Sale agent in medical devices under Italian law

Firms trading in medical devices and appliances also often operate through sales agents.

However, the medical supplies sector has the following specialty trait: a large part of the demand for medical devices is developed by the public sector, which entails the application of public procurement regulations.

This essential fact directly influences the content of the work services rendered by the commercial agent. Indeed, the typical mechanism of procurement by public tender prevents the agent in medical devices from dealing directly with buyers of medical tools offered by the principal. It should also be borne in mind then that public purchasing operations are increasingly conducted in Italy by centralized, regional or even national contracting stations.

The agent is therefore called upon to perform services that can essentially fall into the following categories: (a) technical support; (b) propaganda.

In the first respect, the agent maintains the relationship with the structures of public agencies in charge of evaluating medical products offered in the market. These structures take on various names, such as clinical engineering, biomedical technology, and economics, and are in charge of evaluating the technical and economic characteristics of devices marketed by different principals as part of so-called preliminary consultations. At this stage, the agent presents the medical devices offered by the principal to the appointees of the public bodies. As a result of these consultations, the authorities in charge prepare the invitations to tender, contemplating the technical and economic characteristics of the medical devices they intend to purchase.

Under the second profile, the agent's activity is also carried out with respect to the end users of the device, whether they are the physicians or the technicians who will later have to use the device in the field. This is from the instrumental perspective of identifying the purchasing needs of the facilities, which, although functionally assigned to the appropriate internal units, are in practice influenced by the demands coming from the health care personnel. The agent's work is then also carried out in commercial initiatives in the area of ECM (continuing medical education), with the presence at the sites of conferences, conventions and training initiatives sponsored by the principal, for the presentation, illustration and demonstration of the products in the dedicated spaces, generally alongside the technical staff of the principal.

On some occasions it is then possible for the agent to be assigned the task of representing, by virtue of power of attorney, the principal in bidding operations.

As can be seen, the atypical feature of the work of the agent in medical devices is the fact that his activity is not directed to the promotion of the conclusion of contracts, not involving-at least for public sector purchases-the slightest relationship with the direct buyer of the product.

This feature of the work of the agent in medical equipment has profound reflections on the legal regulation of the relationship.

Indeed, the case law that has accrued on the subject of propagandists should be kept in mind, as well as specific precedent on the subject of medical device agent.

In the jurisprudential lexicon, a propagandist refers to that employee of the entrepreneur who carries out propaganda, awareness, presentation and illustration of the qualities of the products sold by the principal to an audience other than the final buyers.

Principal figure of propagandists is the pharmaceutical representative.

On the issue of agency contract qualification, the most significant precedent is certainly CCsl 6482-2004: "in the agency contract the performance consists of acts of varied and not predetermined content-such as the task of propaganda, the preparation of contracts, the receipt and transmission of proposals to the principal for acceptance-acts that all tend to promote the conclusion of contracts in a given area on behalf of the principal. None of these activities constitutes an indispensable component of the agent's performance. The typical activity of the commercial agent does not necessarily require the search for the customer and is still attributable to the performance deduced in the agency contract even when the customer, from whom the contract proposal transmitted by the agent originates, has not been directly sought by the latter but is acquired on the principal's instructions or in any other way, provided that there is a causal link between the promotional work carried out by the agent towards the customer and the conclusion of the deal to which the request for commission refers."

The same judgment elsewhere further clarifies, "promoting the conclusion of a contract means provoking its conclusion, but the causal effectiveness of the action should be related more to the overall volume of contracts concluded in the assigned area than to the individual contract."

It should be noted that CCsl 6482-2004 is an opening judgment with respect to Italian Supreme Civil Court precedents in which it was stated in no uncertain terms that the activity of the propagandist cannot be traced back to the typical scheme of the agency contract because such activity is not aimed at the direct buyer of the product.

For example: CC 13027-2001: "the activity of the propagandist of medicines consists in persuading potential customers of the advisability of the purchase, informing them of the product and its characteristics, but without promoting (except in a completely marginal way) the conclusion of contracts and differs from the activity of the commercial agent who, in the context of an obligation not of means but of result, must also achieve the promotion of the conclusion of contracts, being directly related to these and commensurate with his remuneration”.

It should be added, on the latter position, CC 6355-1999: “the activity of promoting the conclusion of contracts on behalf of the principal, which constitutes the typical obligation of the agent, cannot consist in a mere propaganda activity, but must consist in the activity of convincing the potential client to place orders for the principal's products. Therefore, when the auxiliary of a pharmaceutical company merely propagandizes the product to physicians, and thus only indirectly promotes the principal's business, that auxiliary is not an agent but a scientific propagandist, whose activity may be the subject of subordinate or self-employment”.

