ABUSE OF ECONOMIC DEPENDENCE – FRANCHISE AGREEMENTS
Article 9 of law No. 192 of 18/06/1998 on subcontracting prohibits the abuse of economic dependence, i.e., the situation which exists when a party is able to determine an excessive imbalance of rights and obligations for the other party.
Namely, Art. 9 Law 192/1998 provides:
“Abuse of economic dependence
- The abuse by one or more undertakings of the position of economic dependence in which a customer or supplier undertaking is, in or against them, shall be prohibited. An economic dependency is a situation in which an undertaking is able to cause, in its commercial relations with another undertaking, an excessive imbalance of rights and obligations. Economic dependence shall also be assessed taking into account the real possibility for the party subject to abuse, to find satisfactory alternatives on the market.
- Abuse may also consist in a refusal to sell or a refusal to buy, the imposition of unjustifiably onerous or discriminatory contractual conditions, or the arbitrary interruption of existing commercial relations.
- The pact through which the abuse of economic dependence is carried out shall be null and void. (..)”
The competence to decide in this matter lies with the ordinary courts, but also the Italian Antitrust Authority can intervene with warnings and sanctions when it envisages, precisely, a relevance of the alleged abuse in terms of competition.
Although the above provision is included in a law dealing with subcontracting contracts, Italian case-law is in favour of a wide application to most commercial contracts and, in principle, also to franchise agreements. However, when examining the factual situation, Italian Courts have almost always excluded the existence of an economic dependence between franchisor and franchisee, mainly considering – on a case-by-case evaluation – that the franchisee had the chance to find satisfactory alternatives to the franchisor in the market, without even getting to the point of ascertaining a possible abuse.
On the contrary, recently the Italian Antitrust Authority opened investigations against some main franchisors, i.e. Benetton (on November 17, 2020 – proc. A543) McDonald’s (on July 27, 2021 – proc. A546) and Original Marines (on December 3, 2021 – proc. A550) for alleged abuse of economic dependence against their franchisees. The proceedings arose from complaints brought by former franchisees of the relevant franchise networks who basically claimed the imposition by the franchisors of imbalanced contractual provisions, which potentially give rise to an abuse of economic dependence.
In the framework of those proceedings, both McDonald’s and Original Marines agreed to amend their franchise agreements, in compliance with the requests made by the former franchisees; the Antitrust Authority accepted the franchisors’ commitments to proceed with such amendments and closed the relevant proceedings respectively on June 14, 2022 (McDonald’s) and on July 5, 2022 (Original Marines). The investigation against Benetton (which seems not to have committed to amend its franchise model) is still pending and the decision of the Antitrust Authority is expected by March 2023.
ABUSE OF ECONOMIC DEPENDENCE – DIGITAL PLATFORMS
In connection with the previous information, it is important to consider that the text of Article 9 of Law 192/1998 was recently amended (by Article 33 of Law No. 118 of August 5, 2022), introducing a presumption of economic dependence in the commercial relations between digital platforms and undertakings which use their intermediation services, under certain circumstances.
Namely the following sentences have been added to paragraphs 1, 2 of Article 9:
- (..) “Unless proven otherwise, economic dependence is presumed where an undertaking uses the intermediation services provided by a digital platform that plays a decisive role in reaching end users or suppliers, including in terms of network effects or data availability.”
- (..) “The abusive practices carried out by the digital platforms referred to in paragraph 1 may also consist in providing insufficient information or data on the scope or quality of the service provided and in requesting undue unilateral performances not justified by the nature or content of the activity carried out, or in adopting practices that inhibit or hinder the use of a different provider for the same service, also through the application of unilateral conditions or additional costs not provided for in the contractual agreements or existing licences.”
Competence over civil actions in this matter is now reserved to the specialised business sections (“sezioni specializzate in materia di impresa”) of the ordinary Courts.
The amended rules will be applicable as of October 31, 2022.
Silvia Bortolotti, Secretary General IDI, IDI Country Expert for Italy