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  • #987532
    bees
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    Hi all,

    We import the raw materials to make a small keepsake product from the US. We are the exclusive distributors of these materials in Australia and NZ, and we sell to wholesale/trade customers, as well as creating our own product with them.

    Last month a competing brand cropped up in the UK, selling the raw materials in bulk that we use to make our product. This is coming from the exact same manufacturer, the one we have the exclusive agreement with for the sale in Australia. Their marketing is heavily focused on Australia and they ship bulk product here from the UK.

    I’ve written to our legal team but it takes them forever to respond and costs us an arm and a leg! I wondered if anyone had any input in the meantime. What is our legal position? Technically the manufacturer isn’t supplying to a competing Australian company, he’s selling to a customer in the UK, and he says that because he doesn’t have a formal agreement with this company he can’t control where they sell to.

    Anyone had any experience in this area?

    thanks,

    Janine

    #1163224
    LucasArthur
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    Hi Janine

    Hope you are well.. sounds similar to the last post, although the supplier you buy from has now provided the ‘loop whole’ that they are selling to the UK with no agreement and as such cant control where the sell too.

    I think you really just need to speak to your solicitor as the outcome will be what is written in your formal agreement.. such as, is there a protection clause that your supplier must adhere to in the contract (such as they have to do all they can to prevent people selling into australia etc)…

    Other than that, its all going to be speculation cos the written word is the most important here i think..

    Some legal eagles may come along and say something dif, although i doubt it…

    What have you established thus far? what is the worse case scenario if the sales continue, will you have to close shop or alter your business model? how far have you come in this process from your own perspective to try and insulate yourself??

    Just being a world market, and even with agreements, competition will eventually come from somewhere… Just terrible regarding you having an agreement though, but sounds like they may have circumvented it.

    Sorry to hear about your continued troubles…

    Keep us informed.

    Jason

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
    #1163225
    bees
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    Hi Jason,

    Thanks for your reply. This is an entirely different situation, unexpected, but yes, giving my manufacturer even more room to move given that the buyer/seller is not based in Australia.

    At the end of the day, the manufacturer wants to make money. When we purchased the business, the previous owner had set a price for the raw materials that discouraged competing brands setting up. This is an ‘iffy’ situation given that, as a distributor, I’m obliged to distribute their product, and pricing it out of the market is only protecting my brand, and not honouring their end. I understand this. There is a number of products that we distribute for them, and we are hoping to protect only one. It’s this that the UK customer is now selling. And much more cheaply than we are!

    So, the bottom line is we may need to drop our prices in order for competing brands to buy it from us. We then get our cut, but as far as the manufacturer goes, he’s getting his sale regardless, I doubt that he’d care how he gets that.

    You make some great points, and you are quite right, if these sales continue, we will adjust our business model, not close up shop. It will mean dropping the price to wholesalers, accepting that competing brands may crop up, and losing our ‘exclusive’ aspect. This is happening anyway, with the UK sales so no point in fighting on that level. It was always going to be inevitable, we’re just working so hard on getting our product line in place, we’d like to have had a bit more time to do so before confronting this.

    In terms of how far we’ve come…the business was a mess when we took it over. We’re probably 60% there in terms of getting the product line into stores and it being something we are proud of. Another 3-4 months at least. That still gives us an edge on any potential competitors.

    I’ll dig out our contract over easter and pour over it again. Our supplier is actually very reasonable and we have a great relationship, but he clearly feels we are pricing his product too high, which this situation has made us aware of, so I guess it’s a learning curve and a bit of give and take needed on both sides.

    Thanks again for your input. It’s great to take a step back and view things from a different perspective! Each time one of these issues arises, we learn a bit more and move in a different direction, so it’s likely to be all for the best in the long run.

    Janine

    #1163226
    LucasArthur
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    bees, post: 188754 wrote:
    I’ll dig out our contract over easter and pour over it again. Our supplier is actually very reasonable and we have a great relationship, but he clearly feels we are pricing his product too high, which this situation has made us aware of, so I guess it’s a learning curve and a bit of give and take needed on both sides.

    Hi Janine

    You are welcome, sorry i dont have the ‘expertise’ you are chasing although i hope its a tad helpful. Re your comment about pricing, is it possible that a review may be in accordance anyway’s to try and re-establish the equilibrium of product vs pricing that may have been overlooked in the take over of the business?

    Because if the supplier feels he is missing out and others are still able to ship into the UK then into AUS there must be a lil bit of movement and maybe this is now starting to be felt a little more by you with the introduction of this new player from the UK? Could it just be time to re-evaluate the prices etc overall in order to try and maximise sales, profits, supply and everyone be happy :)

    Take this with a grain of salt, i am only ‘spit balling’ here as it is difficult not understanding the complete picture and i am grabbing at a few random comments you are making.. hope that makes sense?

    Certainly not telling you what to do :D

    Look forward to hearing how you progress.. Have a great Easter,

    Jason

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
    #1163227
    bees
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    No Jason, you are right on the money. It’s all just so new to me, and as things crop up, I initially have a knee jerk reaction, then think ‘ok, how can we rework this’. And you are dead right, this is just another one of those times we need to reconsider our approach.

    I’m happy to work with the supplier to bring the prices down. The previous owner of the business pawned the ‘please be patient’ card too many times for me to ask that of him again. He needs sales. He’s offered a couple of years grace now and its not fair to him to continue to request exclusivity.

    It’s an ongoing evolution, and I’m happy to say it doesn’t really stress me out too much, it’s great to have options and look at different approaches considering it’s all new. Expertise is all well and good in offering legal standing, but at the moment I think you’re advice is perfect in helping me to look at the bigger picture.

    Thanks again. And happy Easter to you also!

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