The Belgian Parliament introduced the prohibition on abuse of economic dependence in an Act of March 2019 to protect undertakings that are economically dependent on their suppliers or buyers.[1] Belgium has thus followed the example of other EU Member States by making use of the option offered by Article 3 (2) TFEU to prohibit and penalise unilateral conduct by companies even in the absence of a dominant position. Following the Royal Decree amending the Code of Economic Law regarding abuses of economic dependence published on 12 August 2020, this prohibition on abuses of economic dependence finally enters into force on 22 August 2020.
The prohibition in a nutshell
The new prohibition is subject to three cumulative conditions: (1) the existence of a position of economic dependence, (2) an abuse of that position and (3) that abuse may result in competition on the Belgian market or a substantial part of it being affected.
Only an undertaking in a position of economic dependence can bring a claim.
The new Article I.6, 4° of the Belgian Code of Economic Law (“CEL”) defines economic dependence as “an undertaking’s position of submissiveness towards one or more other undertakings that is characterised by the absence of a reasonably equivalent alternative, available within a reasonable period of time, on reasonable conditions and at reasonable costs, allowing this or each of these undertakings to impose obligations or conditions that could not be obtained under normal market circumstances.”
The Act does not contain further indications on how such a position of economic dependence should be assessed. For undertakings and practitioners, it therefore remains to be seen which factors will be used in the case law to find an economic dependence situation. The preparatory works of the Act of 4 April 2019 list the following elements that might be relevant in this regard: the relative market power of an undertaking, the share of the other undertaking in one’s own turnover, the technology or know-how held by an undertaking, the strong reputation of a brand or the scarcity of a product, the purchasing loyalty of consumers, and the access to essential resources or infrastructure by the economically-dependent undertaking.
The finding of a position of economic dependence will, however, just like the finding of a dominant position, be determined on a case-by-case basis.
An abuse of the situation of economic dependence must be proved.
The non-exhaustive list of abusive practices included in the new law contains practices similar to those included in Article 102 TFEU (and its Belgian equivalent of Article IV.2 CEL):
- refusing a sale, a purchase or other transaction terms;
- directly or indirectly imposing unfair purchase or sales prices or other unfair contract terms;
- limiting production, markets or technical development to the detriment of users;
- applying dissimilar conditions to equivalent obligations towards economic partners, thereby putting them at a disadvantage in competition;
- making the conclusion of contracts dependent on the acceptance by the economic partners of additional obligations that, by their nature or according to commercial usage, have no connection with the subject matter of such contracts.
This would allow the Belgian Competition Authority (BCA) and the Belgian courts to rely on existing case law on abuse of dominance to find an abuse. It remains to be seen whether the interpretation of this new provision will indeed follow the existing case law on the abuse of a dominant position.
Only abuses that have an effect on competition in the Belgian market are covered.
It is important to note that the new Act does not require an actual effect on competition, but provides that a potential effect on competition is sufficient.
Fines of up to 2% of annual turnover
The BCA can use its existing investigation tools under competition law to investigate, prosecute and penalise abuses of economic dependence. The fines provided for this new type of restrictive practice differ from the fines for the existing antitrust law infringements. While for restrictive agreements and abuses of dominance a fine can be imposed of up to 10% of the undertaking’s previous year’s worldwide turnover, the maximum fine for an abuse of economic dependence is capped at 2% of the undertaking's previous year’s Belgian turnover (Belgian and export from Belgium).
Comment
As the prohibition on abuse of economic dependence is new in Belgian competition law, it remains to be seen how this provision will be applied in practice and enforced by the BCA and Belgian courts. The BCA has already indicated that it needs more resources if it is to investigate additional infringements of the abuse of economic dependence without reducing its activities regarding the existing competition law provisions.
However, although the prohibition of abuse of economic dependence is included in Book IV of the CEL, it is not only within the BCA’s competence. A party prejudiced by an abuse of economic dependence by their trading partner can therefore choose to file a complaint (possibly accompanied with a request for interim measures) with the BCA and/or to follow the path of private enforcement by bringing an action before the courts, for example through cease and desist procedures or by claiming damages.
The future will have to show how, and how intensely, the new prohibition will be publicly and privately enforced. Given its limited resources the BCA will probably focus its enforcement activities on cases that have a broader impact on competition in the Belgian market or a particularly strong impact in a specific industry.
[1] Act of 4 April 2019 amending the Code of Economic Law with regard to abuse of economic dependence, unfair terms and unfair market practices between companies, Belgian Official Gazette 24 May 2019. The Act initially provided that the prohibition of abuses of economic dependence would enter into force on 1 June 2020. However, a subsequent Act postponed this entry into force and mandated the King to adopt a Royal Decree determining the effective entry into force of the new prohibition. The Royal Decree of 31 July 2020 modifying Books I and IV of the Code of Economic Law with regard to abuses of economic dependence, Belgian Official Gazette of 12 August 2020, determined the date of entry into force on 22 August 2020.
