Antitrust Compliance in Cross-Border Distribution Agreements: Four High-Frequency Risk Clauses for Chinese Companies Entering the EU Market

In recent years, more and more Chinese companies have established a presence in European markets. Some enter retail channels through distributors, while others sell directly to European consumers using e-commerce platforms. In addition, some Chinese manufacturers establish franchise or supply partnerships with European companies. Throughout this expansion, legal and compliance teams often focus on market access, data protection, and product certification. However, they often overlook the antitrust compliance risks that may arise in distribution agreements.

There are significant differences between China and the EU in how they regulate vertical agreements, safe harbour thresholds, and specific contract clauses. As a result, practices that are routine under Chinese law may violate EU competition law. For example, a standard contractual term under Chinese law could fall under the prohibition in Article 101(1) of the Treaty on the Functioning of the European Union (TFEU). This may expose companies to investigations by the European Commission or national competition authorities, which risks fines of up to 10 percent of their global annual turnover. In some circumstances, such as when a company is a repeat offender and recidivism is taken into account, the actual penalties may be even higher.

This article identifies four types of antitrust risk clauses that Chinese companies frequently overlook in their European distribution agreements. Each type is considered with reference to the differences between Chinese and EU competition law. The aim is to help companies build a perspective that takes EU rules into account during contract drafting and review, rather than relying only on domestic compliance practices.

In this article, an arrangement that does not meet the safe harbour conditions of the Vertical Block Exemption Regulation (VBER) is not automatically unlawful. It simply means the arrangement cannot benefit from the legal certainty provided by the block exemption and must instead be assessed on a case-by-case basis. This involves two main steps. First, determine whether the arrangement appreciably restricts competition under Article 101(1) TFEU, for which the De Minimis Notice may provide guidance. Second, if it does appreciably restrict competition, consider whether it qualifies for an individual exemption under Article 101(3) TFEU. Any use of the term “individual assessment” below refers to this process.

The Chinese Anti-Monopoly Law (AML), amended in 2022, states that fixed or minimum resale price agreements are not prohibited if the company can show that the agreement does not have the effect of eliminating or restricting competition. The 2025 revision of the Provisions on Prohibiting Monopolistic Agreements clarified the safe harbour thresholds. For fixed or minimum resale price agreements, the safe harbour applies if each party’s market share in the relevant market is below 5 percent and annual turnover for the relevant goods is below 100 million yuan. Agreements that exceed these thresholds are not automatically illegal. They may still avoid penalties through individual assessment if the company can prove there are no anti-competitive effects. However, meeting this burden of proof is very difficult in practice. Non-binding recommended retail prices and maximum resale prices are not listed as prohibited conduct under Article 18 of the Chinese AML. As a result, these practices are generally permitted.

In EU competition law, RPM agreements are classified as hardcore restrictions under the VBER. These agreements cannot benefit from the safe harbour rules of the VBER, regardless of the parties’ market shares. However, as mentioned above, losing the block exemption does not automatically make the agreement unlawful. In the Super Bock judgment (Case C-211/22), the CJEU clarified that enforcement authorities and courts must not skip case-by-case analysis just because RPM is classified as a hardcore restriction. They must still consider the content and objectives of the agreement, as well as its economic and legal context, before concluding that the conduct is unlawful. While an individual exemption under Article 101(3) TFEU is technically possible, it is extremely rare in practice. In this respect, both Chinese and EU antitrust rules take a similar approach that both allow some room for companies to defend RPM, but in practice, that room is very limited.

In addition, both Chinese and EU law prohibit not only direct RPM, but also arrangements that achieve the same effect indirectly. Actions such as applying pressure, making threats, imposing penalties, offering incentives like discounts or rebates, controlling distributors’ margins, or using price monitoring mechanisms to interfere with distributors’ pricing are also prohibited.

Chinese companies entering into distribution agreements with European distributors should carefully review all contract clauses related to price control. Any clause that directly fixes prices, sets minimum prices, or links contract termination to price deviations may be seen as RPM. Applying Chinese law standards to these clauses in agreements with an EU focus is not recommended. A thorough compliance assessment using the EU legal framework is essential.

