Distributor's Obligations of Confidentiality and Non-Competition

Distribution agreements should provide for the distributor’s confidentiality obligation, which prohibits the distributor from disclosing or using otherwise than in connection with the agreement the principal’s business secrets, know-how etc. during the term of the agreement or thereafter.

The distributor is usually not allowed to sell and market competing products. When drafting the agreement, the product selection of the distributor should normally be specified, in order to avoid discussion regarding competing products at a later stage. Competition law imposes certain requirements on such restrictions of competition, which should be taken into account.