In its judgment of 16 September 2016, the Court of Cassation ("Hof van Cassatie"/"Cour de cassation") dismissed the appeal against a judgment of the Ghent Court of Appeal which had concluded that the prohibition of selling at a loss was incompatible with the Unfair Commercial Practices Directive.
The facts
A company was accused of selling cameras at a loss. The court referred a question to the Court of Justice for a preliminary ruling on the compatibility of the prohibition against selling at a loss in article 101 §1 of the act of 6 April 2010 on market practices and consumer protection (the "Market Practices Act") with Directive 2005/29/EC concerning unfair business-to-consumer commercial practices (the "Unfair Commercial Practices Directive").
In its order of 7 March 2013 (C-343/12), the Court of Justice ruled that the Unfair Commercial Practices Directive must be interpreted as precluding a national provision which provides for a general prohibition against offering for sale or selling at a loss in so far as that provision pursues objectives relating to consumer protection.
It was for the national court to establish whether the Belgian prohibition of selling at a loss pursues objectives relating to consumer protection.
In its judgment of 16 December 2013, the Ghent Court of Appeal concluded that the prohibition of selling at a loss not only concerned the economic interests of competitors, but also pursued objectives relating to consumer protection. Consequently, the Court of Appeal refused to apply the prohibition of selling at a loss due to its incompatibility with the Unfair Commercial Practices Directive.
The unsuccessful party lodged an appeal in cassation against that decision.
The decision of the Court of Cassation
According to the Court of Cassation, it follows from consistent case law of the Court of Justice that, whenever a national provision not only pursues objectives relating to the protection of economic interests of competitors, but also pursues objectives relating to the protection of consumer interests against unfair commercial practices that harm the interests of consumers – even if only indirectly – this provision falls within the scope of the Unfair Commercial Practices Directive. Only national legislation concerning unfair commercial practices which harm "only" competitors' economic interests, or which relate to a transaction between traders, is excluded from the scope of the directive.
According to the Court, it should be concluded from the legislative history of article 101 §1 Market Practices Act that, with the prohibition, the legislator not only formally set a double goal, but also actually and with full reasons pursued objectives relating not only to the protection of the economic interests of competitors but also to consumer protection. Reference was made to:
- aggressive pricing practices, whereby larger companies use loss-making prices to attract customers to their shops, which allows them to also sell other goods with a higher profit margin; and
- the disappearance of specialised shops and the fact that it is in the interest of the consumer that sufficient alternative distribution channels remain available, especially the specialised shops, where the focus lies on better service.
According to the Court of Cassation, it follows that the practice of selling at a loss harms the interests of the consumer and that the prohibition can contribute to the consumer protection sought by the legislator. Consequently, the Court concluded that the Ghent Court of Appeal had correctly decided that the prohibition in article 101 §1 Market Practices Act falls within the scope of the Unfair Commercial Practices Directive, and therefore cannot be applied.
What is the future of the prohibition of selling at a loss?
In the meantime, the Market Practices Act has been repealed and replaced by Book VI of the Economic Law Code (hereinafter "ELC"). In the introduction to Book VI ELC, the Belgian legislator, bearing in mind the case law of the Court of Justice, added the words "in order to ensure fair market practices between traders” to the prohibition of selling at a loss in article VI.116 §1 ELC. Also, in the explanatory memorandum, the legislator explicitly noted that "this legislation only aims at guaranteeing the existence of healthy and fair competition between traders".
However, the question arises whether these interventions suffice to exclude the prohibition of selling at a loss from the scope of the Unfair Commercial Practices Directive.
Author:
Lisa Snauwaert
