Distribution Agreements in Italy

Distribution agreements (contratti di distribuzione) are not governed by a specific statute, unlike, for example, agency contracts (regulated by the Italian Civil Code, artt. 1742–1753).

A distribution contract is an atypical agreement whereby one party (the supplier or manufacturer) undertakes to supply products on a continuous or repeated basis to another independent party (the distributor), who purchases such products and resells them in its own name, on its own account and at its own commercial risk, within a given territory or market.

The Italian civil code regulates a type of contract concerning the continuous sale of goods or services (“contratto di somministrazione”), which, according to some scholars, may also govern distribution agreements.

However, according to the most recent interpretations and case law, distribution agreements are generally considered “atypical contracts” (contratti atipici) under Article 1322 of the Civil Code. This means they are valid and enforceable so long as they pursue interests worthy of protection under the legal system and comply with general contract law principles.

In such cases, in the absence of a specific contractual agreement, the courts will apply, by analogy, the provisions of the Civil Code that are useful for resolving the specific case.

A specific exception applies to motor vehicle distribution agreements. In Italy, agreements between a motor vehicle manufacturer or importer and an authorised distributor are subject to the special regime set out in Article 7-quinquies of Decree-Law No. 68/2022, as converted into Law No. 108/2022. This provision applies to vertical agreements for the marketing of unregistered vehicles (and certain nearly-new vehicles), even where they are structured as agency, concession of sale or commission agreements. Under this regime, such agreements must either be open-ended or, if fixed-term, have a minimum duration of five years. In the case of open-ended agreements, either party may terminate only by giving 24 months’ written notice. In the case of fixed-term agreements, either party must notify the other in writing at least six months before expiry of its intention not to renew; otherwise, such notice is ineffective. These sector-specific rules apply in addition to the general principles of Italian contract law and the EU competition-law framework governing vertical agreements in the motor vehicle sector.

Law 68/2022 also provides for a pre-contractual obligation of the manufacturer or importer to provide the distributor with all the information in its possession that is necessary to make an informed assessment of the extent of the commitments to be undertaken and their sustainability in economic, financial, and asset terms, including an estimate of the marginal revenues expected from the marketing of the vehicles.

Although distributors and agents are involved in distributing products or services, the distinction between a distributor and a commercial agent is clearly defined under Italian law.

A distributor is an entrepreneur who purchases goods from a supplier and resells them under its own name and account, bearing the full commercial risk, including unsold stock, customer insolvency, and market fluctuations.

The distribution agreement is an atypical contract, whereas the commercial agency relationship is expressly regulated by Articles 1742–1753 of the Italian Civil Code and by Directive 86/653/EEC.

According to Article 1742 Italian Civil Code, “An agent is a party who, on a stable and continuous basis, undertakes, in consideration of remuneration, to promote, on behalf of another party (the principal), the conclusion of contracts for the sale of goods or the provision of services within a given territory.

The distributor purchases goods or services for resale to third parties, while the agent acts as an intermediary between the parties, is remunerated by commission, and does not purchase the goods or services from the supplier. The agent does not acquire ownership of the goods, does not bear inventory or credit risk, and acts on behalf of the principal.

The fact that a distributor may occasionally perform intermediary activities does not affect the legal distinction between the two contracts, provided that such activities remain marginal and ancillary to the resale activity.

In Italy, the distribution contract is distinct from the franchising contract, which is a typical contract regulated by Law No. 129/2004. According to the law, franchising presupposes the structured replication of a business format, the transfer of know-how, and the use of the franchisor’s distinctive signs, together with mandatory pre-contractual disclosure obligations. Distribution, by contrast, is functionally centred on the circulation of goods rather than on the replication of a specific business system.

The distributor also differs from other commercial intermediaries operating in the Italian market, such as brokers or business finders, which are recognised in practice, but whose contractual relationships are not governed by specific statutory regimes.

The procacciatore d’affari (business finder) is not expressly regulated by the Italian Civil Code and is regarded as an atypical contractual figure developed through case law. Its function consists of sporadically introducing or reporting potential business opportunities to a principal, typically by identifying potential customers. Unlike a distributor, the procacciatore d’affari does not purchase or resell goods, never acquires ownership of the goods, and does not bear commercial or inventory risk. It is a mere business finder, whose role is limited to signalling or facilitating individual transactions, without becoming a party to the resulting contracts or assuming any commercial risk.

The distributor is also distinct from the broker. The term “broker” does not, as such, identify an autonomous legal category under Italian law, but is used in a functional sense to refer to professional intermediaries, often operating in regulated sectors such as insurance, finance, shipping, or commodities. From a civil law perspective, a broker may be classified as a mediator where it maintains a position of neutrality, or may fall within the scope of a mandate, advisory relationship, or even an agency relationship, where it acts in the interest of one party only.

