An extract from The Dominance and Monopolies Review - Edition 9
Although the assessment of the abusive character of a specific commercial practice is inherently fact-specific, the BCA and the Belgian courts can generally use criteria or tests similar to those developed to that effect by the European Commission and the European Court of Justice. Article IV.2 of the CEL was modelled after Article 102 of the TFEU, and, accordingly, contains a non-exhaustive list of practices that may be considered abusive depending on the circumstances. Moreover, as at the EU level, the BCA, and courts take as a starting point that holding a dominant position is not problematic per se,47 and that 'the existence of a dominant position does not deprive an undertaking in this position from the right to protect its own interests when they are jeopardised',48 but that it may not abuse its position to exploit consumers or foreclose competition. With respect to exclusionary conduct, the 'as-efficient competitor test' is also used as a baseline.49 Belgian courts are more unpredictable than the BCA with respect to the application of these principles.i Overview
Generally, the abusive character of a commercial practice implemented by a dominant company depends on its actual or likely effects on competition. To assess the materiality or likelihood of such effects, the BCA and courts typically rely on specific tests designed for certain categories of practices, which are then applied to the facts of each case. These tests tend to create presumptions that are rebuttable in view of the circumstances prevailing on the relevant markets and the actual effects observed (or lack thereof). Similarly, a practice is only regarded as abusive after consideration has been given to possible objective justifications, if any, put forward by the dominant company. Unfortunately, Belgian courts sometimes tend to adopt a formalistic approach to the notion of abuse, occasionally driven by underlying 'fairness' considerations.50ii Exclusionary abusesExclusionary pricing
With regard to predatory pricing, the leading precedent in Belgium is Electrabel.51 The case involved allegations of predatory pricing on the part of the incumbent gas operator, Electrabel, at the time of the liberalisation of the sector. The allegations were dismissed for two main reasons: the short duration of the alleged predation (six months), which was considered too short to implement a credible predatory strategy; and the fact that no alternative operator had exited the market during that period.
This case is interesting in three respects:
- it seems to require evidence of actual foreclosure effects, whereas the Commission does not consider that 'it is necessary to show that competitors have exited the market to show that there has been anticompetitive foreclosure';52
- much like under the US antitrust framework, it suggests that predation implies the possibility to recoup losses at a later stage, whereas the Commission and the European Court of Justice recently reiterated that the prospect of such a recoupment was not a prerequisite for the establishment of an exclusionary strategy; and
- the BCA did not perform a cost analysis in this case, but focused on the materiality of the foreclosure effects.
As a general matter under Belgian law, temporary below-cost prices associated with the launch of a new product or the liquidation of stocks is not abusive.53
With regard to margin squeeze, the BCA's practice is generally in line with EU case law. The leading precedent on margin squeeze in Belgium is Base v. BMB, in which the BCA established a margin squeeze on the basis of a comparison between the wholesale prices charged by BMB on the upstream market for call terminations on its network (as charged to competitors) and the retail prices charged by BMB on the downstream market for mobile telephony services to business customers.54 Considering that BMB is 'a vertically integrated undertaking offering termination services on the upstream market and telephony services on the downstream market' and that 'termination services are an essential input for BMB's competitors', the BCA endeavoured to 'verify whether BMB would be able to make a normal profit on its on-net calls if it had to bear the termination cost charged to its competitors'. Having found that this was not the case during the relevant period, it subsequently referred to EU case law to support the conclusion that '[a] margin squeeze may, by its very nature, restrict competition'.55
In the Lampiris v. Electrabel case, the BCA dismissed a margin squeeze allegation among other claims of price-related abuses of dominance by Electrabel.56 The BCA found no margin squeeze. Applying the 'as-efficient competitor test' on the basis of Electrabel's long-term average incremental costs, the BCA found that Electrabel's margins would have remained positive in the retail market even when paying the prices charged to customers in the wholesale market. The BCA further noted that during the relevant period, Lampiris' prices had been equal to or lower than Electrabel's prices, with positive margins, and that Lampiris had grown its market share.
