Distribution arrangements are a commonly used vehicle for the importation and sale of a broad variety of goods and services in Canada, and can offer many benefits to domestic and foreign manufacturers, suppliers, distributors and retailers, particularly where a local partner with knowledge of local laws, markets and industry customs and conditions is engaged.

However, distribution arrangements are not without risk. A business entering into a distribution agreement in Canada must consider and ensure compliance with key legal and regulatory requirements, including applicable franchise, employment, competition, consumer protection and product liability considerations, among others.

In a practice note for Thomson Reuters - Practical Law, our cross-practice team provides an overview of key issues for businesses and counsel to consider when entering into distribution arrangements in Canada, including applicable laws and regulations, important considerations for appointing a distributor, key provisions in distribution agreements and termination considerations.

Topics covered in the practice note include:

• Key regulatory areas
• Franchise law: Navigating potential application of provincial franchise legislation, including statutory disclosure obligations.
• Competition law: Governed by the Competition Act, including rules on price maintenance, exclusive dealing, tied selling, and abuse of dominance.
• Consumer protection and product liability: Federal and provincial laws impose warranties and safety standards. Suppliers and distributors share responsibilities under the Canada Consumer Product Safety Act.
• Taxation: Non-resident suppliers may be subject to Canadian income and sales taxes, depending on their business presence and tax treaties. Registration may be required if sales exceed CA$30,000 annually.
• Language requirements: Québec mandates the use of French under the Charter of the French Language.
• Privacy and data protection: Regulated under federal (PIPEDA) and provincial privacy statutes.

• Common distribution structures and relationships
• Independent distributors
• Joint ventures
• White/private label arrangements

Legal risk arises if distributors are misclassified as employees or if the arrangement resembles a franchise. Employment law and franchising statutes in several provinces (e.g., Ontario, Alberta) require careful compliance.

• Key contract provisions
• Agreements should cover:
• IP ownership and use (trademarks, copyrights)
• Minimum purchase obligations
• Online sales and e-commerce compliance
• Confidentiality and personal data protection
• Termination rights and indemnification obligations

• Importation and trade
• Canadian customs law regulates importation. Parties should clearly allocate responsibilities for compliance, duties, and potential liabilities. Attention should be paid to current international trade policies and tariff regimes.

Access the full practice note to learn more.

Reproduced from Practical Law with the permission of the publishers. For further information, visit practicallaw.com

For more information on this topic, please reach out to the authors, Helen Fotinos, Adam S. Goodman, Michael G. Beairsto, Chantal Bernier, Erica Shadeed, Manon Jubinville, Paige Donnelly, Camila Maldi, Sean Stephenson and Claire Browne.