The Italian Antitrust Authority has commenced an investigation against Benetton for an abuse of economic dependence pursuant to Law no. 192 of 18 June 1998, regarding their franchising contracts stipulated with franchisees.

This is a very unusual measure which shows the Authority's attention to this type of conduct and which we would like to point out for this reason.

According to the Antitrust Authority, Benetton would have required its retailers to maintain a sales structure and a commercial organization rigorously designed according to its needs, in view of the fact that Benetton contractually guaranteed the possibility to set rules and organizational parameters suitable to stiffen the business structure of the franchisee, to the point of preventing a possible conversion of the franchsing scheme with another supplier.

The Authority censures Benetton's discretionary use of certain intrusive contractual clauses that would allow it to influence the reseller's strategic choices, such as the definition of proposals and/or purchase orders, not only in terms of timing, but also in terms of quantity.

In this way, Benetton could have significantly affected the economic activity of the franchisee, who would in fact be prevented from managing his business independently.

Benetton holds an important position in the clothing market, with a brand that enjoys a strong commercial appeal, and therefore the matter is relevant not only in terms of the individual contractual relationship, but also for the protection of (fair) competition in the market. The use of the contractual model in question by an entity that manages a significant franchising network could, in fact, have a significant impact on all the entrepreneurs which create the network in question, to the detriment of fair competition in the market.

This would, moreover, lead one to believe that, when the abusing company does not enjoy a position of national importance, the Authority would not consider itself competent, leaving the case to the civil court.

The investigation, for the moment, does not cover the possible imposition of a resale price, the lawfulness of which in franchising agreements has always been in discussion, unlike other distribution/resale contracts where it is, instead, always considered illegal.