Distribution system whereby a supplier enters into (vertical) agree- ments with a limited number of selected dealers in the same geographic area. Selective distribution agreements, on the one hand, restrict the number of authorised distributors. On the other hand, they prohibit sales to non-authorised distributors: this leaves authorised dealers only other appointed dealers and final customers as possible buyers. Selective distribution is almost always used to distribute branded final products.
The possible competition risks are a reduction in intra-brand compe- tition, the facilitation of collusion between suppliers or buyers and the foreclosure of certain type(s) of distributors, especially in the case of cumulative effects of parallel networks of selective distribution in a market. Purely qualitative selective distribution is, in general, considered to fall outside the prohibition of Article 81(1) of the EC Treaty, provided three conditions are satisfied. Firstly, the nature of the product in question must necessitate a selective distribution system. Secondly, resellers must be chosen on the basis of objective criteria of a qualitative nature. Thirdly, the criteria laid down must not go beyond what is necessary.
Source: Glossary of terms used in EU competition policy, Antitrust and control of concentrations, European Commission, 2002