On 21 March, Belgium adopted amendments to the Code on Economic Law, on the abuse of a significant dominant position in the Belgian market.
The aim of this new instrument is to protect companies (e.g. SME's with less negotiating power), against companies with a significant dominant position (e.g. suppliers, clients, etc.). Such a significant dominant position in a market may be evidenced by the ability of a company to impose terms and/or performances on other market players that exceed normal market practice (for examples, see below).
The issue had already been addressed in Book IV of the Belgian Code on Economic Law on competition law, as well as in similar codes in other European countries. The Belgian House of Representatives has now, by amending the Belgian Code on Economic Law:
(i) Clarified and enlarged the definition of abuse of a dominant position in the Belgian market;
(ii) Improved the protection of predominantly small and medium enterprises against enterprises with a significant dominant position; and
(iii) Enlarged the definition of unfair market practices.
Please find below a brief outline of the new general and specific protective measures.
(i) Definition of a dominant position
The amended legislation prohibits enterprises from exploiting and abusing their dominant market position. A company is dominant if it is able to impose terms and/or performances exceeding normal market practice on other market players because of the absence of reasonable alternatives for such other market players. The latter are in that case considered as "economically dependent" on the dominant market player. The creation of this new criterion of economic dependency makes it easier to find an abuse of a dominant market position, in comparison to the previous law. The legislator has introduced a non-exhaustive list of potential abusive measures:
a. A refusal of sales, purchases, or other conditions of a transaction;
b. Directly or indirectly imposing unequitable prices or conditions;
c. Restricting production, sales or technical development at the expense of consumers;
d. Imposing different conditions on some market players in comparison with other market players for similar performances, affecting each player's ability to compete in the relevant market; or
e. Refusing to enter into agreements unless the business partner agrees to supplementary performances, which, by nature or within the ordinary course of business, do not relate to the object of the main agreement.
(ii) Prohibited provisions in B2B contract drafting
a. General prohibition on unfair contract clauses
The amended Belgian Code on Economic Law prohibits the use of clauses in B2B agreements creating an apparent imbalance between the rights and obligations of the parties in such agreements (so-called "unfair clauses"). To establish whether a clause is unfair, courts may take into account all circumstances in which the agreement has been concluded (including commercial considerations (quid pro quo), relevant market practices, other clauses related to the transaction, etc.) and the clarity and comprehensibility of the clause.
b. Blacklist and grey list of abusive clauses
Certain clauses will always be regarded as abusive and are blacklisted. Examples are clauses providing the right for one enterprise to unilaterally interpret contract clauses, and clauses imposing that the counterparty waive all rights of recourse in case of a dispute.
Also a grey list has been created, containing clauses that are presumed to be abusive, unless proven otherwise, e.g. a clause allowing the dominant company to unilaterally raise or reduce the price.
(iii) Review of unfair market practices
The prohibition of unfair market practices has also been redefined, amending article VI.104 of the Belgian Code on Economic Law. Those practices include deceptive practices and misleading omissions, as well as aggressive market practices, and other types of infractions that lead to the breach of any provision of this new law.
Penalties in cases of violation of the law
The Belgian Competition Authority (BCA) has the power to fine companies up to 2% of their annual Belgian turnover if they are found to have breached the new provisions on relationships of economic dependence. In addition, the BCA may impose a daily fine of up to 2% of the company's average daily Belgian turnover if it fails to comply with its decision. Although the degree of such fines is not negligible for companies, these are sensibly lower than fines the BCA may impose for general breaches of competition rules. More precisely, for general breaches of competition rules, the BCA has the power to fine companies a maximum cap of 10% of their annual Belgian turnover, as well as a daily fine of 5% of the average daily Belgian turnover for non-compliance.
It is worthy to note that additional proposals of legislation in Belgium are looking to significantly modify the basis for calculation methods of fines from Belgian turnover to consolidated worldwide turnover for companies found to be in breach of competition rules. If adopted, the new fine ceilings will only apply for breaches taking place after the entry into force of the proposed law."
Entry into force
The bulk of the new protective measures will enter into force four months after its publication in the Belgian Gazette, which will presumably take place in May. The most important articles regarding the abuse of a dominant position (i.e. the black and grey lists) will only enter into force on the 19th month after the publication of the law in the Belgian Gazette. The law will only have effect on contracts concluded, modified or amended after its entry into force.
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