Distribution and commercial representation (agency) in one of the most used legal formats in Brazil for companies to expand their commercial efforts and services to end clients.
Distribution and commercial representation contracts hold significant differences that need to be analyzed case by case to identify the best model.
Which one would actually be the best option?
Distribution is classified as those relationships in which: (i) there is, on the part of the distributor, the continuous and successive purchase of certain products for resale, that is, the products belong to the distributor; (ii) there is greater independence for the distributor, who can establish their own commercial practices; (iii) it is possible to establish exclusivity and operating area for the distributor; and (iv) responsibility for product distribution logistics is the responsibility of the distributor, who moves the products at points of sale.
Commercial Representation has a specific Law, Law No. 4,886/65, which sometimes brings greater security to the limits of the relationship, as the actions of each party are clearer. Their role is extremely limited compared to the distributor – selling – which requires even greater care in goals and obligations, in order to avoid the relationship ending up constituting a labor bond between the company and sales representative, which could become a major liability in Brazil.
From an operational point of view, the main difference between the two models is the autonomy of the parties, much more evident in the distribution contract, which requires even greater financial health for these partners, given the responsibilities they assume.
Therefore, when deciding on the contract to be used, it is essential to carry out a multi-area analysis, in order to identify the company’s real needs in relation to the partner, but, mainly, the feasibility of assigning important commercial issues to these partners, such as establishing a sales strategy and carrying out product distribution logistics.
What may initially be seen as a benefit can, if poorly executed, turn into a difficulty in expanding sales and reaching the product to the final customer.
