Sole Distributors in Denmark

1.1 Contractual Freedom and the Commercial Agent Act

Sole-distributor agreements are not directly regulated in Danish legislation. Producer and exclusive distributor have broad contractual freedom to set their terms. The Danish Commercial Agent Act can be used for inspiration when interpreting the contract, but it does not apply directly.

This also means that, as a starting point, the exclusive distributor cannot claim compensation for loss of clientele (goodwill) when the agreement ends. Danish law presumes that the distributor’s resale price already includes the profit needed to offset termination risk.

1.2 Form and Proof of the Sole-Distributor Agreement

No formalities are required: a sole-distributor agreement may be oral, written or implied through long-standing cooperation. In practice, a written contract is the norm, often preceded by useful pre-contractual correspondence.

Unwritten principles from case law and general contract law may partially regulate the content if no written agreement exists, but the party relying on the agreement must prove its terms. Parties who want a secure legal position should always conclude a clear written sole-distributor agreement.

2.1 Distinction from Commercial Agents and Other Intermediaries

In business practice there is frequent confusion between an exclusive distributor and, for example, a commercial agent. The terms are sometimes used interchangeably in contracts. Legally, both are intermediaries—businesses or persons selling a producer’s products to customers—but their roles differ.

2.2 Core Characteristics of an Exclusive Distributor in Danish Law

Although Danish law contains no statutory definition, an exclusive distributor typically has two key features:

• • Exclusive territorial rights: The producer grants an exclusive right to market and sell specified products within a defined area, often a region or a country.
  • Acts in own name and for own account: The exclusive distributor contracts directly with customers and bears responsibility for performance. The supplier is not party to the customer agreement.

By contrast, a non-exclusive distributor has no territorial exclusivity and must accept competition from other distributors of the same product.

3.1 Danish Competition Act – Resale Prices and Dominance

It violates section 6 of the Danish Competition Act if the supplier imposes mandatory resale prices on the exclusive distributor. In some situations, this may also amount to an abuse of a dominant position under section 11.

3.2 Non-Compete Clauses and EU Dimension

Post-termination non-competition obligations are regulated by both the Danish Competition Act and section 38 of the Danish Act on Contracts. Long-term non-compete clauses will rarely be upheld. If the sole-distributor agreement has Community dimension, it may additionally fall under EU competition law, including Article 101 TFEU and the Block Exemption rules.

Exclusive distributors doing business in Denmark must be registered in the Central Business Register (CVR), where companies (ApS, A/S) and partnerships (I/S) are listed. The business must also be registered for VAT with the Danish tax authorities.

5.1 Long-Term Cooperation and Key Obligations

A sole-distributor agreement often marks the start of a long-term collaboration to distribute the supplier’s products in an exclusive territory. Over time, a range of unwritten expectations has developed.

The main obligations are:

• • The supplier’s duty to deliver products to the exclusive distributor within the agreed area.
  • The exclusive distributor’s duty to market and sell the products loyally and professionally.

5.2 Good Faith, Information Duties and Competing Products

Exclusive distributors are not automatically prohibited from selling competing products. However, both supplier and distributor must act in good faith and keep each other informed about circumstances of significance for the market, sales and marketing of the products. Selling substantial competing products is subject to a duty to notify the producer; failure to inform may, depending on the circumstances, be a material breach giving the producer the right to terminate the agreement.

5.3 Supply Failures and Remedies

The supplier cannot normally be forced to continue supplying products. However, repeated breach of the supply obligation may allow the exclusive distributor to terminate the agreement and claim damages—for example for lost business, start-up and marketing costs.

5.4 Customer Service and Technical Know-How

A central task of the exclusive distributor is customer service. In technically complex industries, the distributor’s skills and product know-how are often crucial for closing deals and maintaining the customer relationship.

The exclusive distributor’s remuneration is the margin between the purchase price paid to the supplier and the resale price to customers. Price agreements that fix resale prices are, as a rule, contrary to competition law.

Sole-distributor agreements may be concluded for a fixed term or for an indefinite period. According to Danish case law, indefinite agreements may be terminated on reasonable notice. For long relationships of around seven years or more, six months’ notice is typically reasonable; in shorter relationships, three to six months will often suffice.

8.1 Damages for Premature or Wrongful Termination

If the agreement is terminated earlier than allowed under its terms—whether fixed-term or indefinite—or is wrongfully terminated, the exclusive distributor can claim damages for loss of income (margin) up to the date when the agreement should properly have ended. Claims are assessed under Danish tort and damages principles and require proof of an economic loss.

8.2 No Statutory Goodwill Compensation

Exclusive distributors do not have a statutory right to goodwill compensation for loss of customers on termination. The Danish Commercial Agency Act does not apply to exclusive distributors.

Accordingly, the exclusive distributor should either factor the lack of goodwill compensation into pricing, or negotiate a contractual clause granting compensation calculated by reference to the principles in the Commercial Agency Act.

9.1 Denmark as a Small but Wealthy Market

Denmark is consistently rated one of the easiest places in Europe to establish and operate a company and enjoys a strong, AAA-rated economy. Despite its relatively small GDP compared to larger EU markets, Denmark has high GDP per capita, high price levels and relatively low competition, creating attractive margins for well-positioned suppliers.

9.2 Using Commercial Agents and Exclusive Distributors

Because the market is small, establishing a full local subsidiary may not always be cost-effective. Fixed costs for premises, staff and a dedicated sales organisation can quickly become substantial. For many foreign businesses, it is therefore attractive to use commercial agents or exclusive distributors in Denmark. Commercial agents typically receive 10–15% commission on revenue, whereas exclusive distributors set their own resale prices and pay the supplier’s agreed purchase price; they are not entitled to direct payment from the supplier.