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Points to Note in Signing Agreement with Distributors/Agents

9.3.1  Sales Behaviour

1. Distributors may only sell the manufacturer's goods in their assigned regions and not across regions.

2. Before the goods leave the factory, information on the distributor may be added onto the products.

3. Distributors cannot wholesale their goods to regions covered by other distributors. Those who breach this rule have to buy back the goods and pay a fine; they may even have their distributors' rights rescinded and face legal action.

4. Manufacturers may announce their standardised prices through advertisements in a move to standardise the retail prices within the same region.

9.3.2  Complaint Procedures

1. If a distributor finds out that its products are being sold through other sales channels in the same region, it should collect the relevant information and evidence and lodge a written complaint with the production enterprise immediately.

2. Upon receipt of the distributor's complaint, the manufacturer should send a senior sales manager to the region to investigate the matter.

3. The manufacturer should, based on information and evidence collected from on-site investigations, assess the situation involving the parallel goods and the degree of damages done to the distributor.

4. The manufacturer should penalise the supplier of the parallel goods and compensate the distributor in accordance with the relevant regulations.

9.3.3  Penalties and Compensation Procedures

1. Where breach of contract is found, the manufacturer should issue an order both to the supplier of the parallel goods and to the harmed party.

2. The harmed party should buy the parallel goods in accordance with the quantity and the price specified in the order.

3. The supplier of the parallel goods should use the same price to buy back the parallel goods from the harmed party and pay a fine equivalent to this amount.

4. If the supplier of the parallel goods does not comply with the order, the manufacturer should revoke its distribution right, deduct a portion of the money from its market protection bonus and reserve the right to take legal action.

5. The amount to be paid by the harmed party to buy the parallel goods as instructed in the manufacturer's order should not exceed the total accumulated sum of the supplier's market protection bonus. The manufacturer is not liable for any amount in excess.

9.3.4  Price Management

Price management mainly includes standardising retail prices, standardising direct sale prices, standardising distributors' prices and standardising agents' prices.

Content provided by Hong Kong Trade Development Council
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