In ABB Industrial Solutions (ABB), the College imposed interim measures on ABB, a producer of 'smart' electricity meter boxes, following a complaint lodged by its competitor Teco NV.57 In Belgium, electricity distribution is regulated at the regional level. Eandis (now Fluvius), the energy grid net operator in the Flemish region, set the mandatory standard type of electricity meter boxes to be installed and launched two public tenders for the boxes and the boxes' lids, respectively. The exclusive right to fabricate and deliver lids was obtained by GE Industrial Solutions (GE), but after its acquisition it was passed on to ABB. ABB then charged a substantially higher price for the lids than the price offered to Eandis in GE's tender bid, lowered its prices for electricity meter boxes, allowing it to squeeze the margin, and created uncertainties in supplies to other companies that were economically dependent on it for these lids. The College found it not manifestly unreasonable to assume prima facie that ABB abused its dominant position.Exclusive dealing
The offering of rebates characterised as exclusive tends to be treated somewhat strictly by the BCA and courts. On 27 September 2013, the Brussels Court of Appeal upheld the BCA's decision of 30 July 2012 imposing a €245,530 fine on Presstalis,58 a French media distributor, for providing French publishers an extra 2.5 per cent discount (BSC discount) on top of other volume-based discounts in exchange for the exclusive right to export their magazines to the Belgian, Swiss and Canadian markets for a period of 12 months.59 The BCA found that the BSC discount had had a 'strong fidelity effect', and enabled Presstalis to foreclose competitors both in the market for the export of French magazines, and, through its privileged relationship with Belgian distributor AMP, in the market for the distribution of those magazines in Belgium. While confirming that the proof of likely (and not actual) foreclosure effects on competitors that are at least as efficient as the dominant company was sufficient to establish an abuse, the Court adopted a strict view holding that loyalty discounts provided in exchange for exclusivity are as such in violation of Article 102 of the TFEU. The Court concluded that the BCA correctly qualified the BSC discount as a loyalty discount, and ruled that it was sufficient that the BSC discount placed competitors in a less favourable economic position than Presstalis.
With regard to loyalty rebates (not tied to an exclusivity requirement), the BCA adopted an effects-based approach in Base v. BMB, which also involved individualised conditional rebates in the form of free subscriptions, reimbursements proportionate to spending, a reduction on certain types of calls, or free calls and text messages.60 The BCA dismissed the existence of an abuse on the grounds that it was unclear how said rebates were 'likely to have a real influence on the customer's choice'; and how 'the offers from the dominant undertaking on the one hand, and the competitors on the other hand' compared with each other.61 In Algist Bruggeman, however, the BCA reviewed various loyalty-enhancing rebates and found that, because these rebates were aimed at enhancing the loyalty of distributors and bakers to exclude lower-priced competitors, and had no objective justification, they breached Article 102 TFEU and Article IV.2 of the CEL.62
Volume rebates are generally unproblematic under Belgian law. The Brussels Court of Appeal has considered, for instance, that:
the existence of a dominant position does not deprive such an undertaking of its right to grant volume-based rebates to its customers depending on the customer's volume of purchases, if there are objective reasons to believe that the conferral of a financial benefit to certain customers is justified by the business volume realised by these customers and the economies of scale to which they give rise.63Leveraging
Leveraging allegations have occasionally been made in Belgium.
In National Lottery, the National Lottery acknowledged forms of leveraging in a BCA settlement decision in 2015.64 Following complaints, the Auditorate had investigated the National Lottery's conduct at the time of its launch of Scooore!, a new sports betting product. The Auditorate found that the National Lottery had abused its dominant position through a one-off use of customers' contact details to promote Scooore!. The contact details had been collected through its legal monopoly, where competitors were unable to collect data of a similar scope and nature at reasonable costs and within a reasonable period of time. In addition, the National Lottery had obtained commercially sensitive information about competitors, both before and after the launch of Scooore!, from some of its retailers, for which the sale of lottery products represented a significant share of their turnover.
