Adoption of the "Law amending the Economic Law Code with regard to the abuse of a dominant position"
The law amending the Belgian Code of Economic Law with regard to the abuse of economic dependence, abusive clauses and unfair market practices between companies was passed on March 21, 2019 (hereafter the "Law").
The Law consists of three parts:
- The prohibition of abuse of economic dependence between companies (Book IV of the Code of Economic Law);
- The prohibition of abusive clauses (Book VI of the Code of Economic Law) and;
- The prohibition of unfair, misleading or aggressive practices between companies (Book VI of the Code of Economic Law).
I. Abusive of economic dependence
The law introduces a new area of enforcement of Belgian competition law.
Any practice constituting an abuse of economic dependence will be illegal, provided that this practice is likely to affect competition on the Belgian market or a substantial part of it.
The concept of economic dependence is defined as "a position of subjection of a company with respect to one or more other companies characterized by the absence of a reasonable equivalent alternative, which is available within a reasonable period of time, and under reasonable conditions and costs, which allow this company/these companies to impose services or conditions that could not be obtained under normal market conditions".
The Law provides examples of what could be considered as abusive behaviors:
- To refuse a sale, a purchase, or other conditions of a transaction;
- To impose, directly or indirectly, unfair sale or purchase prices or other unfair contractual conditions;
- To limit production, sales or technical development to the detriment of consumers;
- To apply different conditions for equivalent services to different economic partners, thereby placing them at a competitive disadvantage;
- The fact that entering into contracts is conditional on the acceptance by the economic partner to perform additional services, which, by their nature or according to the commercial practices have no connection with the subject of these agreements.
As the abuse of economic dependence is meant to be inserted in Book IV of the Code of Economic Law, the Belgian Competition Authorities will be able to intervene and investigate, on a complaint or on its own initiative.
Fines up to 2% of annual revenue may be imposed, as well as penalty payments in case the prohibition is not respected by the company.
These provisions will come into force on the thirteenth month following the publication of the Law in the Belgian Official Gazette, meaning June 1 2020 (the law was published on May 24, 2019).
They apply to all companies, i.e., essentially any individual acting as a self-employed person as well as any legal person as defined in article I.1,1° of the Code of Economic Law.
As regards the scope of application of the prohibition of the abuse of economic dependence, the Law provides that, in order for the practice to be prohibited, the abuse of economic dependence must have an anti-competitive effect on the Belgian market or a substantial part of it.
II. Abusive clauses between companies
Inspired by what already exists for consumers, the Law prohibits the inclusion of abusive clauses in contracts concluded between companies.
A provision is considered abusive when, on its own or combined with others, it causes a significant imbalance in the parties' rights and obligations arising under the contract.
The unfairness of a contract term is assessed taking into account the nature of the products for which the contract was concluded and by referring, at the time of the conclusion of the contract, to all the circumstances attending the conclusions and to all the other terms of the contract or of another contract on which the former is dependent.
Article 17 of the Law contains a list of clauses which will always be considered as abusive:
- To include an irrevocable commitment for one party, while the performance of the services depends on the discretion of the another party to the contract;
- To give a party the exclusive right to unilaterally interpret any clause of the contract;
- In case of dispute, to cause the other party to waive any means of remedy against them;
- To stipulate, for contract clauses of which the other party could not have knowledge before entering into the agreement, the knowledge and the acceptance of the other party in an irrevocable manner.
Article 18 contains a list of clauses which are presumed to be abusive, unless the contrary is proven:
- The right for a company to unilaterally change the price, characteristics or conditions of the contract without a valid reason;
- To automatically extend a contract of limited duration, without specification of a reasonable time while the party may give its notice of termination;
- To place the economic risk on the other party, while normally another party would bear this risk;
- To improperly exclude or limit the legal right of the other party towards the company or another party in the event of full or partial non-performance or defective performance of one of the obligations under the contract;
- To bind the other party without a clear indication of a reasonable notice period;
- To release a party of its liability for intentional and gross negligence, or in case of non-performance of an obligation which constitutes one of the principal performances of the contract;
- To restrict the means of evidence admitted;
- To determine the amount of damages able to be claimed in cases of failure or delay in performance of the obligations which go clearly go beyond the potential harm that could result from the failure or delay.
Those provisions are applicable to all companies, except to the contracts related to financial services and public procurements and will come into force on the nineteenth month following the publication of the Law in the Belgian Official Gazette, meaning on December 1 2020, for all agreements entered into, renewed or amended after this date.
Therefore, those provisions do not apply to the current contracts on that date.
III. Unfair, misleading or aggressive practices
Article 29 of the Law states that a market practice is considered to be misleading if it is accompanied with incorrect information and therefore based on untruths or, even if the information is factually correct, a company can (also by the general presentation of a matter) be deceiving or could be deceiving in respect of one or more of the following elements, and lead or may lead the other party to make a decision about a transaction that it otherwise would not have made:
- The existence or nature of the product;
- The main characteristics of the product;
- The scope of the obligations of the company, the reasons for the market practice and the nature of the sales process, any statement or symbol which may lead to the belief that the company or the product receives sponsorship, or direct or indirect support;
- The price or the manner in which the price is calculated, or the existence of a specific price advantage;
- The need for a service, part, replacement or repair;
- The capacity, characteristics and the rights of the company or its intermediary;
- The rights of the other company, or the possible risks it may be undertaking;
- Any marketing activities of a product creating confusion with another product, label, commercial name or other distinctive sign of a competitor;
- Failure by a company to respect commitments contained in a sectoral code of conduct to which it committed to comply;
- To share harmful comments towards other companies, its goods, its services, its activities.
Article 30 of the Law states that a market practice will be considered to be a misleading omission if the market practice omits essential information which the other party needs to make an informed decision about a transaction and leads, or may lead, to the other party making a decision about a transaction that it otherwise would not have made (taking into account its factual context, all its characteristics and circumstances and the limitations of the communication medium).
A market practice will also be considered to be a misleading omission if a company conceals essential information in an unclear, incomprehensible, ambiguous or late manner or does not clearly state its intention which leads or may lead to the other party making a decision about a transaction that it otherwise would not have made.
Article 33 of the Law states that a market practice is considered to be aggressive if the market practice limits or could limit the freedom of choice or the freedom of action of a company through harassment, coercion, including the use of physical violence, undue influence and thereby leading or may lead to the other party making a decision about a transaction that it otherwise would not have made (taking into account its factual context and all its characteristics and circumstances).
Undue influence is defined as the exploitation by a company with a dominant position of another company by exerting pressure, even without the use or threat of physical violence, in a way that reduces the ability of the company to take an informed decision.
Article 34 of the Law contains a few factors to take into consideration in order to determine whether a market practice uses harassment, coercion, including the use of physical violence, undue influence:
- The time, place, nature and persistence of the market practice;
- The use of threatening or abusive language or behaviour;
- The deliberate exploitation of certain setbacks or circumstances which are so serious that they can seriously limit the judgment of the company, with a view to influence its decision regarding the product;
- Company-imposed, cost-carrying or excessive non-contractual barriers with regard to rights that the other company wishes to exercise under the contract, including the right to terminate the contract or to choose another product or another company;
- The threat of measures which cannot be taken in a legal manner;
- The contractual position towards another company.
Those provisions are applicable to all companies and will come into force on the fourth month following the publication in the Belgian Official Gazette, meaning on September 1, 2019.