Abuse of economic dependence and unfair contract terms in B2B relations: ready for 2020?
Belgium recently adopted a new act prohibiting (1) the abuse of economic dependence, (2) the use of unfair contract terms and (3) unfair market practices in B2B relationships.
Non-dominant companies are well-advised to assess their position of economic dependency towards one another to ensure compliance with the new rules and seek possible justifications for certain practices. In addition, and independent of any position of dominance or economic dependence, contracts will have to be revised. The prohibitions are set to enter into force in 2020 (and those of unfair commercial practices already in September 2019), so companies should start making their evaluations now; as the saying goes, well-begun is half-done.
The Belgian act introduces the following three prohibitions:
1. A prohibition on the abuse of a situation of economic dependence, entering into force 1 June 2020.
The prohibition on abuse of economic dependence is inspired by similar provisions in other member states, such as France and Germany. It concerns situations where one company is in a specific weak position towards its counterpart(s), even where the other company is not in a dominant position. Economic dependence is defined as the position of submission of one company to another, characterised by (i) the absence of a reasonable equivalent alternative that is available within a reasonable time and under reasonable conditions and costs (ii) that allows this company to impose conditions that cannot be obtained under normal market conditions. Notably, the position of economic dependence is not prohibited; only the abuse of it. The act lists examples of such abuses which are entirely inspired by the list of prohibited abuses of a dominant position contained in article 102 TFEU and article IV.1 of Belgium's Code of economic law.
The abuse of economic dependence is qualified as a new category of restrictive practice, alongside the existing prohibitions on cartels and abuse of dominant position. As a result, the Belgian competition authorities are fully competent to investigate such practices and impose sanctions, including fines up to a maximum of 2% of the worldwide turnover of the company concerned. Ordinary judges too will remain competent to sanction such practices and to impose damages.
2. A prohibition on unfair terms in B2B contracts: a black list, a grey list, and a general prohibition on apparent imbalance in the contract terms, entering into force on 1 December 2020 for future contracts.
Regarding the unfair terms, the act specifies four clauses (in the so-called black list) which are always prohibited in B2B contracts, as well as eight clauses (the so-called grey list) which are only allowed in contracts if they can be justified. The grey list includes clauses on limitation of liability, unilateral modifications of prices and characteristics of the contract, limitation of damages, among others. These rules also apply outside any situation of economic dependence. On top, the act in general prohibits clauses that create a non-justifiable imbalance. The new rules will significantly impact existing contract terms and will oblige companies to review clauses in future contracts.
3. A prohibition on misleading and aggressive market practices in B2B relationships, entering into force on 1 September 2019.
The rules on unfair practices prohibit misleading and aggressive practices in a B2B context. The current prohibition on unfair market practices in B2B is thereby further clarified and extended.
This article was published in the Competition Law Newsletter of July 2019. Other articles in this newsletter:
