Can I grant my Israeli distributor an exclusive territory under Israeli law?

Territorial exclusivity in a vertical distribution agreement is permissible in Israel if the parties satisfy the conditions of the Vertical Restraints Block Exemption Regulation of 2013 — specifically, neither party's Israeli market share may exceed 30%. The exclusivity may cover active sales by other distributors, but it cannot prevent passive sales (responding to unsolicited orders from outside the territory).

If either party's market share exceeds 30%, the arrangement must be individually assessed by the Israel Competition Authority (ICA) and may still be lawful under a rule-of-reason analysis. For more detail, see Economic Competition Law in Israel: What Every Foreign Company Needs to Know.