The granting of the exclusive right to the concessionaire is an incidental and non-essential element of the contract, cannot be derived implicitly from the predetermination of an 'area' to the concessionaire himselfas there is no necessary connection between the area and exclusive.

The grantor may not prevent exclusive area dealers from making passive sales outside the territory entrusted to them.

1. Sales concession and exclusivity

In a sales dealership relationship, 'exclusivity' is to be understood as the obligation on the part of the grantor to supply only the dealer with certain products in the area entrusted to him.

Although this obligation is one of the most frequently used agreements, it does not constitute an essential part of the agreement and, therefore, is not necessary for the relationship between the concessionaire and the grantor to be considered valid.[1]

Therefore, if the parties have not expressly agreed to it in the contract, it cannot be inferred either that it exists merely because a dealership contract has been concluded, or, even less so, because the dealer has been entrusted with an area (it is not at all unusual, in fact, for a dealer to act in a certain area entrusted to him, but without exclusivity).[2] On this point, we read in Jurisprudence that:

"the granting of the exclusive right to the concessionaire, being an incidental and non-essential element of the contract, cannot be derived implicitly from the predetermination of an 'area' to the concessionaire himselfas there is no necessary connection between the area and exclusive. "

However, it is not precluded that the parties may nonetheless prove that such an obligation exists even in the absence of a written contract and prove by witnesses that, for example, such an obligation arises from an oral agreement, or that it is inferred from the actual development of the relationship (cf. on the subject of agency: Burden of proof in agency contracts). On this point, a 2007 ruling by the Court of Appeal of Cagliari held that:

"In a sales dealership, the attribution of the exclusive right to the dealer is an incidental and non-essential element of the contract, but its existence, if the contract is not in writing, may be proven by witnesses and by any other suitable means (in the present case, the existence of the exclusivity clause was inferred, inter alia, from the fact that the parent company refused direct dealings with third parties by referring them to the dealer, from the advertising in the yellow pages and from the lack of other dealers in the area)."

In case the parties have not indicated thescope of application exclusivity, it must reasonably be understood to extend to the entire area entrusted to the dealer; as to the products, however, it must refer to the contractual products.[3]

2. Passive sales outside the territory.

This being said, the question arises as to whether the grantor, who has undertaken to sell certain products exclusively to an exclusive dealer in an area (e.g. Lombardy and Piedmont), may sell the same products to parties outside the territory, knowing that the same parties (potentially) could resell them in the territory of the dealer himself. The Supreme Court, in a more 'dated' orientation, held that:

"the exclusivity agreement entails, with reference to the area covered and for the duration of the contract, a prohibition to perform, not only directly, but also indirectly, services of the same nature as those forming the subject matter of the contract. [...] The prohibition to trade [...] the same products in the reserved area, [...] required the grantor - in accordance with the duty of fairness that constitutes the internal limit of any contractually assigned subjective legal situation - to refrain from any conduct likely to affect the result pursued."

However, this orientation must be updated and 'dropped' into a new regulatory framework, in line with the provisions of the Regulation (EU) No 720/2022 of the European Commission on agreements between companies operating at different levels of the production and distribution chain (vertical agreements).

In particular, Article 4 of the Regulation states that it shall not be unlawful to prevent the purchaser from making active sales in territories or customer groups which the supplier reserves to itself or allocates exclusively to another buyer, provided that the restriction does not also limit sales by the buyer's customers.

To better understand this rule, it is important to make a brief distinction between active sales and passive salesSimplifying, a passive sale can be defined as a 'purchase' in that the initiative is taken by the buyer;[4] active selling, on the other hand, is a consequence of an entrepreneurial strategy and actions of marketing targeted.

In light of the predictions briefly outlined above, a grantor can certainly create an exclusive networkdefining the territories in which their dealers can promote and market their products, but limiting such restrictions to active sales only. The licensor cannot, therefore, prevent exclusive area dealers from accepting and executing passive sales to parties outside the area entrusted to them; what can be excluded and prevented, however, is the area dealer from executing active sales, which are the result of marketing campaigns or commercial strategies carried out outside his territory.

However, the grantor has an obligation to control the network of its concessionaires (unless this obligation is contractually excluded[5]) , being liable for any breaches of exclusivity within its distribution network and, in some cases, even "intervene to counteract the behaviour of other dealers."[6]

Finally, it is emphasised that infringement of the exclusive right:

"constitutes conduct contrary to the duties of fairness and good faith and constitutes a serious breach of contract from which the termination of the contract follows."

3. Sales concession and non-compete obligation

As for thenon-compete obligation by the dealer, it too is not a natural part of the contract and, therefore, in the absence of express provision, the dealer will be free to deal in competing products.[7] As with the exclusivity agreement, the parties may however prove by witnesses the existence of such an obligation.

However, the obligation of the concessionaire to carry out its activity in line with the principle of good faith in the performance of the contract remains unaffected, as it may not carry out any activity that may damage the market, brand and trade of the grantor.

Regarding the duration of the dealer's non-competition agreement, it is not subject to the limits (five years) imposed by Article 2596 of the Civil Code, insofar as it is not applicable to the discipline under examination.[8]

Regarding the issue, viewed from the perspective of antitrust law, in the light of current European legislation, Regulation (EU) 720/2022, in Article 5(1)a, introduces provisions concerning non-compete agreements within vertical agreements. In particular, the regulation provides that all agreements restricting competition may benefit from the block exemption, provided that the duration of the non-compete clause does not exceed five years. The new regulation is in line with the previous Regulation (EU) 330/2010[9]which already excluded from exemption non-compete clauses with a duration of more than five years, even if they were tacitly renewable.

However, the European Commission's new guidelines[10] have introduced an important innovation in this respect. In the case of tacit renewal, non-compete clauses that are tacitly renewed may be exempted, provided that they do not exceed a period of five years and that the distributor has an effective possibility to renegotiate or terminate the vertical agreement containing the non-compete obligation, with reasonable notice and without incurring unreasonable costs. Furthermore, the distributor must be able to switch to another supplier at the end of the five-year period. This represents a step forward compared to the previous regulation, as it introduces more flexibility and protection for the distributor while safeguarding the principle of competition.

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[1] Appello Cagliari, 11/04/2007; Cass. Civ. 2004 no. 13079; on this point see Baldi - Venezia, Il contratto di agenzia, la concessione di vendita, il franchising, 2014, p. 135, GIUFFRÈ.

[2] Cass. Civ. 2004 No. 13079; Cass. Civ. 1994, No. 6819; Bortolotti, Distribution Contracts, 2016, p. 552, WOLTERS KLUWER.

[3] BORTOLOTTI, p. 553, op. cit.

[4] http://www.impresapratica.com/internet-marketing/vendita-attiva-o-passiva/

[5] Trib. Bologna 4.5.2012.

[6] Cass. Civ. 2003 no. 18743.

[7] BORTOLOTTI, p. 557, op. cit.

[8] Cass. Civ. 2000, no. 1238.

[9] Article 5(1)(a) of Regulation 330/2010 provided that: "The exemption provided for in Article 2 shall not apply to the following obligations contained in vertical agreements: (a) a direct or indirect non-compete obligation, the duration of which is indefinite or exceeds five years".

[10] Paragraph 248, Commission Guidelines.