Belgium Prohibits Abuse of Economic Dependence in B2B Relations
By 1 December 2020, a new Belgian prohibition on the abuse of a position of economic dependence in business-to-business (B2B) relations will enter into force. This development, which was first scheduled for 1 June 2020 but postponed, is of note because it will restrict contractual freedom and increase the risk of legal challenges for all companies by, in essence, extending competition rules on abuse of an “absolute” market dominance to abuse of a “relative” dominance vis-à-vis one specific market operator. We therefore summarize the main features and practical significance of the prohibition below.
1. Main Features
In general, Article 4 of the Law of 4 April 2019 amending the Belgian Code of Economic Law (“CEL”) (“the Law of 4 April 2019”) states in relevant part that “it is prohibited for one or more enterprises to abuse a position of economic dependence in which one or more enterprises find themselves, which could affect the competition in the relevant Belgian market or in a substantial part thereof.” As such, companies will be deemed to have infringed the new prohibition if there is proof of each of the following conditions:
1. A position of economic dependence of one or more enterprises;
2. Abuse of such position by one or more other enterprises; and
3. Such abuse being capable of affecting competition on the Belgian market or on a substantial part of that market.
1. a. Economic Dependence
As defined by Article 2 of the Law of 4 April 2019, economic dependence entails “a position of subjection of an enterprise to one or more other enterprises characterized by the absence of a reasonable equivalent alternative, available within a reasonable time, and under reasonable conditions and costs, allowing this or each of these enterprises to impose performances or conditions that cannot be obtained under normal market conditions.” Key criteria for a finding of economic dependence, thus, include that:
1. An enterprise is subordinated to one or more other enterprises;
2. The enterprise has no reasonable alternative to the subordination; and
3. The subordination allows the other enterprise(s) to impose acts or conditions that deviate from normal market practice.
Although it remains to be seen how these provisions will be applied in practice, examples of factors that could be taken into account to determine the existence of economic dependence include companies’ (i) market share, (ii) brand reputation, (iii) share in the turnover or control over technology and know-how of another company, (iv) possibility to change trading partners under the same conditions, and (v) access to resources or facilities.
1. b. Abuse
In terms of practices that would constitute “abuse,” Article 4 of the Law of 4 April 2019 sets out the following non-exhaustive list, which resembles the lists for abuse of absolute market dominance under EU and national law:
1. Refusing a sale, purchase or other transactional conditions;
2. Directly or indirectly imposing unfair purchase or selling prices or other unfair contractual conditions;
3. Limiting production, markets or technical development to the prejudice of consumers;
4. Discrimination by applying to economic partners unequal conditions for equivalent services that place such partners at a competitive disadvantage; and
5. Tying the conclusion of contracts to the acceptance by the economic partners of supplementary obligations that by their nature or according to commercial usage have no connection with the subject of the contracts.
1. c. Enforcement
As the abuse of a position of economic dependence is deemed to be anticompetitive behavior, the Belgian Competition Authority (“BCA”) will be responsible for investigating and sanctioning any infringements of the new prohibition. In this regard, Article 9 of the Law of 4 April 2019 provides that Belgium’s Competition College will be able to impose the following on companies and company associations found to have committed such abuse:
- Fines of up to 2% of the total domestic and export turnover of such companies or associations in the accounting year preceding the Competition College’s decision to impose a fine; and
- In case of non-compliance with the Competition College’s decision, penalty payments of up to 2% of the average daily domestic and export turnover of such companies or associations for each day of delay in ceasing the abusive practices following the Competition College’s decision.
In addition to this enforcement by the BCA, any abuse of a position of economic dependence may furthermore be challenged by affected companies before the Belgian courts through private legal claims for the annulment of all or part of a contract, damages or injunctive relief.
2. Practical Significance
As a general matter, the new prohibition will extend the existing EU and Belgian competition rules on abuse of an “absolute” dominance in relation to all other market operators to situations where there is an abuse of a “relative” dominance vis-à-vis one specific market operator. The prohibition will hereby apply to all companies, although it could have a more pronounced impact on vertical B2B relations between small and large market operators, where unbalanced contracts are more likely to occur. In addition, the prohibition is expected to be of specific relevance for industries characterized by a strong economic dependence on suppliers or buyers such as, for example, internet platforms.
In terms of practice, the prohibition will restrict contractual freedom as companies will be subject to greater scrutiny and an increased risk of legal challenges. Companies are therefore strongly recommended to review, and where necessary update, the standard contractual clauses, general terms and conditions, and practices that they apply to B2B relationships in order to ensure compliance with the new prohibition. Furthermore, companies are similarly well-advised to regularly monitor their position in the market vis-à-vis that of other market operators with whom they maintain B2B relations.