Distribution of Wine in Italy

With its 6 billion bottles a year, Italy is the largest producer in the world (2nd state in terms of turnover behind France) and wine is a cultural phenomenon too, besides being an economic ele-ment of absolute importance. Suffice it to say that in Italy there are 310.000 winegrowers, 45.000 bottling companies and around 340.000 bottles are consumed per hour.

The Italian market, therefore, is an extremely competitive market, in which domestic production plays a dominant role on medium and low-end products, having a quality-price ratio that is diffi-cult to match by any imported products.

Instead, there are three factors that – if fully exploited – can play in favour of foreign producers of medium-high-end wines: first (i) the average consumption of wine per capita is among the high-est in the world (about 35 lt each), and this leads the consumer, on average very aware, to vary his/her choices a lot. This has led (ii) to the opening of several specialized shops (both online and offline), often selling also quality foreign wines, for which the consumer is willing to spend rather high figures. Finally (iii), in Italy there are many trade fairs and events (from Vinitaly to small lo-cal expositions) in which producers can introduce their wine to sector operators and distributors already structured on the market.

In short: not an easy market, but a market offering different chances for producers having a clear distribution strategy and a quality wine to sell.

While Italian producers must pay particular attention to counterfeiting when they enter foreign markets, on the domestic Italian market this is a rather negligible phenomenon. Despite this, the registration of the trademark remains a fundamental step to protect distinctive signs, especially in the event of disputes or conflicts with other subjects. If the brand is not registered, in fact, competing companies can use a similar one, confusing consumers and, therefore, vanishing all the promotional investments made.

As seen previously in the EU guide, when registering a trademark in one of the Member States it is, first of all, opportune to ask whether it is better to register an EU trademark, which, with a single application, guarantees a quite fast and cheap protection in all Member States.

It is advisable to register the trademark with a national application only if: (i) the business plan provides to operate in the Italian market only; or (ii) in another Member State a very similar trademark has already been registered, as this can lead to the rejection of the EU application.

The application for registration of an Italian trademark shall be filed at the Italian Patent and Trademark Office (UIBM) of the Ministry of Economic Development. Registration lasts 10 years (renewable indefinitely) and costs around € 150,00, plus € 34,00 for each additional class and € 50,00 for presentation of the application by an authorized representative.

Since it can take several months (up to 18) to complete the registration process, it is a good idea to do in-depth clearance searches before filing the application, in order to verify that there are no identical or very similar previous trademarks registrations.

Before entering the market, in addition to registering the trademark, it is advisable to register your domain name, in order to prevent third parties from fraudulently stealing the domain name (so-called “cyber-squatting”) and, consequently, preventing you from using it.

The labelling of wines sold on the Italian market is governed by the EU legislation (already seen in the specific EU Guide) which in Italy has been implemented and applied by specific legal provisions (the Ministerial Decree 13/08/2012 is certainly the most important), which mainly con-cern: the size and format of the characters to be used on the labels; the way in which it is possible to shorten the company names of the bottler, producer, seller and importer; the use of the vine variety names with references to specific DOP / IGP; the traditional mentions, and other aspects of detail.

Italy is part of the European Customs Union, therefore import procedures from non-EU countries follow EU rules, while wines from other EU states (or already cleared in any other EU state) are free to enter the Italian market without additional customs controls.

For the export of non-EU wine, the goods intended to leave the EU territory must be placed under the specific arrangements by lodging the customs export declaration, accompanied by the com-mercial documents and any licences, authorisations or certificates where required for the export of that type of wine product.

Italian companies are subject to corporate income tax (IRES), as well as to regional tax on produc-tive activities (IRAP). Taxes are due for tax periods (fiscal year), each of which generally corre-sponds to an autonomous tax liability.

IRES is commensurate with total net income at the rate of 24%. The IRAP rate may vary from re-gion to region and is generally 3.9%.

Excise duty: In Italy, wine is not subject to excise duty, unlike other alcoholic beverages such as beer.

Value Added Tax (VAT): in Italy it is 22%. If the products are consumed in a bar or restaurant, the reduced rate of 10% applies (in line with the serving of food within these establishments).

It is possible to promote wine through advertising messages, but the Commercial Communication Code of Conduct provides certain limits to promotional methods, aimed at encouraging alcohol consumption models inspired by restraint, correctness and responsibility. In particular, commercial advertisings must not:

• encourage excessive and uncontrolled use;
• represent situations of morbid fascination with the product and, in general, alcohol addiction or suggest that the use of alcohol can solve any personal problems or increase physical and sexual efficiency or that the lack of consumption leads to a condition of physical, psychological or social inferiority;
• address, even indirectly, to minors, and to represent the latter consuming alcohol or any other individual who evidently appears consuming alcohol;
• associate the driving of vehicles with the use of alcoholic beverages;
• represent sobriety and abstention from alcohol consumption as negative values;
• use as a main theme of the advertising the high alcohol content of a drink.