Distribution agreements in China often include exclusive distribution arrangements, selective distribution, territorial allocations, and non-compete obligations. These are all examples of non-price vertical restraints. Of these options, exclusive distribution and non-compete obligations are most frequently used by Chinese companies that are setting up distribution networks in Europe. This section focuses on these two types of arrangements in detail. Selective distribution, which is also common, is not subject to any specific rules under Chinese AML and is normally treated as a general non-price vertical restraint. Under EU law, selective distribution can benefit from the block exemption if both parties’ market shares are below 30 percent, provided that cross-supplies between authorized distributors and sales to end users are not restricted. Even above that threshold, a selective distribution system based on objective, non-discriminatory quality criteria, that do not go beyond what is necessary, generally does not restrict competition. Given the focus and length of this article, selective distribution will not be discussed further.

Under EU competition law, the VBER safe harbour for non-price vertical restraints applies when both the supplier’s share of the relevant sales market and the buyer’s share of the relevant purchasing market are below 30 percent. In addition, exclusive arrangements and non-compete obligations must meet further conditions to benefit from the exemption.

For exclusive distribution, Chinese law requires only that the market share threshold is met. There are no additional requirements related to territorial allocation or how sales restrictions are structured. Under the VBER, the main principle of exclusive distribution is that a supplier can reserve a territory or customer group for itself or assign it to a limited number of distributors (no more than five). The supplier may then prohibit other buyers from actively selling into the protected territory or customer group. This arrangement is what provides protection for exclusive distributors. Active sales involve actively approaching or soliciting specific customers, such as through targeted advertising, direct outreach, or promotional campaigns aimed at a particular territory. In contrast, passive sales are those made in response to customers’ unsolicited requests. EU law only permits restrictions on active sales into protected territories or customer groups. Passive sales by exclusive distributors must always remain unrestricted. It is especially important to note that online sales are generally considered passive sales, which means that a total ban on online sales is usually not allowed (see part 4 below).

For non-compete obligations, Chinese AML imposes no limitation on duration. Under EU competition law, a non-compete obligation that lasts longer than five years does not qualify for the VBER safe harbour (unless the buyer operates from business premises owned or leased by the supplier). This rule covers both direct restrictions, such as a clause providing that “the distributor shall not directly or indirectly sell competing products during the term of the agreement and for ten years after termination”, and to indirect restrictions, such as “automatic renewal provisions under which the non-compete obligation is extended in parallel”. 

It is also worth noting that Chinese AML does not distinguish between non-compete obligations that apply during the term of the agreement and those that apply after its termination. Both are subject to the same rules. Under EU competition law, however, post-term non-compete obligations are subject to stricter rules than those applying during the term of the agreement. Such an obligation can only be exempted if it relates to goods or services that compete with the contract goods or services, is limited to the premises and land from which the distributor operated during the term of the agreement, is indispensable to protect know-how transferred by the supplier, and does not exceed one year after termination. However, a restriction that merely prohibits the use or disclosure of know-how that has not entered the public domain is not subject to this one-year limit.

In summary, China’s safe harbour applies at a lower market share threshold and does not include other substantive conditions. In contrast, the EU safe harbour applies at a higher threshold and sets out more detailed requirements for territorial arrangements, and the duration and post-term treatment of non-compete obligations. Chinese companies operating in the EU should not only monitor their market share in the EU market, but also review each additional condition individually.

In China, e-commerce platforms commonly require merchants to guarantee that their products are offered at the lowest price across all channels. Under the Chinese AML, Most Favoured Nation (MFN) clauses are primarily regulated by Article 22 as a potential abuse of dominance, rather than as a type of vertical restraint. Therefore, the safe harbour rules for vertical agreements do not apply to MFN clauses. The key enforcement question is whether the company imposing the MFN clause holds a dominant position, and whether the clause constitutes abusive conduct. For companies that do not have a dominant position, the antitrust risk associated with “best price” clauses is minimal.