In any event, a broker does not purchase goods, resell them, or assume the commercial risk of the transaction. Its role remains to facilitate or structure agreements between third parties.

However, under Italian law, labels are not decisive, and courts look at the actual performance of the relationship.

Italian law does not impose any form requirements for the validity of a distribution agreement. As an atypical contract, it is subject to the principle of freedom of form and may therefore be validly concluded orally or by conduct.

Nevertheless, the absence of formal requirements does not diminish the legal relevance of written agreements, particularly given the structural complexity of distribution relationships. Core contractual elements such as exclusivity, duration, termination regimes, post-termination restraints, and applicable law must be clearly defined to ensure certainty of obligations and to avoid judicial reconstruction of the parties’ intent under Articles 1362 et seq. of the Italian Civil Code.

It should be noted that, where a contract is drafted by one party and is not subject to negotiation, Article 1341 of the Italian Civil Code applies. This provision requires that certain clauses, commonly referred to as “vexatious” or “onerous” clauses, must be specifically approved in writing by the party who did not draft the contract in order to be enforceable.

Furthermore, pursuant to Article 1342 of the Italian Civil Code, clauses added to a standard form or template prevail over the clauses contained in the standard form itself, even where the latter have not been expressly deleted.

Resale price maintenance is assessed primarily under EU competition law, which is integral to the Italian legal system. The imposition of fixed or minimum resale prices constitutes a hardcore restriction of competition and renders the relevant contractual provisions null and unenforceable.

Italian domestic competition law provides for an entirely analogous concept. In particular, Article 2 of Law No. 287 of 10 October 1990 (Rules for the Protection of Competition and the Market) provides that “agreements between undertakings which have as their object or effect the prevention, restriction or significant distortion of competition within the national market or a substantial part thereof are prohibited, including in particular agreements which consist in: (a) directly or indirectly fixing purchase or selling prices or any other trading conditions…”. Such agreements are null and void as a matter of law.

By contrast, clauses providing for recommended or maximum resale prices are not prohibited per se. Their legality depends on whether the distributor retains genuine pricing autonomy. Italian and EU authorities adopt a substantive approach, focusing on the clause's actual economic effects rather than its formal wording.

Reservation of title clauses are expressly contemplated by Articles 1523 et seq. of the Italian Civil Code and are, in principle, enforceable. Such clauses allow ownership of the goods to remain with the seller until full payment of the purchase price, notwithstanding delivery.

However, certain formalities are mandatory. For the clause to be valid, it must be agreed in writing, must bear a date certain prior to any attachment or enforcement proceedings, and the goods must be clearly identified. Issues relating to enforceability against third parties (particularly in insolvency scenarios) are governed by statutory provisions and have been the subject of restrictive judicial interpretation. Although such clauses are commonly used, their effective enforcement is not straightforward.

A deeper analysis of such clauses is available at this link.

Non-compete obligations during the contractual term are generally admissible, as they are functionally linked to the organization of the distribution network. As the exclusivity obligation, the fact of having entered into a distribution agreement is not sufficient to establish that the distributor is not allowed to distribute competitive products.

Post-termination non-compete clauses are also permissible in principle, as distribution contracts are not subject to the statutory limitations applicable to agency agreements.

However, such clauses remain subject to scrutiny under Articles 1341 and 1418 of the Italian Civil Code and under EU competition law. They must be proportionate and justified by legitimate interests, such as the protection of know-how, and must be limited in scope, territory, and duration.

Any non-compete obligation exceeding the limits established by EU and Italian competition law falls outside the block exemption and is, in principle, incompatible with EU and Italian competition law

The answer depends on whether the distribution agreement is for a fixed term or for an indefinite term.

If the agreement is for an indefinite term and the contract does not otherwise provide, it may be terminated for convenience upon reasonable notice. This requirement derives from the general principles of good faith and fairness in contractual performance and termination, and, by analogy, from Article 1569 of the Italian Civil Code (the rule established for “contratto di somministrazione”).  If the parties have not indicated the period of notice in the contract, the court will fix an appropriate period.

Italian courts assess the adequacy of notice in light of the concrete structure of the relationship, including its duration and the degree of economic integration. While analogies with agency law occasionally emerge in judicial reasoning, no statutory notice regime applies to distribution agreements.

If the agreement is for a fixed term, termination for convenience is only possible if it is expressly provided for in the contract and exercised in accordance with the principle of good faith.

Generally, immediate termination is permissible only in the presence of a breach of such gravity as to frustrate the contractual purpose and irreparably undermine the relationship of trust between the parties. The assessment is qualitative rather than formalistic, and Italian courts require that the non-compliance be serious rather than merely episodic to justify termination without notice.

