Why brands want bans — and why absolute bans are risky
Distributors dump prices on e-marketplaces, use poor product imagery, advertise “cheapest genuine goods” — brands want all distributors barred from online selling to protect price and image. Contracts state: “Distributor shall not sell through any online channel.”
The problem: absolute online-sales bans in vertical distribution may count as anti-competitive agreements — restricting where/to whom distributors may sell, allocating markets by channel. Competition Law 2018 (Article 11) bans restrictive agreements, and many competition authorities (EU, and the trend in Vietnam) treat absolute online bans as hardcore restrictions. Vietnamese brands exporting to the EU must be extra careful — EU partners banned from online sales may sue under EU competition law.
Lawful online-channel control: four ways
1. Quality criteria (selective distribution): instead of banning, set standards for online channels: own-domain websites, compliant imagery, customer service, return policies. Compliant distributors may sell online — selective distribution, widely accepted.
2. Marketplace-specific bans: less risky than total online bans — brands may bar third-party marketplaces (Shopee, Lazada…) while permitting own websites. (Note: even marketplace bans face debate in some jurisdictions — get specific advice.)
3. Brand-value controls: online brand-guideline compliance, bans on “cheapest price” advertising, minimum advertised price rules (MAP — distinct from selling price).
4. Dual distribution: the brand runs its own official online channel (flagship store) at standard prices; offline distributors focus on service/experience — clear role division over prohibition.
Drafting safe clauses
Never write absolute “online sales bans.” Instead: “Distributors may sell online meeting Annex X standards” plus detailed, objective, uniformly applied standards. Every allow/deny decision must rest on standards, without discrimination. And for export markets: review the importing country’s competition law — don’t apply Vietnamese policies to EU partners.
Frequently asked questions
Banning Shopee but allowing own websites — OK?
Less risky than absolute bans and common brand practice. Still get competition advice — some jurisdictions are tightening even marketplace bans. State quality/brand reasons; apply uniformly.
Distributor secretly sells online despite bans?
Handle contractually (warn, penalize, terminate repeats) — but first check your own ban clause is competition-clean. Enforcing a competition-violating clause deepens brand risk.
Brand’s own online prices undercut distributors?
Brands may trade through their own channels, absent contractual online-exclusivity promises to distributors. Avoid conflict: contracts distinguishing offline/online channels, with consistent cross-channel pricing.
Do MAP policies breach competition law?
MAP limits only advertised prices; distributors may still sell lower (true price visible at cart) — lower competition risk than RPM. But the MAP/RPM line is thin — design carefully with counsel.
Distributor sells online into another’s territory?
Two issues combined: online selling plus territory invasion. Handle under contractual territory clauses (see EXP-6311) — but don’t use territory pretexts for total bans on passive online sales, which re-touches competition law.
This article has been quality-reviewed by the FLAW AI Legal Council
