4 Int'l J. Franchising L. 3 (2006)

handle is hein.journals/intjoflw4 and id is 1 raw text is: I FEATU RE

Regulation setting up Franchise
Rules in Italy: Commentary and
Unofficial Translation
by Professor Aldo Frignani, Frignani e Associati, Turin
Professor Frignani provides a translation of and Commentary to the 'Regulation setting up Rules on Franchise,
under Article 4, paragraph 2, of law n. 129 of 6 may 2004', Decree of the Ministero dele attivit6 produttive
(Ministry for production activities) n. 204 of 2 September 2005.1

With the above decree,2 the legal framework relating
to disclosure in franchising is now complete.
Article 4.2, part 2, of law n. 129 of 6 May 2004,
provides that 'as to the information under (d)', '(list of
current franchisees and    of the franchisor's direct
outlets)', (e) '(annual variation in the number of
franchisees with their locations and addresses in the
last three years)' and (f) '(summary of judicial or arbitral
disputes concerning the franchising network)', the
franchisor 'can supply the information related to the
franchise business carried out in the Italian market only'
while 'the information to be supplied under (d), (e) and
(f) by a franchisor who has carried out his activities only
abroad, will be regulated by a decree of the Ministry for
Production Activities' (the 'Regulation').
Such provision represents a novelty and appeared in
the text of the statute as a last minute insertion. In fact a
double problem then arose: whether or not a franchisor
that already carried out his activity in a foreign country
other than   Italy, was obliged to provide, in the
disclosure under letters (d), (e) and     (f), all the
information related to its business everywhere else
abroad. On this issue it was then decided that if a party
is dealing with the opening of a franchise business in
Italy, only the information related to this territory is
relevant for the purpose of evaluating the franchise:
hence the limitation provided by paragraph 2, first part,3
art. 4.2.
-     The information concerning the foreign markets in
which the franchisor already has a franchise network
becomes relevant only         when   there  is no   other
information available concerning Italy, once it has

been assumed - as the law (tacitly) allowed - that the
testing carried out abroad4 has been done in a suitable
manner.
On the other hand, it is also necessary to take into
account the case of the franchisor who, until that time,
has only been operating his business abroad but wishes
to expand his business in Italy. Requiring such an
investor to provide the prospective franchisee with
information relating to all the countries in which he is
present, with the same accuracy of an investor operating
in Italy has, as a first drawback, the fact that the
franchisee, when he deals with this mass of non
selective information, is not in a position to get out (this
is the phenomenon, underlined by economists and
sociologists, according to which too much information is
equivalent to the lack of information).5
Bearing this in mind, with reference to a foreign
franchisor who has carried out his activities in many
foreign countries, one proposal was to be selective and
provide only that information which related to those
countries with a market similar to that of Italy, which
information would appear therefore to be of greater
value to the prospective franchisee.6 Such a proposal has
not been included in the final text of the law.
Therefore the concern felt by some during the
drafting  of the text of the regulation, that the
intention  of the legislators was to     treat foreign
franchisors in a privileged way compared to the
Italian ones, must be discounted. The law pursues the
objective to provide a service to the prospective
franchisees by rendering intelligible the disclosures.

www.richmondLawtax.com

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