor invests heavily in marketing.

A year later, it discovers that the manufacturer has started selling directly to the largest Czech customers.

The manufacturer says:

“The agreement only prohibits us from appointing another distributor. It does not prohibit direct sales.”

And it may be right.

The word exclusive alone does not address every sales channel.

👉 The exclusive distributor stops selling

A supplier gives a distributor exclusivity for five years.

There is no minimum purchase requirement.

During the first year, sales are strong.

In the second year, the distributor starts prioritising another product.

By the third year, sales are almost zero.

The supplier still cannot simply appoint another partner.

Exclusivity without performance conditions can turn a distributor’s competitive advantage into the supplier’s commercial trap.

👉 The buyer wants a sole supplier

A manufacturer needs secure supply of a critical component.

It requires:

“The supplier shall reserve the entire production capacity for us.”

That may make commercial sense.

But if the supplier reserves all of its capacity, it needs the answer to another question:

How much will you actually buy?

An exclusive supply obligation without minimum purchase commitments shifts a substantial part of the commercial risk to one side only.

👉 The internet removes the border from the map

The Czech distributor has Czech exclusivity.

The Slovak distributor has Slovak exclusivity.

Both operate online stores.

A customer in Bratislava finds the Czech website and places an order without being solicited.

The contractual question suddenly becomes:

Was the customer actively targeted, or did the customer approach the seller independently?

That distinction is also relevant under EU competition law.

WHY YOU SHOULD BE CAREFUL WITH “I’LL DO IT MYSELF”

A generic exclusivity clause might say:

The Supplier grants the Buyer the exclusive right to distribute the Products in the Czech Republic.

That is one sentence.

But it does not tell us:

• which products,
• whether future products are included,
• which customers,
• which sales channels,
• whether the supplier may sell directly,
• whether there are reserved accounts,
• how online sales work,
• what “sales outside the territory” actually means,
• what minimum performance is required,
• what happens if the target is missed,
• whether exclusivity terminates or is merely reduced,
• how long the restriction lasts,
• whether the restriction complies with competition law.

Generative AI can draft a polished exclusivity clause.

But if the instruction is:

“Draft me an exclusive distribution agreement for Europe,”

AI cannot know by itself:

• how the market works,
• what the parties’ market shares are,
• which customer groups matter,
• which accounts the supplier wants to retain,
• how online sales operate,
• what market-entry investments are expected,
• which restrictions are competition-law compliant.

The difficult part of exclusivity is not drafting the prohibition. It is determining exactly what should be prohibited and what either cannot or should not be prohibited.

LAWYER’S RECOMMENDATION + CHECKLIST

Before signing, I would use one simple test:

Can I identify a specific transaction that one party would like to enter into after signing but is no longer permitted to enter into because of the exclusivity?

If not, the exclusivity is not defined precisely enough.

Checklist

• The underlying contractual model is clear.

• Agency and distribution are properly distinguished.

• The covered products are precisely identified.

• The territory is defined.

• Any customer group is defined.

• It is clear which party is restricted.

• It is clear whether exclusivity is unilateral or mutual.

• Direct sales by the supplier are addressed.

• Existing or strategic customers are defined.

• Online sales are addressed.

• Cross-border sales are addressed.

• Competition-law rules have been considered.

• Duration of exclusivity is defined.

• Minimum purchases or other KPIs are defined.

• Consequences of failing to meet KPIs are defined.

• Renewal of exclusivity is addressed.

• Product availability and supplier capacity are addressed.

• Forecasting and ordering procedures are addressed.

• Termination is regulated.

• Sell-off of remaining stock is addressed.

• Existing orders are addressed.

• Use of trademarks and marketing materials after termination is regulated.

• For commercial agency, statutory rights upon termination have been reviewed.

FAQ

What is an Exclusive Representation Agreement?

If the relationship is genuinely one of commercial agency, Czech law directly recognises exclusive commercial agency.

Within the agreed territory or customer group, the principal may not use another commercial agent, while the agent is restricted from representing others within the same scope.

Is an exclusive commercial agent the same as an exclusive distributor?

No.

A commercial agent typically develops and negotiates business for the principal.

A distributor normally buys products and resells them in its own name and for its own account.

The distinction may have significant legal consequences, particularly on termination.

Can the principal sell directly even if the agency is exclusive?

Yes.

Under Czech law, direct sales by the principal are not automatically prohibited in an exclusive commercial agency relationship, although the agent may remain entitled to commission.

What is exclusive purchasing?

It usually means an obligation of the buyer to purchase particular products or services exclusively, or predominantly, from a specified supplier.

The scope should be defined carefully, and significant arrangements may also require competition-law review.

What is exclusive supply?

It usually means an obligation of the supplier to supply a particular product only to a specified buyer.

For the supplier, such a commitment should normally be matched by a sufficiently concrete commercial obligation on the buyer’s side, such as minimum purchases or long-term purchasing commitments.

Can a distributor have exclusive rights for the entire Czech Republic?

An exclusive distribution system can generally be created.

The agreement must, however, deal properly with territory, customer groups, direct sales and the distinction between active and passive sales.

EU competition law also applies.

Can I completely prohibit the distributor from selling to customers outside its territory?

An absolute prohibition may be competition-law sensitive.

EU rules distinguish between active targeting of customers and passive responses to unsolicited demand.

Those forms of selling do not have the same legal treatment.

For that reason, I would not use a blanket prohibition on “any sales outside the territory” without further analysis.

What happens if the exclusive partner misses the minimum turnover target?

The agreement may provide for:

• loss of exclusivity,
• conversion to non-exclusive cooperation,
• reduction of territory,
• termination rights.

For exclusive commercial agency, Czech law also contains a specific rule addressing insufficient business volume.