Business Contracts in ItalyDistributorship contracts in Italy: a legal guide for foreign companies entering the Italian market

Why foreign companies choose distributorship agreements in Italy

For international businesses, Italy represents a gateway to the European Union and a market rich in industrial and consumer potential. Many foreign companies prefer to appoint local distributors in Italy rather than establish a branch or subsidiary, as this model offers a flexible and cost-efficient way to expand. However, the legal framework for distributorship contracts in Italy differs from other jurisdictions and requires careful drafting to protect the supplier’s commercial interests.

Legal framework: no specific regulation under Italian law 

Italian law does not provide a specific statutory regime for distributorship agreements. They are considered “atypical contracts” (contratti atipici) under Article 1322 of the Italian Civil Code.

This means:

• the content of the agreement is mainly defined by the parties’ freedom of contract

• the contract must comply with general principles of good faith, public policy, and mandatory rules

• Italian case law plays a significant role in interpreting these arrangements

Distribution vs. Commercial Agency: key differences

Foreign companies should carefully distinguish between a distributorship and a commercial agency agreement, as the two carry different legal consequences under Italian and EU law.

Essential clauses in an Italian distributorship contract

Because there is no statutory template, the success of a distribution agreement in Italy depends heavily on how it is drafted. Key provisions typically include:

• territory and exclusivity: define whether the distributor has exclusive rights within a specified territory

• minimum purchase obligations: useful to ensure active market development

• pricing and resale terms: must comply with EU and Italian competition law (avoid resale price maintenance and territorial restrictions)

• duration and termination: set clear terms for renewal and reasonable notice periods

• intellectual property: regulate the use of trademarks, trade names, and promotional materials

• governing law and dispute resolution: commonly, Italian law and arbitration (e.g., Milan Chamber of Arbitration) are chosen for efficiency and enforceability

Antitrust and competition law compliance

Distributorship arrangements in Italy fall under Article 101 of the Treaty on the functioning of the European Union (TFEU) and the vertical block exemption Regulation (VBER).

Foreign suppliers should ensure their contracts do not include “hardcore restrictions”, such as:

• fixing resale prices

• preventing passive sales to customers in other EU territories

• imposing unjustified non-compete obligations

Non-compliance may lead to invalid clauses and administrative penalties under Italian and EU competition rules.

Tax and permanent establishment considerations

An Italian distributor typically acts in its own name and for its own account, meaning it is legally independent and does not create a permanent establishment for the foreign supplier. Nevertheless, companies should pay attention to Transfer pricing for inter-company arrangements, VAT implications for cross-border transactions. Furthermore, it is essential to avoid any structure that could be reclassified as a permanent establishment under Italian tax law.

Practical tips for foreign businesses

To ensure a secure and compliant entry into the Italian market, foreign companies should:

1. conduct due diligence on potential distributors (financial stability, reputation, compliance)

2. draft the contract in English and Italian to facilitate enforcement

3. seek specialized Italian legal advice to align with national and EU regulations

4. define termination rights and notice periods precisely

5. consider territorial exclusivity carefully to maintain flexibility

Conclusion: legal certainty through careful drafting

Appointing a distributor in Italy can be a powerful market-entry strategy. Yet, because Italian law offers flexibility but little statutory guidance, success depends on a carefully tailored contract that anticipates commercial and legal risks. Working with an Italian law firm experienced in international distribution and commercial law ensures your agreement is enforceable, compliant, and strategically aligned with your business goals.