Last summer, a couple of months after the entry into force of the European Commission Regulation (EU) 2022/720 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices, the Italian Parliament enacted an important provision on automotive distribution. Pursuant to Italian law dated August 8, 2022, no. 108, which converted the Italian Decree no. 68 of 16th June 2022, the Italian Parliament has regulated relevant aspects of the relationship between manufacturer, importer and distributor; aspects that had been (voluntarily?) neglected by the afore mentioned European Regulation. Below a summary of the most relevant developments.
The newly introduced rules concerning the automotive distribution have been established by the law converting the Italian Decree no. 68/2022. In particular, Article 7 quinquies establishes peculiar rules on the duration of dealer agreements signed between the manufacturer/importer and the dealer; it also regulates the terms of withdrawal from the contract and precise duties of information during the negotiations; finally, Article 7 quinquies provides new and severe compensation limits in the event of the early termination of the contract by the manufacturer or the importer.
These provisions appear to be particularly disruptive, so that the European Commission was supposed to deal with such issues, not the Italian Parliament. The European Commission approach would have favoured the harmonization of the regulations concerning such matters among Member States.
Instead, the result is a diversification of the Italian framework caused by the introduction of compelling provisions which seem to go upstream (as far as the legislative technique goes) compared to the previous European Regulations 330/2010 and 720/2022. Indeed, the latter Regulations established/establish the admissibility of agreements and agreed practices among enterprises, as long as they were/are not in contrast with the hardcore restrictions.
Art. 7 quinquies on the other hand, takes us back to a very strict regulation of the distribution agreements; it even mandates a minimum duration of five years for such agreements, which seems to retrace the so called "Monti Regulation" no. 1400/2002.
Nevertheless, let's proceed with order.
Scope of application
Article 7 quinquies applies to vertical agreements between the manufacturer or importer and the authorized dealer and concerns the distribution of vehicles which are not yet registered or vehicles which have been registered by the authorized dealers for no more than six months and which have travelled no more than 6.000 kilometres (art. 7 quinquies para. 1).
Finally, a definition of "new vehicle", which, in practice, includes "km0" vehicles and cars in general too. Note that the provision is very similar [or identical] to the definition of "new vehicle" established for intra-EU good purchases in order to calculate V.A.T. (Decree no. 331, 30th of August 1993, art. 38).
Dealership contract duration and withdrawal
The new VBER of June 2022 is silent on this matter, while art. 7 quinquies paragraph 2 expressly provides that agreements between the manufacturer/importer and the dealer "...shall have a minimum duration of 5 years...". As a consequence, it still seems possible to stipulate an open-ended agreement, as long as they do not last less than 5 years.
The provision leaves some questions unanswered: if the contract has a duration of 5 years, is the automatic renewal still subject to the five years minimum period or can it provide a shorter term?
At the end of the first five years, if the parties do not expressly stipulate otherwise, does the contract automatically become open-ended?
As far as the withdrawal is concerned, it is clear that both parties shall be able to exercise such rights, which shall be done by means of a "...written note..." to be sent to the other party at least six months before the expiration date of the contract (the rules on duration and withdrawal are clearly based on the "Monti" Regulation no. 1400/2022).
Manufacturer and Importer's duty to inform
During the negotiations leading to the dealership contract's conclusion, the manufacturer/importer are required by paragraph 3 art. 7 quinquies to provide the Dealers with a list of information aimed at showing the actual risks (and earning chances) related to the agreement. Indeed, the provision states that the obligation to inform includes: "...all the information in their knowledge which are necessary to evaluate carefully the magnitude of commitments and their economic, financial and capital sustainability; including an estimation of marginal earnings expected from the commercialization of the vehicles...".
Actually, a transparency obligation during the negotiations between parties is not something unheard of (see good faith principle – art. 1337 Italian Civil Code). Nevertheless, the said principle does not require the manufacturer/importer to provide the future Partner with possible earnings predictions.
What if such previsions turn out to be wrong?
Fair compensation in case of withdrawal from the dealership contract
Another important development relating to art. 7 quinquies is the inclusion of a fair compensation that the manufacturer or importer must pay to their Partner in case of early withdrawal from the contract.
Such compensation shall be quantified by taking into account the following considerations:
- investments made in good faith by the dealer in order to give execution to the agreement, as long as said investments have not been depreciated at the moment of termination of the agreement;
- the business start-up for the activities carried out during the execution of the agreement, also taking into consideration the turnover of the dealer during the last five years of validity of the agreement.
It is then specified that such compensation is not due the event of termination for non-performance of the dealer or withdrawal of the same (art. 7 quinquies para. 5).
Art. 7 quinquies of the D.L. 68/2022 is applicable to all the dealership agreements concluded after the 5th of August 2022; nonetheless, on the transitional framework uncertainties still remain.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.