With Law No. 108 of 5 August 2022 (converting Decree-Law No. 68 of 16 June 2022 into law, with amendments), the Italian government introduced a favorable regime for authorized car distributors that will have a major impact on the sector.
The new legislation applies to all vertical relationships between the manufacturer or importer of vehicles and the authorized distributor for the sale of vehicles that have not yet been registered, as well as vehicles that have been registered by the authorized distributors for not more than six months and have not traveled more than 6,000 kilometers.
The most important interventions of the new Law occur both in the contract formation phase and in the dissolution phase of the relationship.
With regard to the contract formation phase, in addition to imposing a minimum contract term of five years, the Law also provides for a minimum content of provisions to be included in the contractual document, such as the terms of sale, the limits of the mandate, the respective assumptions of liability, and the allocation of costs associated with the sale.
Moreover, prior to the signing of the contract (or even in the event of its amendment), the manufacturer is required to offer a set of mandatory pre-contractual information on the commitments to be undertaken by the distributor and the sustainability of the same in economic, financial and equity terms, including an estimate of the marginal revenues expected from the marketing of the vehicles.
On the other hand, with regard to the termination of the contractual relationship, should the manufacturer wish to withdraw from the same before the expiry date, the latter will be required to pay fair compensation assessed, taking into account (i) the value of investments not yet amortized and (ii) goodwill commensurate with the authorized distributor’s turnover over the last five years of the agreement.
For more details on the content of the Law, please refer to the table below.
The provision, which is part of the ‘Urgent provisions for the safety and development of infrastructures, transport and sustainable mobility, as well as in the matter of major events and for the functionality of the Ministry of Sustainable Infrastructures and Mobility’, seems to have been the consequence of a last minute hasty drafting, probably influenced by the vehicles retailers category.
The legislative intervention, in fact, clearly aims to protect authorized distributors; however, it leaves open a number of critical points.
For instance, the Law does not identify the legal consequence in the event of non-compliance with the minimum duration, minimum content and the obligation of pre-contractual information. Furthermore, the Law does not specify whether it also applies to contracts governed by foreign law, nor does it provide for a transitional regime for existing contracts.
Equally ambiguous is the provision requiring the parties to give written notice at least six months prior to the expiration date of their intention not to renew the agreement. Indeed it is not clear whether a notice is due also in the context of fixed-term contracts that do not provide for tacit renewal.
The Law generates an uncertain scenario, which may possibly generate an increase of disputes between automotive manufacturers and dealers. In this context, a safe approach could be for car manufacturers to implement the new rules as a precautionary measure not only for future relationships but to the possible extent also to existing relationships.
Content of the Law
- The provisions of this Article shall apply to vertical agreements between the vehicles manufacturer or importer and individual authorized distributors for the marketing of vehicles that have not yet been registered, as well as vehicles that have been registered by the authorized distributors for not more than six months and have not traveled more than 6,000 kilometers.
- Agreements between the manufacturer or the importer and the authorized distributor shall be concluded for a minimum period of five years and shall regulate the terms of sale, the limits of the mandate, the respective assumptions of liability and the allocation of costs associated with the sale. Each party shall give notice, in writing at least six months prior to the expiry date, of its intention not to renew the agreement, failing which the notice shall be ineffective.
- The manufacturer or the importer shall, prior to the conclusion of the agreement referred to in paragraphs 1 and 2, as well as in the event of subsequent amendments thereto, provide the authorized distributor with all the information in its possession which is necessary to make an informed assessment of the extent of the commitments to be entered into and the sustainability of the commitments in economic, financial and asset terms, including an estimate of the marginal revenue expected from the marketing of the vehicles.
- A manufacturer or importer who terminates the agreement before the expiry of the contractual period shall be obliged to pay the authorized distributor fair compensation, which shall be jointly proportionate to the value:
- Of the investments which it has made in good faith for the purpose of performing the agreement and which have not been written off at the date of termination of the agreement.
- Of the goodwill for the activities carried out in the performance of the agreement, commensurate with the turnover of the authorized distributor in the last five years of the agreement.
- The compensation referred to in paragraph 4 shall not be due in the event of termination by default or when termination is requested by the authorized distributor. (…)”.