Discusses distribution network from how products enter to final destination, including reliability of distribution systems, distribution centers, ports, etc.
Using an Agent or Distributor
Companies wishing to use distribution, franchising, and agency arrangements need to ensure that the agreements they put in place are in accordance with European Union law and Italian law. Council Directive 86/653/EEC establishes certain minimum standards of protection for self-employed commercial agents who sell or purchase goods on behalf of their principals. The directive establishes the rights and obligations of the principal and its agents, the agent’s remuneration, and the conclusion and termination of an agency contract. It also establishes the notice to be given and indemnity or compensation to be paid to the agent. U.S. companies should be aware that, according to the directive, parties may not derogate from certain requirements. Therefore, a clause specifying an alternate body of law to be applied in the event of a dispute will likely be ruled invalid by European courts.
The European Commission’s Directorate General for Competition enforces legislation concerned with the effects on competition in the internal market of “vertical agreements.” Small- and medium-sized enterprises (SMEs) in the United States are often exempt from these regulations because their agreements likely would qualify as “agreements of minor importance,” meaning they are considered incapable of affecting competition at the EU level but useful for cooperation between SMEs. Companies with fewer than 250 employees and an annual turnover of less than €50 million are considered SMEs. According to Commission Notice 2014/C 291/01, agreements that affect less than 10% of a particular market are generally exempted.
EU authorities also look to combat payment delays. EU Directive 2011/7/EU covers all commercial transactions within the EU, whether in the public or private sector, primarily dealing with the consequences of late payment (transactions with consumers, however, do not fall within the scope of this directive). This directive entitles a seller who does not receive payment for goods and/or services within 30 days of the payment deadline to collect interest (at a rate of 8% above the European Central Bank rate) as well as €40 as compensation for recovery of costs. For business-to-business transactions, a 60-day period may be negotiated subject to conditions. The seller may also keep title to the goods until payment is completed and may claim full compensation for all recovery costs.
Companies’ agents and distributors can take advantage of the European Ombudsman when victim of inefficient management by an EU institution or body. Complaints can be made to the European Ombudsman only by businesses and other bodies with registered offices in the EU. The Ombudsman can act upon these complaints by investigating cases in which EU institutions fail to act in accordance with the law, fail to respect the principles of good administration, or violate fundamental rights. In addition, SOLVIT, a network of national centers within the EU, offers online assistance to citizens and businesses that encounter problems with transactions within the borders of the single market.
Establishing an Office
Establishing an office in Europe, whether a subsidiary or a new business, requires knowledge of the relevant national legislations in the country of interest. While there are several EU-level policies in effect, some key areas such as taxation are still largely a member state competence.
For more information, please refer to the State Department’s Investment Climate Statement for Italy, which includes details on establishing and operating an office as well as hiring employees. Setting up a new company in Italy is done online through the Single Business Communication.
Franchising is widespread throughout Italy and growing. With a turnover of about $29 billion in 2021, Italy is the fourth-largest market for franchises in Europe after France, Germany, and Spain.
In 2019, the number of Italian franchise locations reached more than 59,840, a 6% increase from the previous year; of the 980 franchises, 90% were Italian. The number of master franchisors in Italy fell from 72 in 2020 to 71 in 2021. Nevertheless, employment in this sector now totals 238,194 (up 9% since 2019).
The highest concentration of franchise networks can be found in northern Italy (Lombardy and Veneto), primarily in city centers, commercial districts, and shopping malls. Lombardy leads the market with 16.3% of the total franchising turnover, and Lazio and Sicily follow. Historically, new franchise concepts launch in large cities, such as Rome and Milan, but franchisors have also been successful in smaller cities. This is primarily due to the presence of a relatively large middle class with a strong demand for new and sophisticated goods and services. In recent years, in addition to franchise locations in malls, department stores, and on main streets, an increasing number of franchises have opened in airports and train stations. U.S. firms interested in entering the Italian market should be aware of the market entry challenges stemming from Italy’s unique culture and entrepreneurial spirit. Despite Italy’s structure of family- and locally owned businesses and small-scale operations, there is opportunity for franchising if quality is maintained. Success depends on finding the right partner. Potential franchisors must have the ability to adapt their franchise concept to the Italian market and maintain an organized structure.