Finally, CC 6291-1990: “the activity of promoting the conclusion of contracts on behalf of the principal, which constitutes the typical obligation of the agent, cannot consist in a mere propaganda activity, from which an increase in sales may only indirectly result, but must consist in the activity of convincing the potential customer to place orders for the principal's products, in view of the fact that it is precisely with regard to this result that the agent is awarded the remuneration, consisting of the commission on the contracts concluded through him and successfully concluded, and that the obligation (borne by the agent himself) to the star del credere is configurable. Therefore, when the auxiliary of a pharmaceutical company merely propagandizes the product to physicians, and thus promotes only indirectly (since the drugs are not purchased by the physicians themselves) the business of the principal, such an auxiliary, however it is defined by the parties, is not an agent but a scientific propagandist, whose activity may be the subject of subordinate or autonomous work, depending on whether or not the characteristics of subordination are detectable”.

CCsl 6482-2004 itself, in bringing the propagandist's activity back into the type of commercial agency, seems to incorporate the orientation of the doctrine which, to this end, has valued the zone as a polarizing element for ascertaining the causal link between the agent's activity and the principal's conclusion of contracts. Thus, through the zone, the activity of the propagandist also seems to assume causal significance in the conclusion of business, in the sense that the work of raising awareness, information and illustration of the product in the entrusted area becomes a determining element in the conclusion of the deal and, thus, albeit indirectly, may fall within the typical causal scheme of the agency contract.

In any case, not even the reported broader interpretation of the concept of promoting the conclusion of contracts seems to be applicable to the medical device agent for the obvious reason that the conclusion of the contract by means of public bidding definitely removes the agent's activity from the causal series leading from propaganda to the conclusion of the contract. In fact, all those with whom the agent comes in contact have only an advisory and instrumental function in the preparation of the call for tenders, where the actual awarding and, therefore, the conclusion of the contract, is entrusted to the meeting of the demand with the best offer, according to the tender law and in the evaluation of the technical committee with which the agent has and can have no relationship. 

Much less can the element of area come to the rescue, also in view of the fact that, as already mentioned, more and more purchases are made by contracting stations at the regional or national level.

This interpretation was later expressly recognized by the Italia Supreme Civil Court, which in CCsl 18686-2008 expressly ruled that: “there can be no doubt that for the case that the principal's products were offered to hospitals or public health companies, both of which are obliged to carry out contractual activities in public evidence, the agreed commissions could not accrue in favor of the commercial agent”.

Although influenced by the subject matter of the Supreme Civil Court case, which centered on the agent's demand for commissions for contracts entered into by the principal with public counterparts, the ruling from which the above maxim is taken is crystal clear in bringing within the scope of the agency contract only those activities that have direct causal relevance to the conclusion of the deal, in fact, elsewhere, it argued thus: “the criticism that must move to the judge of merit is to have summarily read the judgment 6482 of 2004 of this Court, engendering the doubt that from its reading can be drawn the conclusion that the mere activity of dissemination, although supplemented by other elements, can independently configure the agency contract. This Court, on the other hand, in the judgment indicated, had particularly delved into the concept of promotion, but had left firmly in place the point that the existence of the agency contract is linked to the finding that the person carrying out the promotional activity also actively participated in the conclusion of the contract”.

Which leads directly to the finding, indeed rather disconcerting on the economic-social level, that the agent in medical devices may well not be an agent on the legal level, with consequent very significant repercussions on the regulation of the relationship.

The aforementioned arrests by the jurisprudence of legitimacy do not seem to be fully acceptable either on the theoretical level, since they should be recognized as one of those excesses of the subsumption method denounced by doctrine since the 1970s, or on that of the concrete discipline of the relationship, entailing, in fact and for most cases, a transit from the regime of commercial agency to that of self-employment, with consequent loss of protection for the agent-propagandist. Nevertheless, since they come from the highest nomofilactic body, they certainly cannot be disregarded.

This opens up the problem of a possible alternative qualification of agency contracts for the promotion of the sale of medical devices, as well as of identifying the extent to which this alternative qualification entails an alteration of the regulation of the relationship.

Indeed, it should not be forgotten that, although to a largely lesser extent than in subordinate employment, the strong presence of heteronomous sources in the regulation of the relationship is also found in commercial agency, particularly the mandatory statutory regulations and collective bargaining agreements, to which a large number of individual contracts make direct reference.

