Belgium’s Law of April 4, 2019 published in May 2019 in the Belgian Official Journal (Belgisch Staatsblad/Moniteur Belge), introduces several significant changes to the Belgian Code of Economic Law (CEL) by regulating three unfair trading practices (UTPs) in a business to business (B2B) relationship: (i) abuse of economic dependency (enters into force in June 2020); (ii) abusive clauses (enters into force in December 2020); and (iii) unfair market practices (recently entered into force as per September 1, 2019).
The objective of the legislation is to widen the scope of Belgian competition law by broadening the notion of “abuse of dominance,” which now also entails abusive conduct performed by undertakings who are considered as indispensable commercial partners to other undertakings. This means the Belgian Competition Authority (BCA) to establish establishing market dominance – ie, when there is a situation of economic dependency in a commercial relationship between undertakings.
Because the legislative changes are aimed at protecting smaller trading partners, these new rules are mainly relevant in vertical relationships.
II. Substantive changes
A. ABUSE OF ECONOMIC DEPENDENCY
Whereas under article 102 TFEU, abusive behavior can only be sanctioned when the undertaking subject of the investigation is dominant in the market(s) concerned, the Belgian provision1 now relaxes that obligation by prohibiting non-dominant undertakings from abusing their market position in their relation with smaller trading partners (on the condition that there is economic dependency in their commercial relationship).
Indeed, the aforementioned practice would fall within the scope of Article IV.2/1 CEL if the following cumulative conditions are fulfilled:
- established economic dependency in a commercial relationship between the undertakings concerned
- abusive conduct and
- effect on competition on the Belgian market or a substantial part of it.
The Belgian Law of April 4, 2019 defines economic dependency as “a position of subordination of an undertaking in relation to one or more other undertakings defined by the absence of a reasonable equivalent alternative, available within a reasonable period of time, on reasonable conditions and at a reasonable costs, allowing the latter undertaking(s) to impose terms and conditions that they would not be able to obtain under normal market conditions”.
The CEL does not prevent the creation of commercial relationships between undertakings where there is a degree of economic dependency. It does however prohibit the abuse of such position. Article IV.2/1 CEL provides a non-exhaustive list of abusive practices, ie:
- Refusal to deal
- Imposition of unfair prices or trading terms
- Output limitation
- Discrimination between trading parties and
- Abusive tying.
Acting on its own initiative or following a complaint, the BCA is able to instigate an investigation against abuse of economic dependency, which can be sanctioned with a fine of up to 2 percent of the undertaking’s global annual turnover.
This resonates in two ways. First, a similar and quite old provision can be found in Germany. In particular, Article 20 of the Act against Restraints of Competition (GWB) imposes an obligation of non-discriminatory treatment on suppliers with relative market power (below the level of dominance) in relation to smaller buyers that are economically dependent on the supplier. This provision can be used to force access. An illustrative example is a toy store in the city of Nürnberg that is refused supplies of Märklin miniature train sets, a “must-have” brand, in the pre-Christmas period. The obligation presupposes discriminatory treatment – ie, the toy store in our example can only force supplies if Märklin has a policy of selling its products via toy stores. Where Märklin does not engage in trade at the toy store level, our toy store cannot force an exception.
There is, however, another way in which this provision could be used. In the digital economy, there is a lot of policy talk on platforms that operate as competitive gateways and block competing suppliers from access to the platform. A provision that works with the concept of economic dependency would allow to force access to marketplaces without having to prove dominance. The Belgian legislative debates highlighted that the main reasons for adopting such provisions are (i) aligning Belgian law with other European countries – ie, prior to the adoption of the law, Belgian law offered less protection than other European countries such as France; (ii) tackling the challenges small and medium-sized enterprises (SMEs) and farmers encounter in an economic dependent relationship by increasing their protection; and (iii) enabling the BCA to investigate abuses of economic dependency.
However, regardless of the legislative debates, it cannot be excluded that this provision turns into a powerful access tool.
B. ABUSIVE CLAUSES
The Belgian Law of April 4, 2019 moreover prohibits abusive clauses in commercial contracts between undertakings, which occurs when the clause creates, alone or in combination with other clauses, a clear imbalance between the rights and obligations of the parties.
Article IV.91.4 CEL provides for a black list of clauses which are abusive in all circumstances such as (i) potestative clauses (ie, clauses that depend solely on the will of one party); (ii) clauses giving an undertaking in a commercial relationship the unilateral right to interpret any clauses; (iii) clauses requiring one party to waive any means of recourse in the event of a dispute; and (iv) clauses which irrefutably establish one party’s acceptance to clauses of which it has not had the possibility to become aware before the conclusion of the contract.
Similarly, Article IV.91/5 CEL establishes a graylist of clauses which are presumed to be unfair unless proven otherwise, eg, among others, clauses that (i) commit the parties without specifying a reasonable period of termination; or (ii) tacitly extend or renew a fixed term contract without specifying a reasonable period of notice.
The abusive clauses included in the blacklist are null and void and therefore enforceable. The remainder of the contract however remains in place.
The graylist clauses can be challenged by the undertaking(s) involved in a civil court procedure. When establishing the abusive nature of a clause, a holistic approach would be desired. In particular, the overall context would need to be taken into account such as the intention of the parties as well as the nature of the products covered by the product.
The new rules apply to contracts in B2B relations entered into, amended or renewed after December 1, 2020.
C. UNFAIR MARKET PRACTICES
Finally, the Belgian Law of April 4, 2020 also introduces a prohibition of certain unfair market practices between undertakings, including misleading and aggressive market practices. The aforementioned practices were before the introduction of this law, already criminally sanctioned but only in a business to consumer (B2C) context. Unfair market practices can be challenged by the undertaking(s) involved in a civil court procedure.
A market practice is considered misleading if it misleads or is likely to mislead an undertaking with respect to a number of elements with the result that the undertaking is lead to take a decision on a transaction that it would not have taken otherwise. Misleading market practices may also entail providing misleading or erroneous information or hiding essential information.
A market practice of an enterprise is deemed aggressive when it limits the freedom of choice of an undertaking by (for example) harassment, coercion or inappropriate influence over such undertaking.
The assessment of whether a market practice is aggressive or misleading should be done on a case-by-case basis, taking into account all relevant circumstances.