When Your Partner Becomes Your Competitor: Who Gets the Market You Built

Years of work that can easily go to someone else

You have spent years building a market for the brand you distribute. What stops the supplier from handing that exclusivity to your closest competitor as soon as it terminates the contract with you, together with all the market insight you passed on along the way?

What it looks like in numbers (an imagined example)

Imagine that you have 120 customers, a turnover of €600,000 a year and an 18% margin, that is €108,000 of margin a year.

If a competitor gets the exclusivity and your customer data right after termination, and takes over half of the customers in the first six months, you lose about €54,000 of margin a year.

A standstill period of 12 months in which the supplier may not authorize a new distributor in the same territory would not solve the problem, but it would give you time to find a replacement brand and keep your customers.

For your own case, take the figures from your turnover and customer base.

Questions to Check Before Signing

These are not ready-made contract clauses or legal advice, but questions worth thinking about before you accept the terms. The exact wording depends on your contract and the applicable rules.

What does the contract say about who may be the new distributor after termination?

Which customer and pricing data does the supplier ask for, and how may it use it?

Is there a cooling-off period and how long is it?

Does the contract provide compensation for the market you built?

What happens to your stock and open orders on termination?

What the supplier knows about your customers

The supplier often asks for sales data: who buys, how much, at what price, through which channel. Part of that is understandable, for example for stock planning. But the same data in the hands of a new distributor is a ready-made customer list. So before you sign it is worth knowing what you are handing over, in how much detail and under what rules the supplier may use it.

Consider whether the data can be given in aggregate form (by region or product) rather than customer by customer, whenever that does not endanger the cooperation.

The standstill period and the transition

A standstill period is the time after termination during which the supplier may not appoint a new distributor in your territory. Its length is not universal and depends on how long you need to replace the brand or keep your customers. It is often discussed together with a transition period: how long you can still sell your stock, and how open orders and warranties on products already sold are handled.

Ask yourself: how many months would you realistically need, and what happens to customers who ordered in the meantime?

What happens to your data after termination

If the contract doesn't mention what happens to your data and customer base after termination at all, assume the worst-case scenario, and clarify it before signing, not after.

Describe your situation to us and you will get an overview of risks and options.

Prepare questions before making a binding decision

Expert Consilium helps you examine business assumptions, risks and options before you make a decision. A business analysis of the terms shows what they mean for price, risk and flexibility.

Contact us: office@expertconsilium.com | expertconsilium.com

Informational business article. It does not constitute legal, tax, accounting, investment or other regulated advice.