Distribution Agreement In Egypt
(1) The recent decision of the Egyptian Competition Authority (ECA) on the admissibility of restrictive distribution contracts can have important consequences for the marketing of branded products in Egypt. At the same time, it demonstrates the Court`s increasingly active role in combating anti-competitive practices. (4) To what extent should the agreement be compatible with business practices in a given sector; The Competition Act provides for restrictions that generally apply to market participants and stricter restrictions that apply to dominant operators. In recent years, the Court of the European Union has adopted a policy of sectoral and determined enforcement; However, the focus continued to be on combating cartel violations (horizontal agreements) and on abuse of dominance. The legality of vertical restrictions under competition law was found to be controversial, as the case was not the subject of the Court`s decisions. In any event, companies that sell to Egypt through exclusive distribution channels should review their distribution agreements to detect possible violations of competition law. In this case, it is not certain that the producer will be considered a direct competitor to the independent distributor as soon as he himself begins distribution. Even if the agreement between them takes the form of a distribution agreement, the effects of the EUI/EAHC decision must be carefully considered, although many companies can say that, without the agreement, the distributor would not be a competitor and that the agreement itself should be analysed. In the EU, these distribution agreements are considered vertical and have a category exemption in a safe port. In many emerging countries, the classification of these relationships as vertical or horizontal is unclear.
This position could lead to the nullity of vertical restrictions in distribution agreements that prevent Egyptian-based distributors and distributors established outside Egypt from passively selling products on the Egyptian market. It is always questionable whether the Court of Auditors will follow this position in general, regardless of the details of the different sectors of the distribution network or the commercial sector, and to what extent a vertical restriction to limit passive sales and parallel imports can still be justified on the grounds of guaranteeing the quality and reputation of the products. With respect to vertical constraints, section 7 of the Competition Act generally provides that “any agreement or contract between a person and one of its suppliers or customers for the purpose of limiting competition is prohibited.” Notwithstanding the general prohibition, vertical restrictions are not in themselves prohibited in distribution agreements. The Court decides on a case-by-case basis whether a vertical constraint to restrict competition is contrary to Article 7 of competition law. Aqua Bio Technology ASA (ABT) has entered into an agreement with DBK Pharmaceutical S.A.E of Cairo, Egypt, for the distribution of Moana Skincare products in the country.
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