Abuse of economic dependence
The law - which amends the Belgian Code of Economic Law (CEL) - introduces a new area of enforcement of Belgian competition law. It makes the abuse of economic dependence of one or more undertakings which could result in anticompetitive effects on the Belgian market or a substantial part thereof illegal.
The new prohibition requires the following elements to be present:
The existence of economic dependence
This condition concerns the key differentiator with the existing rules regarding the prohibition on abuse of dominance.
The law defines ‘economic dependence’ as a position of subjection of an undertaking towards one or more other undertakings which is characterised by the absence of a reasonably equivalent alternative available within a reasonable time limit, on reasonable terms and at reasonable cost, enabling the latter undertaking(s) to impose services or conditions which could not be obtained under normal market circumstances.
The existence of an economic dependence will be assessed in concreto, presumably taking into account specific business relations and the overall context – i.e. the existence of imbalance between the undertakings concerned. The main difference with dominance is that the concept of economic dependence will have to be assessed in a bilateral or multilateral context, whilst the concept of dominance relates to the structure of a particular market.
Practice will learn how the concept will be applied. In our view, the definition does not provide much legal certainty for the undertakings that may be concerned, which is unfortunate considering the risks involved (ie significant fines and damage claims).
Finally, it is worth noting that the proposal does not require the economically dependent undertaking to be a SME.
The abuse of this economic dependence
The abuse of economic dependence can be expected to be interpreted in the same way as the abuse of a dominant position. The non-exhaustive examples mentioned in the law are the same as the examples mentioned in article IV.2 CEL and/or Article 102 TFEU with the addition of the refusal to sell, to purchase or to accept other conditions.
Considering that the concept relates to economic dependence, it could have been expected that an abuse of economic dependence would only concern so-called exploitative abuses (abuses that directly harm customers, eg excessive prices).
However, in the parliamentary works, the legislator clearly stipulated that the new prohibition is also meant to cover exclusionary abuses (abuses that indirectly harm customers by excluding competitors, e.g. predatory pricing). In our view, this also implies the possibility for actions by third parties, e.g. competitors of a supplier complaining about a supply agreement between that supplier and a distributor. This raises interesting questions, for instance on the relationship between the new provision and EU block exemptions such as the Vertical Block Exemption Regulation.
An actual or potential effect on competition in Belgium or a substantial part thereof
The new provision requires a potential anticompetitive effect. In this respect it does not seem to deviate from the prohibition regarding an abuse of a dominant position. It remains to be seen how this effect will be established in practice. It may reintroduce an element of market assessment (definition of the market, market shares, etc.) characteristic for dominance.
The new prohibition can be enforced by courts and by the Belgian Competition Authority. The latter can act on its own initiative or following a complaint and conduct investigations, impose fines (of no more than 2% of the undertaking’s turnover), settle cases, impose preliminary measures, etc. (as is already the case for anticompetitive agreements or concerted practices between undertakings, anticompetitive decisions of associations of undertakings and abuses of dominant undertakings).
The new prohibition will enter into force on the first day of the 13th month after the publication of the law in the Belgian Official Gazette, ie on 01 June 2020.
The law also prohibits certain unlawful clauses in B2B contracts - without the need to show any economic dependence of any of the undertakings involved (it moreover also relates to contracts between undertakings that are not SMEs). These clauses will be considered to be null and void and therefore unenforceable. The remainder of the agreement concerned will remain valid to the extent possible (eg following a requalification by the court concerned).
More specifically, the law sets out the following obligations:
- written clauses need to be drafted in a clear and understandable manner and can be interpreted conform market practices
- clauses, alone or in combination with other clauses, cannot create an apparent imbalance between the rights and obligations of the parties, taking into account all relevant circumstances - this does not relate to so-called "core clauses", ie regarding the subject matter of the contract or the equivalence of the remuneration and the counter performance, in so far as these clauses are drafted clearly and understandably
- certain specific (blacklisted) clauses are deemed to be unlawful (eg clauses prohibiting one of the undertakings to take legal action), and
- certain specific (greylisted) clauses are assumed to be unfair and therefore prohibited unless evidence to the contrary (eg clauses allowing the unilateral amendment of the price without valid reason, clauses exonerating an undertaking for its gross negligence, clauses limiting the means of evidence of the other party, etc.).
The law provides the possibility to supplement the abovementioned blacklisted and greylisted clauses by royal decree for certain sectors or categories of products.
The rules regarding unfair clauses do not concern financial services and public procurement contracts but this may change by royal decree.
The new rules regarding unlawful clauses in B2B agreements will enter into force on the first day of the 19th month after the publication of the law in the Belgian Official Gazette (ie on 01 December 2020) and will only apply to contracts that are entered into, renewed or amended after this date.
Misleading and/or aggressive market practices
In addition, the law introduces certain unfair market practices between undertakings which include misleading market practices, aggressive market practices and certain behaviour that is currently already criminally sanctioned. Until now, the legislation regarding misleading and aggressive market practices was only applicable in a B2C context.
The law clarifies certain misleading and/or aggressive market practices between undertakings by:
- defining the concept of a misleading market practice and by indicating which misleading elements of a B2B agreement are relevant to determine a misleading market practice (eg main characteristics of the product, scope of the obligations, price, necessity of the offered service, rights of the other party, etc.). This concept also includes the misleading omission (of essential information), and
- defining the concept of an aggressive market practice. Reference is made in this respect to practices such as intimidation, force, the use of physical violence or inappropriate manipulation (ie using a position of power in order to put pressure - even without the use or threat of physical violence – which influences the other undertaking’s ability to make an informed decision).
The identification of misleading and/or aggressive practices requires a case-by-case analysis by which all relevant circumstances are taken into account.
The new rules regarding misleading and/or aggressive practices will enter into force on the first day of the fourth month after the publication of the law in the Belgian Official Gazette, ie on 01 September 2019.