From the perspective of EU competition law, a “best price across all channels” obligation is classified as a wide retail parity obligation (wide MFN clause). This requires merchants to offer their lowest prices on all channels, which makes prices more uniform across competing platforms and limits price competition. Wide MFN clauses imposed by online intermediation service providers do not benefit from the VBER safe harbour rules and must be assessed individually. In contrast, narrow retail parity obligations (narrow MFN clauses) require a seller to ensure that the conditions offered on third-party platforms are no less favourable than those on its own direct sales channels. These are treated more leniently. For platforms with significant market power, the EU applies a stricter regulatory framework under the Digital Markets Act (DMA). Gatekeeper platforms designated under the DMA (currently including Alphabet, Amazon, Apple, ByteDance, Meta, Microsoft, and Booking) are prohibited from imposing both wide and narrow MFN clauses. There is no need for individual assessment in these cases.

Furthermore, under EU competition law, if a network of parallel MFN clauses covers more than 50 percent of the relevant market and causes prices to become uniform across the industry, the cumulative effect may lead enforcement authorities to withdraw the benefit of the VBER safe harbour from the agreements. These agreements would then be subject to individual scrutiny.

In practice, Chinese companies that run platforms or supply brands and want to impose retail parity obligations on European merchants or distributors should clearly define which channels are covered by any MFN clause when drafting agreements. They should also avoid including wide MFN clauses. Chinese companies acting as merchants who face retail parity demands from European platforms should be aware that if the platform qualifies as a DMA gatekeeper, any MFN clause it imposes is illegal and can be refused on that basis. If the platform is not a gatekeeper but tries to require a wide MFN obligation, that clause is not protected by the safe harbour provided by the VBER. Understanding these rules allows companies to negotiate from a stronger position.

When Chinese brands enter European markets, they often include provisions in their distribution agreements that limit distributors’ online sales activities. These restrictions may take several forms, such as a complete ban on internet sales, allowing distributors to sell only on their own websites while not permitting listings on third-party e-commerce platforms, or requiring that online sales meet display and service standards similar to those for offline sales. The legal approach to such provisions is very different under Chinese and EU competition law.

Chinese AML does not contain any specific rules that deal with restrictions on online sales. Such restrictions are usually treated as non-price vertical restraints. If both parties have a market share below 15 percent, the safe harbour applies. At this time, Chinese enforcement authorities have not issued any decisions that focus specifically on restrictions related to online sales.

The EU has a clearer and stricter approach. Under the VBER, a blanket ban on online sales counts as a hardcore restriction and causes the entire distribution agreement to lose the benefit of safe harbour. The VBER and its Guidelines also make it clear that clauses which prevent distributors from selling on third-party e-commerce platforms may still qualify for the safe harbour and can apply across all types of distribution models. These rules are no longer limited to selective distribution of luxury goods. Clauses that require distributors to meet brand quality standards when selling on third-party platforms are usually also eligible for exemption.

Chinese AML does not contain any specific rules on “dual pricing”, that is charging the same distributor different wholesale prices for online and offline sales. Generally, such arrangements only raise antitrust concerns if the supplier holds a dominant position, in which case they may be considered differential treatment and a potential abuse of dominance. By contrast, under EU competition law, the VBER and its Guidelines allow dual pricing to benefit from the safe harbour if certain conditions are met. In particular, the price difference must be intended to incentivize or reward an appropriate level of investment in the relevant sales channel, must reasonably relate to cost differences between the channels, and must not be aimed at preventing distributors from making effective use of the internet.

In summary, for Chinese brands entering European distribution markets, a blanket ban on online sales that is effective under Chinese AML cannot be included within the EU safe harbour and will face individual assessment. We suggest that Chinese companies allow distributors to sell through their own websites but not on third-party e-commerce platforms. Alternatively, they can require that sales on third-party platforms meet brand quality standards.

For Chinese companies entering European markets, the main antitrust compliance challenge at the distribution level is not so much the complexity of the rules themselves. Instead, it is the tendency to directly apply domestic compliance experience and market assumptions to the European context. This approach can lead to serious mistakes, whether in technical areas such as market definition and market share calculation, or in the way individual contract clauses are managed.

Therefore, we recommend that Chinese companies carefully review their existing distribution agreements, platform cooperation agreements, and franchise agreements for compliance with EU competition law before entering the European market. The two legal systems are independent and apply separately. Only by adopting a genuinely EU-oriented perspective can companies achieve effective commercial operations within the European compliance framework.