We recommend that American companies conduct extensive market research; commit to building a sound, long-term business plan that allows enough flexibility to adjust their business model to the Italian market; have a legally bound franchise agreement, a detailed operations manual, a good training program, and a relevant support system; have a well-defined master licensee candidate profile to aid the search process; and create a realistic development schedule for the master licensee. Italian banks will first evaluate the franchisor and then the potential franchisee.
U.S. businesses looking to franchise within the EU will likely find that the market is quite robust and friendly to franchise systems in general. There are several laws that govern the operation of franchises within the EU, but they are fairly broad and generally do not constrain the competitive position of U.S. businesses. The potential franchisor should look not only at EU regulations, but also at Italian laws concerning franchising. More information on legislation relating to franchising can be obtained from the European Franchise Federation (EFF)
In 2004, Italy enacted a general law on franchising and an implementing regulation in 2005. The relevant laws are the Franchising Act ,the Franchising Regulation , the Antitrust Law, the EU Block Exemption Regulation on vertical restraints, and the Anti-Economic Abuse Law. As a code of ethics and/or a standards-based accrediting system, the EFF code of ethics is followed. On June 1, 2022, the EU brought into force new rules that exempt vertical agreements (including franchise agreements) from the EU prohibitions on anti-competitive agreements contained in Article 101 of the Treaty on the Functioning of the EU (Article 101). The EU exemption is contained in a new vertical agreements block exemption regulation (EU VBER), designed to reflect significant changes in consumer buying preferences and advancements in related technologies, particularly online sales platforms and digital comparison tools.
The European Franchise Federation
The EFF was founded in 1972 in Belgium as a not-for-profit association to promote, defend, and speak for the franchise industry in Europe. The EFF brings together a community of national franchise associations that share the same ethical core values and seek to uphold commitments to promote and operate by a robust set of ethical standards and principles as defined by the code of ethics for franchising, which is available on the organization’s website. This code is mandatory for all members, as well as their respective partners. Furthermore, it serves as an important standard on franchising issues, including for legislators, the judiciary, and other professional organizations.
National franchise associations that are EFF members may adopt additional extensions to the code of ethical franchising to fit the evolution of franchising in their national markets, as long as those extensions do not contradict the code.
Bologna Licensing Trade Fair (expected March 2023): Trade fair dedicated to the business of subsidiary rights for companies and professionals, featuring Italian and international licensors and licensing agencies.
Salone Franchising Milano (October 19–21, 2023): The largest franchising trade show in Italy.
- Assofranchising: Italian Franchising Association, member of EFF and WFC
- Confimprese: Italian Association of Retailers and Franchise Networks
- Federfranchising - Confesercenti: Italian Franchising Federation
- AZFranchising: Magazine and communication agency promoting growth of enterprises via franchising network development, providing industry and operative know-how.
- Beesness: Quarterly magazine focused on franchising, retail and entrepreneurship for young entrepreneurs, professionals, and businessmen.
- BeTheBoss.it: Search engine for franchising opportunities in Italy by industry, investment, territory, or company name.
- Millionaire: Magazine and web platform dedicated to new business trends and franchising.
U.S. Commercial Service Italy:
Elisa Martucci, Commercial Specialist
U.S. Commercial Service, U.S. Embassy Rome
Tel: +39 06 4674 2252
The EU has yet to adopt legislation harmonizing the direct selling of consumer products. However, there is a wide range of EU legislation that impacts the direct marketing sector. Compliance requirements are elevated for marketing and sales to private consumers. Companies need to focus on the clarity and completeness of the information that they provide to consumers before purchase and on their approaches to collecting and using customer data. The following gives a brief overview of the most important provisions flowing from EU-wide rules on distance-selling and e-commerce. In addition, it is important for exporters relying on a direct-selling business model to ensure that they comply with Italian requirements. Direct selling in Italy is regulated by Regulations Governing Direct Home Selling and Protection of the Consumer from Pyramid Selling.
Processing Customer Data
The EU has strict laws governing the protection of personal data, including the use of such data in the context of direct marketing activities. For more information on these rules, please see the Data Privacy section of our European Union Country Commercial Guide.
Distance Selling Rules
In 2011, the EU overhauled its consumer protection legislation and merged several existing rules into a single rulebook, the Consumer Rights Directive, the provisions of which have been in force since 2014. The directive contains provisions on core information to be provided by traders before the conclusion of consumer contracts. It also regulates the right of withdrawal, includes rules on the costs for the use of means of payment, and bans pre-ticked boxes. Updates to these rules took effect in May 2022. For more information, consult the European Commission’s useful tool to learn about consumer rules.
