Ferrari Law: Supreme Federal Court Unanimously Upholds It.

Contractual freedom and limits in the automotive sector.

In virtually all sectors of the economy, contractual freedom is treated as one of the pillars of business activity, guiding negotiations, strategies, and business decisions. In the automotive market, however, this logic does not apply absolutely. The sector is subject to a specific legal regime that imposes significant limits on the autonomy of the parties: the so-called Ferrari Law (Law No. 6,729/1979).

The role of the Ferrari Law in the relationship between car manufacturers and dealerships.

This legislation is not limited to formally organizing commercial relations. It directly interferes with the dynamics between automakers and dealerships, influencing the structure of operations, the definition of strategies, and, most importantly, the way contracts are terminated.

The Supreme Court's Verdict: The Consolidation of the Ferrari Law

Recently, the debate surrounding the validity of the law reached a definitive conclusion. The Supreme Federal Court (STF), in a unanimous ruling, declared Law No. 6,729/1979 constitutional. The decision ends years of legal uncertainty caused by questions about the law's compatibility with the principles of free enterprise and free competition.

According to the Court, the state intervention foreseen in the Ferrari Law does not constitute an affront to the market, but rather a legitimate sector regulation. The established understanding is that the Constitution allows the State to intervene to ensure balance in sectors with glaring specificities, where the disparity of power between the parties could compromise market stability.

Free Competition vs. Sectoral Regulation

One of the highlights of the decision was the clarification that free competition is not an absolute principle. The Supreme Court reinforced that regulatory models that organize the market—such as territorial exclusivity and the organization of the distribution network—can coexist harmoniously with the economic order.

In practice, this means that the Ferrari Law does not override competition laws, but acts as an instrument of... economic stability, preventing unchecked contractual freedom from causing a collapse in the automotive distribution network.

Practical Reflections: What changes for the sector?

With the Supreme Court's final decision, legal certainty in the automotive sector is strengthened.

• Continuity: The current distribution model remains fully valid.

• Contracts: Clauses based on the Ferrari Law are no longer at risk of being annulled on the grounds of unconstitutionality.

• Predictability: Companies now have a solid foundation for planning long-term investments, knowing that the rules of the game have been ratified by the highest court.

Conclusion: From Uncertainty to Strategic Security

The Supreme Court's ruling transforms what was previously a "debate about risks" into a clear compliance guideline. More than ever, the proper structuring of contracts and strategic risk management cease to be a precaution and become the foundation of operations in the sector.

The Supreme Court's validation of the Ferrari Law confirms that, in modern business law, freedom of action goes hand in hand with respect for sectoral regulations, guaranteeing a more predictable, balanced, and consequently stronger business environment.

Article written by: Leonardo Nero, Nicoly Crepaldi and Isabela Melo.

REFERENCE:

Ferrari Law: Constitutionality Under Debate and the Risks for Businesses