A manufacturer building a network of distributors and a franchisor expanding a concept essentially want the same thing: a uniform pricing policy, clearly divided territories and control over where and how their goods are sold. An agreement that achieves those aims directly may, however, be a prohibited agreement restricting competition. The limits are set by EU competition law and by Slovak Act No. 187/2021 Coll. on the protection of competition.
The block exemption and when it applies at all
Both a distribution agreement and a franchise agreement are vertical agreements, that is, agreements between undertakings operating at different levels of the production or distribution chain. Commission Regulation (EU) 2022/720 declares that the prohibition of agreements restricting competition does not apply to such agreements where they satisfy its conditions. The principal condition is market share: neither the supplier’s nor the buyer’s market share may exceed 30% of the relevant market (Article 3(1)). The exemption does not in principle apply to vertical agreements between competitors (Article 2(4)) and the Regulation applies until 31 May 2034 (Article 11).
Slovak law extends the same regime to agreements incapable of affecting trade between Member States. Under Section 4(5) of Act No. 187/2021 Coll., the prohibition does not apply to a category of agreements satisfying the conditions for exemption under specific legislation. A party relying on the exemption must demonstrate this to the antimonopoly authority (Section 4(6)).
The block exemption has two limits, however. Some restrictions deprive the whole agreement of the exemption because they are hardcore (Article 4). Others are merely excluded from the exemption on their own, with the remainder of the agreement staying covered (Article 5).
Price: recommending yes, setting no
A typical mistake is a fixed or minimum resale price. The Regulation classifies it as a hardcore restriction:
the restriction of the buyer’s ability to determine its sale price, without prejudice to the possibility for the supplier to impose a maximum sale price or recommend a sale price, provided that they do not amount to a fixed or minimum sale price as a result of pressure from, or incentives offered by, any of the parties;
Recommended and maximum prices are therefore acceptable as long as pressure or rewards do not turn them into a fixed price. A “recommended price” clause whose breach is punished by suspension of supplies or loss of a bonus may thus become a fixed price not covered by the block exemption. Slovak law expressly lists the direct or indirect fixing of prices as an example of a prohibited agreement (Section 4(3)(a)).
Territory and customers: active and passive sales
Dividing territory is common in distribution, but the Regulation distinguishes two kinds of sale. Active sales means actively targeting customers by visits, emails, telephone calls, targeted advertising or, for example, a website using a domain name or language of another territory. Passive sales means sales in response to an unsolicited request from a customer (Article 1(1)(l) and (m)).
If you operate an exclusive distribution system, that is, you allocate a territory or customer group to yourself or to no more than five buyers (Article 1(1)(h)), you may restrict your distributors’ active sales into territories reserved to others. A prohibition of passive sales into another territory is, however, generally a hardcore restriction (Article 4(b)). Similar rules apply where you operate neither an exclusive nor a selective system (Article 4(d)). A prohibition on “selling outside the territory” without that distinction therefore does not belong in an agreement.
Sales over the internet
A prohibition on selling through an online shop is a hardcore restriction where it prevents the buyer or its customers from effectively using the internet to sell (Article 4(e)). The Regulation does expressly permit other restrictions of online sales and restrictions of online advertising that do not preclude an entire advertising channel. You may therefore require a standard of brand presentation or website quality, but the block exemption does not cover a prohibition of internet sales.
Non-compete obligations and know-how
A non-compete obligation agreed for an indefinite duration or for more than 5 years is excluded from the exemption (Article 5(1)(a)). That time limit does not apply where the buyer sells from premises owned by the supplier or leased by it from a third party unconnected with the buyer, and the obligation does not last longer than the buyer’s occupancy of those premises (Article 5(2)). After the agreement ends, a non-compete obligation is covered only where it relates to competing goods, is limited to the premises from which the buyer operated, is indispensable to protect know-how transferred to it and lasts no more than 1 year (Article 5(3)). Protection of know-how that has not become publicly available may be unlimited in time. In franchising, therefore, the main weight falls on protecting the manual and confidential information, as we describe under our franchise agreement service.
What to do with agreements that fail the rules
Where an agreement contains a hardcore restriction, the block exemption does not apply to the agreement as a whole. Such an agreement must be assessed individually against the general conditions for exemption from the prohibition (Section 4(4) of Act No. 187/2021 Coll.), and relying on their being met for a pricing or territorial clause is risky. Slovak law does prohibit only that part of an agreement which can be severed from the rest (Section 4(7)), but that does not remove the risk of proceedings before the Antimonopoly Office and of disputes with partners over the validity of clauses.
When reviewing distribution and franchise agreements we therefore recommend going through, above all, pricing clauses including bonus schemes, territorial prohibitions with the distinction between active and passive sales, rules on online sales and the duration of non-compete obligations. It is equally necessary to check whether the parties’ market shares exceed the block exemption threshold. If you are still choosing a sales model, our article Distributor, commercial agent or commission agent will help. How the draft new Civil Code affects franchising is examined in our article on the franchise agreement in the draft new Civil Code.
We prepare distribution agreements within the limits of competition law under our distribution and franchise agreement service, and franchise packages under our franchise agreement service.
This article provides general legal information as at 12 September 2026. It does not constitute legal services or advice on your specific matter. Laws change and the details of your situation may differ. Check the appropriate course of action or contact us before making a decision.
