Exclusive distribution occurs when the distributor of a product signs an agreement with a manufacturer to be the only company to sell that product in a given area. When this occurs, the distributor will not sell any products that would compete with those of the manufacturer. These agreements may be very lengthy and complex.
An example of an exclusive distribution agreement was one made by Sagent Technology, Inc. of Palo Alto, California, and Sagent U.K. Ltd. in England. In this situation, Sagent Technology would provide computer software, and Sagent U.K. Ltd. would agree to distribute this software to members of the European Union. The company in England would be the only company to sell this computer software and wouldn’t sell any other competing software.
Another example of an exclusive distribution agreement was one between Laser Shot, Inc. in Texas and Lamperd Less Lethal, Inc. in Canada. In this case, Laser Shot Inc. developed firearms simulators, and Lamperd Less Lethal would be the only company to sell these items in Canada. Lamperd Less Lethal wouldn’t sell any items that would compete with this product.