Policy Blog

EU considers new rules on territorial supply constraints: what UK brands need to know

The European Commission is considering new measures to tackle what it describes as territorial supply constraints (TSCs), practices which can make it difficult for retailers and wholesalers in one EU Member State to purchase branded products from suppliers in another Member State.

The issue has been identified by the Commission as one of the most significant barriers to the EU Single Market. The Commission's concern is that restrictions on cross-border sourcing can limit consumer choice, reduce competition and contribute to price differences between countries. It is currently considering new tools to address practices which fall outside existing competition law, particularly unilateral practices by large manufacturers. A legislative proposal is expected in the fourth quarter of 2026.

AIM, the European Brands Association, is actively engaging with the Commission and its members, including the BBG, on the proposals. AIM has argued that any intervention needs to be based on robust evidence and a comprehensive assessment of both the potential benefits and costs. It has also raised concerns that the current debate risks attributing differences in product availability and prices to manufacturers when these can result from a much wider range of factors.

These include differences in national regulation, packaging and labelling requirements, VAT and other taxes, logistics and distribution costs, consumer preferences and the commercial strategies of retailers and wholesalers. AIM also points out that retailers determine the final price paid by consumers, meaning that differences in supplier prices do not necessarily translate into differences in consumer prices.

For brands, an important concern is therefore how a territorial supply constraint will ultimately be defined. Legitimate commercial decisions should not inadvertently be treated as market restrictions. For example, a brand may supply different products, packaging or formulations in different markets because of national regulatory requirements or consumer preferences. Similarly, differences in distribution arrangements may reflect differences in market structure, investment, logistics or customer requirements.

This is particularly relevant as the EU seeks simultaneously to reduce regulatory fragmentation. AIM has highlighted that divergent national requirements, including labelling, packaging and recycling rules, can themselves create barriers to cross-border supply. Any new TSC framework will need to distinguish these regulatory barriers from deliberate restrictions imposed by manufacturers.

There is also a potential Brexit dimension for UK brands. UK businesses supplying the EU are already operating across a regulatory and customs border. Changes which encourage greater cross-border sourcing within the EU could alter competitive and distribution dynamics for brands selling into European markets. The eventual scope of the measures, including which manufacturers, products and commercial practices are covered, will therefore be important for UK brands with EU operations or customers.

For British brands, the key issue is not whether the Single Market should function effectively,  but how that objective is achieved without creating unintended consequences for investment, innovation, product availability and the efficient operation of complex supply chains.

The Commission's public consultation is open until 4 December 2026, and its findings will feed into the impact assessment and the development of the eventual policy proposal. AIM's engagement with its members provides an important opportunity for businesses to contribute practical evidence about how supply chains operate and why supply arrangements can legitimately differ between markets.

BBG will continue to monitor developments and consider the implications for UK brands as the Commission's proposals develop.