The EU adopted in March 2019 a set of two directives which govern EU-wide contract rules for the online sale of goods and the supply of digital content and services; these rules apply as of until January 2022.
Alternative Dispute Resolution
In 2013, the EU adopted an alternative dispute resolution (ADR) mechanism, which provides consumers the right to turn to quality ADR entities for all types of contractual disputes, including purchases made online or offline, domestically or across borders. An online dispute resolution regulation set up an EU-wide platform to handle consumer disputes that arise from online transactions.
Italy is taking steps to encourage the broader use of ADR to resolve civil disputes. The most mediated matters involve bank contracts and property disputes. While pre-filing ADR is mandatory in certain cases (including property disputes, inheritance disputes, leases, insurance cases, banking, and financial contracts), there are no penalties enforced for non-participation or an unwillingness to participate in good faith to settle the claim.
The Chambers of Commerce in Milan and Florence also strongly support the use of ADR and have established mediation centers and rules of procedure. Italy is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards. It is worth noting that, unlike in the United States, mediation in Italy tends to take place before, rather than after, the suit is filed.
Distance Selling of Financial Services
Financial services are regulated by a 2002 directive on distance marketing of consumer financial services , which was designed to ensure that consumers are appropriately protected with respect to financial transactions taking place where the consumer and the provider are not face-to-face. In addition to prohibiting certain abusive marketing practices, the directive establishes criteria for the presentation of contract information. Given the special nature of financial markets, specifics are also laid out for contractual withdrawal.
Direct Marketing over the Internet
The e-Commerce Directive imposes certain specific requirements connected to the direct marketing business. Promotional offers must not mislead customers and the terms for qualifying must be clear and easily accessible. The directive stipulates that marketing e-mails must be identified as such to the recipient and requires that companies targeting customers online must regularly consult national opt-out registers where they exist. When an order is placed, the service provider must acknowledge receipt quickly and by electronic means, although the directive does not attribute any legal effect to the placing of an order or its acknowledgment; instead, this is a matter for Italian law. Vendors of electronically supplied services (such as software, which EU authorities consider a service and not a good) must also collect value-added tax.
The Italian Data Protection Authority (DPA) “Garante per la protezione dei dati personali” oversees direct marketing in Italy, which has stricter rules than many other countries. Promotional offers often require the prior consent of the recipient in writing, with a clear way to opt out. Likewise, prior consent is required for profiling purposes or to transfer personal data to third parties. The DPA grants an exception for companies sending promotional emails to customers who have purchased similar goods or services. According to the DPA’s guidelines, even if personal data is available on the Internet, companies may not send automated promotional messages. Companies and firms may send promotional messages to their followers on social media as long as their followers have given consent to receiving promotional messages.
In recent years, joint ventures (JVs) have become more common in Italy and there are no general restrictions on foreign investments. There are contractual and corporate JVs and all must be registered with the National Revenue Agency in Italy.
Italian consumers have grown accustomed to a relatively slow and, at times, unreliable domestic postal service. However, the rise of e-commerce is raising demands and expectations on speed and quality of service. The range of delivery options available to online shoppers is expanding (including lockers and collection/return points across major cities), but there is still room to grow. As the e-commerce market develops, the options for alternative delivery points or timed slots will increase.
Several express delivery options exist for U.S. small- and medium-sized enterprises wishing to ship goods to Italy, including services offered by global logistics companies such as FedEx, UPS, DHL, and others which usually guarantee a second business day delivery to Europe from the United States. To date the B2C delivery has been dominated by national postal service Poste Italiane and local couriers BRT, SDA, and Nexive (TNT).
Most logistics companies will offer a range of options for international delivery at different price points to meet customer needs. These usually feature different levels of tracking and insurance. Logistics companies can also help with bulk deliveries to help cut costs and provide advice on packaging, address formats, and labelling.
Italian consumers often search for the lowest possible price. Therefore, when domestic retailers offer speedy delivery, it may be worth exploring domestic fulfilment options to compete. Logistics companies either run their own fulfilment centers or can recommend reliable local fulfilment partners.
Product safety testing and certification is mandatory in the EU, and U.S. manufacturers and sellers of goods must perform due diligence following mandatory EU legislation before exporting.
The U.S. Commercial Service helps companies do due diligence through our International Company Profile (ICP) report. An ICP helps companies evaluate potential business partner reliability and capabilities. The report includes available information on the company and insights gleaned from our due diligence.