Abuse of economic dependence: lessons drawn from the first judgments
On 22 August 2020, the ban on abuse of economic dependence was implemented in Belgium (Article IV.2/1 of the Code of Economic Law). Now that almost a year has passed and the first judgments have been rendered, we assess what first lessons can be drawn from these judgments. The rulings show that the ban is regularly relied upon in court and has lowered the hurdle for plaintiffs to make their case.
Economic dependence is defined as "a subordinate position of an undertaking in relation to one or more other undertakings, characterised by the absence of reasonably equivalent alternatives available within a reasonable period of time, on reasonable terms and at reasonable costs, allowing it or each of them to impose services or conditions that could not be obtained under normal market circumstances”. The first judgments applying the principle of abuse of economic dependence are now available and are discussed below.
In a first judgment, the Commercial Court of Brussels held that the refusal of a bank to allow a company to open an account and carry out incoming and outgoing transactions through that account constitutes an abuse of economic dependence when the company in question has no alternative bank to turn to. The case concerned an SME active in the Belgian diamond sector for which for specific reasons no other bank offered such service.
In a second application, the commercial Court of Antwerp held that the refusal of a manufacturer of a leading trademark of hunting weapons to supply these hunting weapons and spare parts to a small independent retailer constitutes an abuse of economic dependence when the retailer has no viable alternatives. The court also took account of the following elements: the significant share of that specific product in the retailer's turnover of the products (90%); the quality and brand recognition of the products; and, the brand loyalty of customers implying that no other spare parts could be used.
In another case, the Commercial Court of Ghent ruled that the unilateral and unannounced refusal to supply a retailer with clothing for the winter collection without objective reason constitutes an abuse of economic dependence when the retailer is entirely dependent on the supplier for its supply and, has, due to the late refusal, no more possibility to purchase its winter collection elsewhere.
Finally, the Commercial Court of Brussels examined whether a manufacturer's refusal to directly supply sanitary products to a retailer constitutes an abuse of economic dependence. The court ruled that there was no abuse of economic dependence, as the retailer had not sufficiently demonstrated that it met the distribution conditions for wholesalers of the supplier, and could purchase the products from other sources (in particular several wholesaler), as it did for years.
The first cases illustrate the use of the new Act in situations where there is no dominant position and thus traditional competition law rules are of no assistance. However, it seems that in nearly all these cases, the existing rules on unfair competition may possibly have led to a similar result, although the new Act clearly made it easier for the plaintiff.
This article was published in the Competition Newsletter of May 2021. Other article in this newsletter:
- Upward referral of killer acquisitions: enlightened or one-stop shop flop?