In MediCare-Market, the College's decision rejecting interim measures did not explicitly refer to leveraging, but found that the practices at hand could constitute an attempt to broaden the scope of pharmacists' legal monopoly beyond the limits set by the legislator (i.e., beyond pharmaceutical products to cover para-pharmaceutical products), which would amount to an abuse of dominance.65
Belgian case law does not contain recent discussions of the principles applicable to tying and bundling practices so that reference can be made to those developed at EU level.66Refusal to deal
The Bofar case, involving a company specialised in the export of pharmaceutical products, enabled the BCA to provide some guidance regarding refusal to deal practices. As is the case at the EU level, the starting point of the analysis is the basic free trade principle according to which 'each undertaking, irrespective of whether or not it holds a dominant position, should have the right to choose its business partners'.67 Subsequently, the BCA appears to condition a finding of abuse on evidence of a clear intent to foreclose actual or potential competition; the strengthening of the company's dominant position; and the absence of objective justification. In this case, the BCA dismissed the existence of an abusive refusal to deal, relying heavily on the Commission Guidance Paper and modelled its decision on the GlaxoSmithKline case law of the European Court of Justice.68
While the principle according to which dominant players should remain free to choose their trading partners is well understood by the Belgian courts, exceptions to this principle are sometimes found on the basis of ad hoc tests that are applied quite flexibly. This is well illustrated by Ducati v. DD Bikes, in which the Ghent's Court of Appeal upheld a lower court judgment finding Ducati guilty of abusive refusal to supply spare parts and other repair equipment to a former dealer-repairer following the (otherwise lawful) termination of the dealership agreement.69 After finding that Ducati, through its official dealers, was dominant on a Ducati brand-specific market for maintenance and repair, it laid down its own test to appreciate the abusive character of the refusal to supply without any reference to EU or other precedent (which is very uncommon in Belgian case law) and dismissed, for example, free-riding arguments or the relevance of the fact that the repairer sold and serviced other brands of motorbikes. In addition, holding Ducati's refusal to supply abusive, the Court imposed a number of obligations on Ducati aimed at ensuring that DD Bikes could effectively offer after-sales services for Ducati motorbikes in the future. This case should be understood in the context of long-term dealership agreements in Belgium, and testifies to a historical tendency on the part of Belgian courts to protect the interests of dealership holders.
In De Troyer v. Woody, the President of the Ghent Enterprise Court applied the recently adopted legislation prohibiting abuses of economic dependency for the first time in Belgium. The President imposed a cease-and-desist order on Woody, a supplier of children's clothing, for refusal to deal. The order held that Woody had breached the new Article IV.2/1 of the CEL by terminating, unilaterally and without prior notice, its supply agreement with a customer in a situation of economic dependency.70Other practices
In Algist Bruggeman, the BCA found an abuse of dominance in denigrating practices against a competitor. The Auditorate found that Algist Bruggeman's circulation of biased internal reports about a competitor's product, aimed to create uncertainty about the microbiological aspects and quality of its competing yeast, and to discourage distributors or bakeries from supplying or using the product.71 Also in 2017, the BCA rejected MediCare-Market's request for interim measures, yet found that the Order of Pharmacists' denigrating press campaign about MediCare-Market's potential harm to the profession of pharmacists and to patients could prima facie constitute an abusive practice.72
In the same case, the BCA clarified in 2019 that, as a general principle, the mere fact for a dominant company of instituting legal proceedings against another company will not be considered as abusive.73 The BCA recalled in this regard that, first, Article 780 bis of the Belgian Code of Civil Procedure already sanctions abuses of process and, second, there are strict conditions under the Promedia case law for entering into litigation to constitute an abuse of dominance, which were not met in this case.74
At the EU level, concentrations are only reviewed under merger control rules and excluded from procedures for restrictive practices, pursuant to Article 21(1) of the Merger Regulation.75 In Belgium, the question of whether mergers and acquisitions that do not meet notification thresholds can be subject to review under Article IV.2 of the CEL (and, in fact, Article IV.1 of the CEL) is a long-standing one, which seems to receive a positive, if qualified, response. In 2006, the Brussels Court of Appeal held that a transaction that does not meet the Belgian notification thresholds may be reviewed under Articles 101 and 102 of the TFEU or Articles IV.1 and IV.2 of the CEL.76 In 2016, the BCA had the opportunity to address the question, after receiving a request for interim measures to suspend the non-notifiable acquisition of Brouwerij Bosteels by AB InBev.77 Alken-Maes contended that the acquisition constituted an abuse of AB InBev's dominance. The BCA referred to the European Court of Justice's Continental Can judgment and acknowledged that concentrations can lead to an abuse of dominance, but also noted the potential harm of interim measures against transactions.78 The BCA then held that an acquisition escaping merger control can be assessed from an abuse of dominance perspective if there are prima facie restrictions on competition, distinct from the effect of the concentration itself, which can be qualified prima facie as an abuse of dominance. This was not the case in the transaction at hand. The Brussels Court of Appeal upheld the BCA decision in 2017.79iii Discrimination
Price discrimination under Article IV.2(2) and (3) of the CEL generally requires evidence of a difference in treatment applied to equivalent transactions with the effect of causing a material competitive disadvantage. In Lampiris v. Electrabel, the BCA considered that the services offered on the electricity wholesale market and on the retail market were not equivalent, and hence dismissed the discriminatory pricing claims.80 In InBev, the on-trade (catering) and off-trade (wholesalers and retailers) segments for the distribution of beers and beverages were considered as separate markets, thereby justifying differences in pricing.81 However, the BCA has not always adequately provided support for its decisions on price discrimination.
