Abuse of Position Involving Economic Dependence Will Soon Be Actionable in Belgium

On 21 March 2019, the Belgian Parliament adopted a law modifying the Code of Economic Law to, inter alia, introduce as an actionable offence the abuse of a position involving economic dependence (Wet houdende wijziging van het Wetboek van Economisch Recht met betrekking tot misbruiken van economische afhankelijkheid, onrechtmatige bedingen en oneerlijke marktpraktijken tussen ondernemingen / Loi modifiant le Code de droit économique en ce qui concerne les abus de dépendance économique, les clauses abusives et les pratiques du marché déloyales entre entreprises – the “Law”). 

The original bill that gave rise to the Law was introduced more than three years ago (in November 2015) and sought to establish an additional competition law infringement (See, Van Bael & Bellis on Belgian Business Law, Volume 2015, No. 11, p. 7, available at www.vbb.com). This bill was then subject to important changes and its scope was significantly extended. The Law now contains the following novel provisions:

• Abuse of a situation of economic dependence – The Law creates a new competition law infringement referred to as an abuse of a situation of economic dependence of a business that affects, or could possibly affect, competition on the Belgian market or a significant part thereof.  This infringement will be added to the existing abuse of a dominant position (Article IV.2 CEL).
   
• A situation of economic dependence – Means a position in which a business is subject to one or more businesses able to impose obligations or conditions on the latter that would not prevail in normal circumstances, due to the absence of a reasonable and equivalent alternative, within a reasonable time period and under reasonable conditions and costs.

Such a situation of economic dependence may result from various factors such as (i) the market power of the company, (ii) the significant share of the company in the turnover of the allegedly dependent company, (iii) the technology or know-how controlled by the company, (iv) the reputation of the brand, the scarcity or perishable nature of the product, or a loyal consumer buying behaviour, (v) access to essential resources or facilities, (vi) the fear of serious economic harm, retaliation or termination of contractual relationship, (vii) the regular application of exceptional conditions (which are not granted to similar undertakings) and (viii) the deliberate or constrained choice to opt for such a situation of economic dependence.   

• Abusive conduct – The Law provides a non-exhaustive list of practices that could constitute abuses:
   
  • refusing to sell, buy or apply other transactional conditions;
     
  • directly or indirectly imposing unreasonable purchase or sales prices or other unreasonable contractual conditions;
     
  • limiting production, distribution or technical development;
     
  • applying different conditions to equivalent services affecting the competitive position of the other party;
     
  • tying certain performances to the conclusion of agreements which are not connected thereto according to their nature or market practices.
     
• Fines and penalty payments – The Law specifies that businesses which abuse a situation of economic dependence can be subject to fines of up to 2% of their yearly Belgian turnover and penalty payments up to 2% of their daily Belgian turnover.
   
• Protection against unfair practices in a business to business (“B2B”) relationship – The latest amendments considerably extended the scope of the Law.  In addition to introducing the abuse of a situation of economic dependence into Belgian competition law, the Law includes the following protection mechanisms for businesses against unfair practices in a B2B context:
   
  • Significantly unbalanced contract terms – Contractual provisions that, solely or together with other provisions in the contract, create a significant imbalance in the rights and obligations of the parties will be unlawful and void.  In this respect, the Law introduces black lists and grey lists of contractual provisions that are, respectively, always unlawful or presumed to be unlawful in B2B contracts.
     
  • Unfair, misleading and aggressive practices – The Law extends the scope of unfair practices in a B2B context to misleading practices which go beyond the current notion of misleading comparative advertising.  Practices are considered misleading if they are based on incorrect information, falsehoods, or if they in actual fact mislead the other party, while correct.
    
    In addition, the Law extends the scope of unfair practices in a B2B context to aggressive practices.  Practices are considered aggressive if they significantly limit businesses’ freedom of action in relation to a product using intimidation, force, violence or inappropriate manipulation.
     
• Mandatory law and criminal sanctions – Businesses which engage in unfair practices in a B2B context can be subject to injunctions and criminal fines of up to € 80,000.  These protection mechanisms are expressly identified as overriding mandatory provisions within the meaning of the Rome I Regulation, which implies that the parties cannot depart from them in their contract.  

The Law should be published in the Belgian Official Journal in the course of April.  It will then enter into force in various steps: the prohibition of unfair, misleading and aggressive practices will enter into force 4 months after publication, the prohibition of abuse of economic dependence 13 months after publication and the prohibition of unbalanced contract terms 19 months after publication.
 

Peter L'Ecluse
Partner
plecluse@vbb.com
 

Martin Favart
Partner
mfavart@vbb.com