Selective Distribution

Systems of selective distribution involve essentially two elements. First, the distribution does not supply every dealer, retailer, or wholesaler who is willing to sell the products in question. Only those who meet certain criteria are appointed as authorized retailers or wholesalers. Second, authorized dealers may sell only to other authorized dealers, or, in the case of retailers, to users.

It is usual to classify the criteria for selecting the dealers to be approved as follows: 1) Qualitative and Quantitative Criteria; 2) Objective and Subjective Criteria; 3) Technical Qualifications and Commercial Qualifications. There may of course be obligations, including restrictive obligations, in a selective distribution agreement that are not selection criteria or requirements. Many obligations are not really criteria for selection of dealers, although they exclude dealers who are unable or unwilling to accept them, and are not confined to selective distribution agreements. It will be seen that the distinctions between qualitative and quantitative criteria, and between objective and subjective criteria, although helpful, are not rigid distinctions.

Some consequences of this important fact are discussed below.