In bpost,82 the BCA referred to a breach of equal treatment in relation to the grant of rebates without reaching a formal finding of discrimination, thereby creating uncertainty as to the applicable standards. The Brussels Court of Appeal annulled this decision on ne bis in idem grounds, and therefore did not review the finding of breach of equal treatment.83 The Belgian Supreme Court overturned the appeal judgment in 2018, as the Brussels Court of Appeal had improperly applied the ne bis in idem principle.84 The case is now back with the Brussels Court of Appeal, which has to make a new assessment on the merits. On 19 February 2020, the Court issued an interlocutory judgment requesting a preliminary ruling from the European Court of Justice on the interpretation of the ne bis in idem principle under EU law. The preliminary ruling is still pending.85
Similarly, Belgian courts sometimes fail to inquire into the existence of an actual competitive disadvantage resulting from an allegedly discriminatory practice, in contradiction with the principles prevailing at the EU level since Post Danmark.86 In SABAM, for example, the Brussels Court of Appeal found that services offered to 'major customers' were equivalent to those offered to other customers, and that the application of different prices was therefore discriminatory, without inquiring into the actual existence of a competitive disadvantage resulting from that difference of treatment on the downstream market.87iv Exploitative abuses
It is well known that there is no clear standard to assess what is or makes a price 'excessive', and the comparative test proposed in some EU precedents leaves room for a significant margin of discretion. Excessive pricing claims are relatively frequent in Belgium but seldom established. In the 2014 Electrabel electricity wholesale market case, the BCA found the former incumbent electricity producer and supplier guilty of an abuse of dominance revolving around Electrabel's tertiary production reserve policy,88 which was presented as an unjustified limitation of production.89 Relying on EU precedents, the BCA defined the relevant markets as the production and wholesale trade of electricity in Belgium, on the one hand, and the supply of the tertiary reserve in Belgium, on the other, and found that Electrabel held a dominant position on both. The BCA then narrowed the scope of the abuse to Electrabel's marketing of reserve capacities by means of the application of an excessive margin scale (qualified as a form of 'economic withholding'). Electrabel's scale governing the release of reserve capacity implied the realisation of margins of 50 per cent to 200 per cent above the average wholesale price per MWh achieved on the Belpex trading platform in 2008, which was found 'excessively disproportionate compared to the marginal cost of production'.90
Similarly, in Festival organisers v. SABAM, the Brussels Commercial Court concluded that SABAM's tariffs for concerts and music festivals did not have a reasonable relation to the economic value of the product provided. The copyright collecting society SABAM had based its tariffs on the size of festivals (while this did not change the nature or cost of its services to provide licences), the festival's total turnover (including turnover unrelated to music), and used pricing methods unrelated to actual use of music (while alternative methods of calculation that quantify use do not require additional costs).91 The Court dismissed SABAM's argument that the tariffs were increased to match those in neighbouring countries.92 On appeal, the Brussels Court of Appeal stayed the proceedings to request a non-binding opinion (amicus curiae) from the European Commission on whether SABAM's tariffs are an infringement of Article 102 of the TFEU.
