Legal Updates

A distributor may sell in the local market the goods that remained with it at the end of the distribution agreement

October 3, 2017

A company acted as a distributor of Beluga Vodka for Israel's duty-free shops only, and for this purpose purchased goods at a price 5% lower than the one purchased by Beluga’s exclusive distributor in Israel. After the distribution agreement was terminated by the manufacturer, the manufacturer moved the Court for an injunction preventing the distributor from selling the remainder of the goods in the Israeli market, inter alia, with the concern that the goodwill of the product would be diluted by selling at a low price and damaging the relations between the manufacturer and its exclusive distributor in Israel.

The Court rejected the motion for an injunctive relief, noting that it is doubtful whether the small quantity remaining with the distributor will damage the goodwill of the manufacturer and its relations with the exclusive distributor in Israel. Additionally, just as a dilution of goodwill argument does not apply in the case of parallel imports that meet all the conditions of the law, it will not apply in the case of distribution in the local market by a previous distributor that is left with inventory purchased directly from the manufacturer.