In Italy, moreover, there is an absolute ban on the supply and sale of alcohol to minors of 18 years. Furthermore, the shops have limits on the sale and administration of alcohol: from 3 am to 6 am for public businesses and private clubs; from midnight to 7 am for vending machines and shops; from 2 am to 6 am for service areas on the roads (from 10pm to 6am for spirits).

The distribution of wine and spirits takes place mainly through distribution and agency agreements, two contracts that are part of the same large family (the commercial distribution of products), but which present very marked differences between them.

As in almost all European countries, in Italy the distribution contract is an atypical contract, without a specific legislative discipline and, therefore, governed by applying rules dictated for similar contracts, such as sales (“compravendita”) and administration (“somministrazione”). For this reason it is essential to negotiate and draft the distribution contract in a exhaustive way, correctly balancing the interests of the two parties and settle all aspects of the relationship.

In addition to any considerations regarding the anti-trust limits to the online resale of products, for which we refer to the EU part of this Guide, we recommend to take the following issues into account when negotiation and drafting a distribution contract in Italy:

• have a clear and precise business model and, consequently, clearly define the fundamental aspects of the agreement (territory, duration, product list, etc.);
• keep in mind that the current anti-trust EU legislation prohibits various clauses (e.g.: fixing of the resale price by the producer; prohibition of resale online; prohibition of resale to consumers from other states) that are deemed harmful to EU competition, because they excessively restrict the distributor's freedom of enterprise;
• further, e-commerce is gaining an important market share in Italy: it is good, therefore, to have a clear idea of how to structure the online sales and regulate them accordingly;
• in Italy there are several fairs and wine themed events: it would be appropriate to define properly in the contract, who will bear the expenses for the promotional activity and at which events the distributor will be required to attend;
• applicable law and jurisdiction. For producers, Italian law is a good choice, because it tends to favour the seller and there is no jurisprudence (unlike other countries like Spain, Portugal and Germany) recognizing that the distributor is entitled to receive a goodwill indemnity (similar to the one recognized in favour of the commercial agents) at the end of the contractual relationship. The judgments of the courts of Italy and any other Member State are automatically recognized and enforced in Italy and in any other Member States under the EU Regulation 1215/2012. The arbitration remains a valid alternative, especially in contracts of high value and when there is a need for confidentiality over any dispute: since Italy is a member of the 1958 New York Convention, foreign arbitration awards are immediately recognized.
  

Italy has implemented within the civil code (articles 1742 and following) the EC Directive 86/653 (please refer to the EU part of this guide), which governs the relations between commercial agents and principals.

Hereinafter some practical tips, specifically referred to the Italian legislation:

• the Collective Economic Agreements ("AECs") are a peculiarity of Italian legislation. AECs are agreements stipulated between the trade unions of the two parties (agents and principals), containing provisions that supplement the existing legal framework (as already seen, composed of the EU legislation and the Italian civil code). AECs apply when: (i) the agent and the principal adhere to the trade union which has stipulated the relevant AEC; or (ii) the contract – expressly or tacitly – refers to the AEC. When drafting an agency con-tract, therefore, one shall evaluate very carefully whether to make reference to the AEC or not, taking into consideration – best if provided with legal advice – the advantages and disadvantages of the choice (the AECs rule several aspects of the agency relationship, such as: promotional expenses, commission calculation, changes in the territory, non-competition agreement, sickness, accidents, pregnancy, duration of notice, termination indemnity, etc.);
• italian or foreign agents operating in Italy on behalf of Italian or foreign principals are required to register with the “Enasarco foundation”, a category-based social security institution that manage the social-security of the commercial agents. The Enasarco has also a monitoring role, as it verifies compliance with social-security contribution obligations and the correct qualification of agency relationships;
• some contractual figures (e.g. business procurement or mediation) are very similar to the commercial agency, and risk, in the presence of certain factors (e.g.: promotional obligations, stability of the relationship, constraints towards the principal, exclusivity, non-competition agreements, determination of the territory), to be requalified as agency relationships. If this happens, all mandatory obligations envisaged for the agency contract must be applied, including the payment of social security contributions by Enasarco and the payment of severance indemnity. This means that the principal will be obliged to pay social security contributions to Enasarco for the entire duration of the relationship and to pay the goodwill indemnity to the business procurer/mediator;
• choice of jurisdiction. When the agent is a natural person (or a partnership in which the agent's personal activity is prevalent) domiciled in Italy, the jurisdiction of the place where the agent-person has his domicile cannot be waived. In similar cases, moreover, the labour section of the Court of the place where the agent has his domicile will be competent. On the contrary, for agents established in corporate form (LLC, or similar), the ordinary rules on jurisdiction will apply;
• choice of law. In an international agency contract, Italian law is applicable when it is explicitly chosen by the parties or, in the absence of choice, when the agent is domiciled in Italy. However, it should be pointed out that, in the event of a dispute in Italy concerning an agency contract subject to foreign law, the judges will still apply the Italian “provisions that cannot be derogated” (i.e. the so-called "rules of necessary application", which also includes the goodwill indemnity regulation.