The step to be taken is therefore as follows: (1) to identify the alternative qualification to commercial agency: (2) to determine the consequence that this alternative qualification has on the application of heteronomous sources, of legal and collective sources.

To carry out the first step, it should be kept in mind that the commercial agency type has a polarizing and absorbing function with respect to other differential elements of the relationship. In fact, whether the commercial agency activity is carried out by means of a company, or by means of the personal activity of the agent-employer, the resulting relationship will always fall under the commercial agency type. Once, however, the relationship with the propagandist has been excluded from the type of commercial agent, the requirement of organization, on the one hand, and that of personal performance, on the other, regain qualifying autonomy, projecting the relevant concrete cases respectively into the realm of contracting out services and employment contract, which are both typical contracts under Italian law.

Starting with the first case, it is possible to argue for the perfect compatibility between the relationship with the propagandist contractor and the service contract scheme.

This is first of all from the standpoint of limited interference of the principal in the propagandist's activity, arguing from Articles 1661 and 1662 of the Italian Civil Code.

By the medium of Art. 1677,  the Civil Code regulation of the supply of goods contract may be also invoked, in particular: Art. 1564, with the really pregnant reference to the mutual trust between the parties, an essential feature of the agency contract and, certainly, also of the contract with the scientific propagandist in medical devices; Articles 1567 and 1568 with regard to the mutual exclusivity between the parties, which, in combination, substantially reproduce the rule contained in Article 1743, with the difference that, operating in the context of the supply of goods contract, the exclusivity must be expressly agreed upon, whereas in the agency contract it is the derogation to the exclusivity regime that must be stipulated; likewise Article 1569 on the subject of termination and notice for the case of a contract of indefinite duration, which contains a rule similar to that in Article 1750.

No particular problems would then seem to arise for the determination of a commission fee, in view of the subjective status of the propagandist agent as a contractor, as well as the fact that the service contract typically provides that the fee is pegged to the result. Moreover, historical precedents are known of service contracts compensated with a percentage of the result obtained, such as contracts for tax collection, which were compensated with a premium on the collected amount.

Different problems arise, however, in the second of the cases identified above: that in which the propagandist's services are performed personally.

This case, in fact, by the mean of Art. 2, Legislative Decree 81/2015 on so-called hetero-organized collaborations, potentially falls within the attractive orbit of subordinate employment, although not substantially, at least in terms of discipline.

Structurally, there is no doubt that the relationship with the propagandist agent falls under the predominantly personal and continuous collaborations scheme. And therefore, the relative relationship will always be typologically ascribable to the contract of work but, for the purposes of discipline, it will be governed by the norms proper to this contract only if the collaboration is not hetero-organized by the principal; when this latter fact instead occurs, it will be governed by the norms on subordinate work.

Which, of course, given the evanescence of the conceptual category of hetero-organization, only adds uncertainty to the qualification problem.

In any case, despite the coordination problems summarized above, assuming that the performance of the propagandist agent for medical devices cannot be subsumed into the abstract scheme of commercial agency, it does not seem difficult to identify a possible alternative qualification along the following general lines:

(1) in case of propagandist agent organized as an enterprise, service contracting;

(2) in case of propagandist agent rendering the service personally, in the absence of hetero-organization by the principal, work contract;

(3) in case of propagandist agent rendering service personally, in the presence of hetero-organization by the principal, work contract to which, however, the discipline of subordinate employment applies.

The scope of the above conclusions on existing relationships should be clarified: all contracts with propagandists for medical devices qualified and regulated by the parties as agency contracts will continue to be regulated as agency contracts. In this case, the application of agency contract rules does not follow so much from subsumption into the type, but rather from private autonomy.

Indeed, the parties are perfectly free to regulate their relationship with the discipline of a different type from that which would be abstractly applicable to the concrete case. The only really relevant consequence is that, since the regulation of the relationship under the commercial agency scheme rests entirely on the will of the parties and no longer on subsumption in the type, the application of the heteronomous rules to the relationship depends exclusively on the transposition made of them in the individual contract, with the consequence of opening up the possibility of derogation for this relationship from the rules that are mandatory for the agency contract.

The only exception to the private power to dispose of the type is to be considered the case of the relationship with the hetero-organized propagandist, where private autonomy provision on the type, from the work contract to the commercial agency, must yield to the provision on the type made directly by the law, in Article 2 of Legislative Decree 81/2015, from the work contract to the subordinate employment.