Car dealership contract and abuse of economic dependence

1.     The case

The case ruled upon by the judgment under examination arises from the performance of a car dealership contract involving the manufacturer’s right to set particularly onerous business targets to be achieved by the dealer on a monthly basis as well as the manufacturer’s right to unilaterally withdraw, inter alia, in case of non-achievement of such targets; the manufacturer also undertook to pay the dealer a price partially based on achievement of the targets set from time to time. Some time after the entry into force of the contract, the dealer was no longer able to fulfil the targets set by the manufacturer and, therefore, having had a drop in its income, accused the parent company of having imposed particularly onerous targets. However, in light of the persistent non-achievement of the targets, the manufacturer eventually opted for exercising its right of withdrawal. The dealer then summoned the manufacturer before court, claiming damages.

Such claim was dismissed at both instances of the proceedings; nevertheless, during the appeal proceedings, the Court of Appeal of Turin, spurred on by the dealer’s defence counsel, addressed some important interpretation issues on the prohibition against abuse of economic dependence. Among other things, the Court of Turin wondered as to whether Article 9 of Law 192/1998 (the “Subcontracting Act”) should apply to subcontracting agreements alone or also to other business contracts driven by same rationale – as was held in the case at issue – and when it is possible to identify economic dependence or deem the contractual conduct of the stronger undertaking abusive in spite of its compliance with contract terms.

Following the above, the dealer submitted the case to the Italian Supreme Court.

2.     The interpretation of the provision

Article 9 of the Subcontracting Act prohibits the abuse by one or more undertakings of the economic dependence of a customer or supplier undertaking. “Economic dependence” means a situation where an undertaking is in a position to create, in its business relations with another undertaking, an excessive imbalance of rights and obligations. Economic dependence is assessed also by taking into account the real possibility for the victim of the abuse to find any satisfactory alternatives within the market. In that respect, it should be noted that the first prohibition under the provision at issue refers to abuse of economic dependence as a unitary and general case, while the other cases set out therein must be considered as mere specifications, mentioned only by way of an example.

Any agreement involving abuse of economic dependence is sanctioned by penalty of nullity when, in addition to the above factual conditions, an unjustified sacrifice is imposed by a dominant on a dependent undertaking.

3.     The sacrifice of the dependent party’s interest  

A further question arises as to “when” the sacrifice of the dependent party’s interest can be deemed unjustified. Article 9 of the Subcontracting Act says nothing on this point, nor is there yet a well-established view of courts and legal commentators.

That being said, some interesting points of interpretation can be inferred from other sectors that are in some way comparable to subcontracting, namely antitrust and consumer law.

For example, in the matter of antitrust, the Court of Justice clarified that “the concept of abuse is an objective concept relating to the behaviour of an undertaking in a dominant position which is such as to influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition is weakened”. Indeed, under such ruling, in order for an abusive conduct of the dominant undertaking to exist, it is sufficient that there be no “objective justifications” for such conduct, in it being only aimed at restricting the interest of other market operators (undertakings or consumers).

In the matter of consumer law, a clause is abusive when it involves a “blatant and unidirectional alteration” of the contract structure, so as to create a “unilateral restriction” of the consumer’s interest “without compensatory advantages and without negotiation”, or when it is worded in the trader’s interest only, without being counterbalanced by other clauses in the consumer’s interest.

4.     Conclusions

Well, although the Supreme Court did not make a ruling on the merits of the case, it gave valuable input for a closer assessment of the provisions of the Subcontracting Act on abuse of dominant position bearing in mind antitrust and consumer law.

From the above scenario it emerges that it is not the extent of the sacrifice imposed on a dependent party (undertaking or consumer) that makes it unjustified, but rather its being instrumental only to strengthening the dominant position of the party who was thereby able to impose it.

In other words, a conduct or agreement is abusive within the meaning and for the purposes of Article  9 of the Subcontracting Act (as also under antitrust laws and regulations on abusive clauses against consumers) when, from an ex post assessment of the relevant context, it emerges that the sacrifice imposed on the weaker party is only justified by the “dominant” party’s intention to  strengthen the other party’s dependence or its own dominant position within the market without justification, either  technical-and-economic or based on production or distribution needs.

This article is for information purposes only and neither is nor can be considered as a professional opinion on the topics covered.

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