Italy

• Author: Aldo Frignani - Francesca Turitto
• Pages: 240-262

240 International Franchise Sales Laws

Italy

I. What is a Franchise?

A. Scope of the Law

In Italy franchise offers and sales are subject to Law no. 129/04 on “rules on the

regulation of franchise” (the Law). The Law is mainly a disclosure statute, although

it also dictates some rules concerning the franchise contract: its form, duration,

mandatory contents, provision for disputes, and so on.

The Law defines a franchise agreement as:

“[A]n agreement, whatever its form or description, between two legally and

financially independent parties, whereby one party [the Franchisor] grants

the other party [the Franchisee], in exchange for consideration, the right to

use a set of industrial or intellectual property rights, related to trademarks,

trade names, shop signs, utility models, industrial designs, copyright, know-

how, patents, technical and commercial support and assistance, with a view

to the Franchisee joining the system characterized by a group of Franchi-

sees operating in the territory, for the purpose of distributing specific goods

and services” (Art. 1.1).

Apart from the essential elements of a franchise (i.e., the concept, the license of

a brand and know-how, the ongoing assistance), some commentators point out that

the above definition has to be read in conjunction with Article 3(4), setting out a list

of items that must necessarily be dealt with and regulated in a franchise agreement,

some of them implicitly creating obligations upon the parties. They consequently

conclude that the legislative notion of franchise also includes the following ele-

ments: (a) the Franchisee’s obligation to make the investments required to carry out

the business; (b) the Franchisee’s obligation to pay the Franchisor by means of

royalties; (c) the Franchisor’s obligation to transfer its know-how; and (d) the

Franchisor’s obligation to provide assistance to the Franchisee.

B. Applicability to Master Franchises

Pursuant to Article 2 of the Law, the provisions concerning franchise agreements, as

defined in Article 1, also apply to master franchises and to corner or unit franchises.

“Master franchise” is defined as “any agreement between two legally and finan-

cially independent undertakings whereby, in exchange for direct or indirect consid-

eration, one grants the other the right to operate a franchise for the purpose of

entering into franchise agreements with third parties.” It must be noted that it is

Italy 241

irrelevant whether a master franchise is granted by a foreign Franchisor or a na-

tional one. Applicability of the Italian legislation depends only upon whether the

agreement is enforced in the Italian territory (see Section I.E. below).

“Corner franchise,” in contrast, refers to any “agreement whereby the Franchi-

see sets up a space dedicated exclusively to the distribution of specific goods or

services in an area at his disposal.”

C. Exemptions

The Law does not provide for any exemptions, exclusions, or exceptions with re-

gard to franchise agreements falling within its scope. In particular, no exemptions

are set out with regard to partnership relationships, trademark licenses, wholesale

distribution arrangements, or credit card service arrangements, nor are there any

special rules applying to specific industries. Article 1.2 of the Law states in fact that

“the franchise agreement can be adopted in any market sector.” Most importantly,

the all-inclusive character of the Law appears clear from the expression “whatever

its form or description” (Article 1). In other words, the rules regulating franchises

apply independently of how the parties designate their contractual relationship.

D. Discretion of Regulatory Authorities

No special authority has been set up to oversee application of the Law. This rests

with the Italian ordinary courts, which are therefore competent for deciding whether

an agreement under their review constitutes a franchise or not, as well as any dis-

pute arising from such an agreement.

Following the enactment of the EU directive of May 11, 2005, concerning un-

fair business-to–consumers (B2C) commercial practices (Unfair Commercial Prac-

tices Directive), which has been embodied in Italy in legislative decree no. 206 of

September 6, 2005, as subsequently amended (the Consumers’ Code), its imple-

mentation was entrusted to the Italian Competition Authority (ICA). We will deal

with ICA’s approach in respect of unfair commercial practices and franchising un-

der Section VIII.A.4.

E. Jurisdiction

The Law applies to any offer or sale of a franchise agreement that is to be performed

in the Italian territory. Subject to this objective condition, the Law is applicable to all

Italian citizens as well as citizens of other countries. No matter where the franchise

contract is negotiated and/or signed, and no matter where the sale of goods or the

performance of services from the Franchisor to the Franchisee occurs, if the con-

tract is intended to be performed in Italy, it must comply with the Italian Law.

Most of the requirements are straightforward for both domestic and international

Franchisors to comply with. However for international Franchisors that have never

previously been established in Italy, certain information (such as the information on

existing outlets) are eased (see Ministerial Regulation no. 204 of September 2, 2005).