In the absence of a specific termination clause—such as an express right of immediate termination or a “clausola risolutiva espresso” under Article 1456 of the Italian Civil Code—the supplier may terminate the contract only if the breach is sufficiently serious. Article 1455 of the Italian Civil Code provides that termination is excluded where the breach is of minor importance, having regard to the interest of the non-breaching party. Accordingly, Italian courts assess, on a case-by-case basis, whether the specific violation constitutes a material breach.

Circumstances that typically justify immediate termination include breaches of exclusivity or non-compete obligations, where contractually agreed, or the infringement of intellectual property rights, or the failure to pay for supplies.

With specific reference to minimum turnover clauses, the same principles apply: the breach must be serious to justify immediate termination. In addition, it is of utmost importance that the relevant clause clearly defines the content of the distributor’s obligation to comply with the minimum turnover requirement; otherwise, the supplier’s right to require performance of the obligation may be undermined or rendered unenforceable. In any event, Italian courts assess, on a case-by-case basis, whether the failure to meet the minimum turnover threshold materially affects the contractual equilibrium.

The parties may contractually provide that the agreement shall terminate with immediate effect if one or more specific obligations are not performed in accordance with the agreed terms by including an express termination clause (clausola risolutiva espressa) pursuant to Article 1456 of the Italian Civil Code. In such cases, the agreement is terminated when the interested party notifies the other party of its intention to invoke the termination clause.

Where an express termination clause is agreed, Italian courts will generally not question the seriousness of the breach, provided that the clause is applied and invoked in accordance with the principle of good faith governing contractual relations.

While the drafting of an express termination clause requires careful attention, its inclusion is advisable.

Italian law does not recognize any statutory right to termination indemnity or goodwill compensation in favour of distributors. The protective regime applicable to commercial agents is regarded as exceptional and not susceptible to extension by analogy.

Nonetheless, damages may be awarded where termination is unlawful, in breach of contractual provisions, or of the general duty of good faith. In such cases, liability is assessed under ordinary contractual principles, and compensation is strictly compensatory rather than automatic.

As an exception, in the field of motor vehicle distribution agreements, Law 68/2022 provides that the manufacturer or importer who withdraws from the agreement is required to pay the authorized distributor fair compensation, calculated on the basis of the value of: 

• the investments that the distributor has made in good faith for the purpose of performing the agreement and which have not been amortized by the date of termination of the agreement;
• the goodwill for the activities carried out in the performance of the agreements, commensurate with the authorized distributor's turnover during the last five years of the agreement.

Similar to the provisions of the legislation governing commercial agency contracts, such compensation is not due in the event of termination for breach of contract or when the authorized distributor requests termination.

No general statutory entitlement exists. Reimbursement obligations arise exclusively from contractual provisions or from judicial findings of abusive termination or violation of good faith. Italian case law has occasionally recognized compensation where termination renders specific, non-amortized investments useless, provided a causal link and fault are established.

The applicable law is determined pursuant to Regulation (EC) No. 593/2008 (Rome I)-. Party autonomy prevails, and a valid choice-of-law clause will be upheld.

Absent a choice, the contract is generally governed by the law of the distributor’s habitual residence, as the distributor performs the characteristic obligation. Mandatory EU competition rules and overriding mandatory provisions may apply irrespective of the chosen law.

The answer depends on several factors, and the choice must be made on a case-by-case basis.

From a contractual perspective, arbitration clauses are frequently adopted in international distribution agreements, as they ensure neutrality and coherence with cross-border enforcement mechanisms, and arbitral decisions are typically rendered within a reasonably short timeframe.

Alternatively, exclusive jurisdiction clauses may validly designate Italian courts, subject to compliance with EU jurisdictional rules.

Judgments rendered by a foreign court may be recognised and enforced in Italy, but the applicable regime depends on the origin of the decision (EU vs. non-EU) and on the nature of the judgment.

For civil and commercial judgments issued by courts of EU Member States, recognition and enforcement in Italy are governed by Regulation (EU) No. 1215/2012 (Brussels I bis).

Judgments rendered by courts of non-EU States are governed by Italian Law No. 218/1995, in particular Article 64.

A deeper analysis on recognition and enforcement of foreign judgments is available at this link.

The recognition and enforcement of an international arbitral award is grounded in binding international instruments (Convention on the Recognition and Enforcement of Foreign Arbitral Awards - New York, 1958) and in the Italian Code of Civil Procedure.

Under Italian tax law, aligned with OECD standards, a distributor acting in its own name and on its own account does not normally constitute a permanent establishment of the foreign supplier. The risk arises only where the distributor lacks genuine independence and habitually plays a decisive role in the conclusion of contracts attributable to the foreign enterprise.  This holds true even if the distributor is formally a separate entity, as both Italian and OECD practice consider contractual authority to be the decisive factor.