Italian amendments on automotive distribution agreements

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5 August 2022
On August 5, 2022, the Official Journal published Italian law no. 108, converting Law Decree no. 68/2022, which contains urgent provisions for the safety and development of infrastructure, transport, and sustainable mobility, as well as for major events and for the functionality of the Ministry of Sustainable Infrastructure and Mobility.

Paragraphs 1 through 5 of article 7-quinquies lay down provisions on distribution of vehicles that are even stricter than those in EU Regulation no. 720/2022, which provides rules for application of article 101 TFEU to vertical agreements. This article applies to agreements between car manufacturers/importers and authorized distributors for the commercialisation of vehicles not yet registered, as well as motor vehicles that have been registered by authorized distributors for no more than six months and have traveled no more than 6,000 km (new vehicles).

More specifically, these agreements are expected to have a minimum duration of five years, and each party must communicate, with a written notice sent at least six months before the expiry date, the intention not to proceed with the renewal of the agreement, under penalty of ineffectiveness of said communication.

In addition, before the agreement is concluded and in the event of any subsequent amendments, the manufacturer or importer shall provide the authorized distributor with all available information necessary to assess the extent of the commitments to be undertaken and the sustainability of the same in economic, financial and equity terms, including the estimate of the marginal revenues expected from the marketing of vehicles.

Finally, manufacturers which withdraw from the agreement before the contractual terms  are obliged to pay the authorized distributor a fair compensation (not due in the event of termination due to non-fulfillment or when the withdrawal is requested by the authorized distributor), based on the value of both a) investments made in good faith for the purpose of executing the agreement that have not been recovered at the date of termination of the agreement; and b) goodwill from the activities carried out in execution of the agreement, proportionate to the turnover of the authorized distributor in the last five years of the agreement’s validity.

Given the above, it will be very important for OEMs to take these provisions into account when negotiating or reviewing their vehicle distribution contracts for the Italian market.

Article filed under: Automotive & Mobility
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