B2B relationships, particularly in the retail sector, are often characterised by an imbalance of economic, and thus negotiating, power between the contracting parties. This economic imbalance allows one party to impose contractual terms that would not be possible under normal market circumstances.
On 21 March 2019, the Belgian parliament approved a package of measures aimed at protecting the “weakest” party in B2B relationships. These new rules, described below, will be introduced in Books IV and VI of the Belgian Code of Economic Law (“CEL”).
1. Abuse of economic dependence
The Act approved on 21 March 2019 introduces into Belgian law the concept of “economic dependence”, which refers to the lack of economic alternatives in the market. A position of economic dependence is defined as a “position of an undertaking in its relation towards one or more other undertakings that is characterised by the absence of reasonable equivalent alternatives, available in a reasonable period of time, under reasonable conditions and costs, allowing this other or these other undertakings to impose performances or conditions that could not be obtained under normal market conditions”. The party in a position of economic dependence does not have to prove that its business partner holds a dominant position in the relevant markets, as would be the case in a competition law dispute.
The Act does not prohibit economic dependence itself, but only the abuse of such position by an undertaking (a client or supplier).
According to the Act, the following practices may be considered as an abuse of economic dependence:
- refusing a sale or purchase;
- imposing unfair prices or other unfair trading conditions;
- limiting production, markets or technical development to the detriment of users;
- applying dissimilar conditions to equivalent transactions;
- making the conclusion of the contract dependent on accepting additional obligations which, by their nature or according to usual trade practices, have no connection with the subject matter of such contracts.
A party facing an abuse of economic dependence by its commercial partner may initiate injunctive relief proceedings before the Belgian courts in order to stop the practices and/or may claim compensation for the damage suffered. Moreover, the Belgian Competition Authority will monitor compliance with these new rules and may impose fines of up to 2% of the turnover of the undertaking concerned as well as penalty payments in the case of non-compliance with the Authority’s decision.
The new rules against abuse of economic dependence will be inserted in Book IV of the CEL and will enter into force 13 months after the publication of the Act in the Belgian Official Gazette (i.e. around May 2020).
2. Abusive clauses
The Act also introduces new rules in Book VI of the CEL prohibiting abusive clauses in B2B contracts. A contractual clause in a B2B contract will be abusive (and prohibited) if, taken alone or in combination with other clauses, it creates a “significant imbalance” between the rights and obligations of the parties.
In addition to this general rule, the Act provides for a black list of clauses which are abusive and prohibited in all circumstances, such as “potestative” clauses (clauses with a condition the realisation of which depends solely on the will of one party); clauses giving a party the unilateral right to interpret a contractual provision; clauses whereby one party must waive any remedy against the other in the event of a dispute; and clauses which irrefutably establish the other party’s knowledge or acceptance of terms that it was not familiar with prior to the conclusion of the contract.
The Act also provides for a grey list of clauses which are presumed to be abusive unless the undertaking can prove that such clauses do not create a significant imbalance between the rights and obligations of the parties (“comply or explain”). This list includes, for example, clauses which give one party the unilateral right to modify the terms of the contract (e.g. the price) without a valid reason; clauses permitting extension or renewal without a reasonable notice period; clauses shifting the economic risks without a proper reason; clauses which ‘inappropriately’ limit or exclude the rights of a party in the event of contractual breach by the other party; and clauses excluding or limiting liability in the event of fraud or gross negligence.
These rules will enter into force 19 months after the Act is published in the Belgian Official Gazette, but only for contracts concluded, renewed or modified after that date. They do not apply to financial services or to public procurement contracts.
3. Unfair market practices
A general prohibition of unfair market practices already existed in Book VI of the CEL. In addition to this general prohibition, the Act of 21 March 2019 now explicitly prohibits “misleading” and “aggressive” commercial practices in a B2B context.
The definition of misleading and aggressive commercial practices is modelled on the existing provisions prohibiting misleading and aggressive practices in B2C relationships. A commercial practice will be regarded as aggressive if, in its factual context, taking account of all its features and circumstances, by harassment, coercion, including the use of physical force, or undue influence, it significantly impairs or is likely to significantly impair the undertaking’s freedom of choice or conduct and could therefore cause it to take a transactional decision that it would not have otherwise taken.
The new rules prohibiting unfair commercial practices will enter into force four months after the publication of the Act in the Belgian Official Gazette (i.e. around August 2020).