The Italian Supreme Court addresses the concept of abuse of economic dependence in franchising agreements, highlighting the need to prove both an actual lack of market alternatives for the weaker party and an abusive conduct by the stronger party.
The Italian Supreme Court (Corte di Cassazione) has recently set aside, with remand, a decision of the Court of Appeal of Venice that had declared null a contractual clause in a franchising agreement for abuse of economic dependence by the franchisor.
The dispute arose from a claim brought by a franchisor seeking termination of the agreement for breach and payment of a Euro 50,000 penalty due to the franchisee’s failure to meet minimum purchase obligations.
The franchisee counterclaimed for termination and nullity of other contractual clauses.
Both the Court of Treviso at first instance and the Court of Appeal ruled in favor of the franchisee, finding that the combination of a significant minimum purchase obligation (coffee supply) and a contract duration tied to the lease of the business premises constituted an abuse of economic dependence by the franchisor as provided by article 9 of Law No. 192/1998. While this provision formally applies to subcontracting agreements, it is well established in case law that it also applies to franchising agreements.
On appeal, the franchisor argued, among others, that the lower courts had failed to properly assess whether the franchisee was actually in a position of economic dependence, particularly in light of the availability of alternative market options and the broader contractual relationship between the parties, which included a prior lease of a business unit.
The Supreme Court upheld the first ground of appeal, clarifying that the assessment of abuse of economic dependence requires a thorough analysis of the “actual cause” of the transaction and the legitimacy of the underlying business interest. Specifically, courts must verify:
(i) whether the disproportion of rights and obligations is truly “excessive,” notably by assessing the existence of viable market alternatives for the allegedly weaker party; and
(ii) whether the conduct is abusive, meaning arbitrary and contrary to good faith, rather than justified by a legitimate business interest.
With this decision the Supreme Court confirmed an important principle: entering into a disadvantageous agreement does not, per se, entitle a party to invoke abuse of economic dependence.
In the case at hand, the Supreme Court found that the Court of Appeal had committed an error of law when it had found the abuse of economic dependence to the detriment of the franchisee, having failed to consider relevant external factors, including the parties’ prior contractual relationship that excluded the existence of such abuse.
The judgment has therefore been set aside and remanded, with instructions for the Court of Appeal to reassess whether, at the time of the execution of the franchising agreement, the franchisor held a position capable of generating an excessive imbalance between the parties.
This decision reinforces a rigorous, fact-based approach to claims of economic dependence, limiting their application to genuinely coercive or abusive commercial situations to be verified in concrete.