The BCA and the courts often dismiss excessive pricing claims.
In Lampiris v. Electrabel and NMBS v. Electrabel, the BCA and the Brussels Court of Appeal both dismissed similar excessive pricing claims.93 Both found that Electrabel's incorporation into its wholesale prices of the value of emission allowances obtained for free was economically justifiable, since the allowances could otherwise be traded. Beforehand, the leading precedent involved the allegedly excessive character of an increase in Electrabel's natural gas prices.94 After comparing Electrabel's prices with a number of competitive price benchmarks – for example, prices of alternative operators, regulated prices and prices applied in other EU Member States – the BCA was not able to reach a finding of infringement.
More recently, in another case involving SABAM, the Antwerp Enterprise Court asked the European Court of Justice whether an abuse exists under Article 102 of the TFEU, whether or not read in conjunction with Article 16 of Directive 2014/26/EU on collective rights management, when a collecting society (with a factual monopoly in a Member State) applies a remuneration model with a fixed rate, instead of a rate taking account of the actual share of the protected music repertoire played during the event, and makes licence fees dependent on external elements (e.g., admission price). The European Court of Justice ruled that SABAM's remuneration model does not constitute an abuse of dominance, provided that the actual fees imposed are not disproportionate to the nature and scope of the use, the economic value generated by that use and the economic value of the service provided to society. The Court also held that no other methods, allowing for a more accurate identification and quantification of the use to achieve the same legitimate aim, should be available.95 The Antwerp Enterprise Court will now have to implement this ruling.
Moreover, loose findings of excessive prices are sometimes encountered in judgments of Belgian courts. This was the case in the AMP judgment,96 where the Brussels Court of Appeal considered excessive an increase in AMP's minimum distribution fee because of its lack of costs-based justification, as established by an expert report. Likewise, in Base v. Belgacom, the Antwerp Commercial Court has held Belgacom guilty of charging excessive prices, as it failed to pass on to consumers a reduction in the mobile termination charges of competing operator Base, as mandated by the telecommunications regulator.97 By holding that prices 'were higher than those that should normally be applied', the Court essentially sanctioned Belgacom's failure to comply with a regulatory decision and gave the concept of excessive pricing an interpretation driven by fairness considerations.98
The CEL grants the BCA the power to issue interim orders in cases of 'price or margin problems', 'abnormal evolution in prices' or 'structural market failures' established by a report of the Price Observatory, with the aim of preventing serious, actual and irreparable harm to companies, consumers, or the general economic interest.99 These orders, which can last for a maximum of six months, are adopted pursuant to summary proceedings during which parties are only heard orally and benefit from a mere five-day period for reviewing any submissions and supporting evidence. Orders are then notified to the Minister for Economic Affairs, who shall submit a plan to the government within six months proposing a 'structural modification of the functioning of the market concerned'.100 No such reports or orders have yet been issued. Thus, the scope of the causes of action, as well as the possible reach of these orders, remain largely unclear, and therefore are a source of concern for the business community.101 This peculiar regime finds its origin in a frustration of political actors with the perceived limitations of dominance principles (notably with notions such as 'excessive prices') and of available remedies.102
In 2019, Belgium saw the federal government using its price regulation powers under Article V.12 of the CEL to cap the price of a medicine. On 5 April 2019, consumer organisation Test Achats filed a complaint with the BCA, claiming that pharmaceutical company Leadiant abused its dominant position by charging an excessive price for its drug CDCA. CDCA is indicated in the treatment of CTX, a rare genetic metabolic disorder. The drug had been launched in the Belgian market several years earlier for the treatment of gallstones, however, at a price that was more than 300 times lower. On 4 September 2019, the Belgian Minister of Economy decided to cap the price of the drug for use in the CTX application to one quarter of the Leadiant's initial price. The Minister also requested the BCA to prioritise the investigation into Leadiant's potential abuse of dominance in relation to the sale of CDCA and called upon the European Commission to assess and review the rules governing 'orphan medicines'.