Abuse of economic dependence

New tool in the toolbox of the Belgian Competition Authority

The legal concept of abuse of economic dependence aims to target any situation where a company abuses the relative economic dependence of another company (e.g. a specific supplier or customer), where one is an indispensable economic partner for the other. Similar rules already exist in e.g. France and Germany.

The new rules come in addition to the existing prohibition of the abuse of a dominant position (Article IV.2 Belgian Code of Economic Law). They are an important new enforcement tool for the toolkit of the Belgian Competition Authority, allowing it to take action even in cases where the conditions of the abuse of a dominant position are not fulfilled, in particular when a dominant position cannot be established.

It remains to be seen whether the Belgian Competition Authority will make extensive use of this new tool. Nevertheless, the new rules could be an interesting instrument to target abusive practices in e.g. the digital economy in situations of dependency (for example in cases where a party needs to rely on a digital infrastructure from a third party for which it cannot find a suitable alternative).

Three cumulative conditions

There is an infringement of Article IV.2/1 CEL when three cumulative conditions are fulfilled: (i) the existence of a relationship of economic dependence between two companies; (ii) an abuse; and (iii) an effect on competition on the Belgian market or a substantial part of it.

Economic dependence

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”.

Economic dependence is a factual situation that may arise from various factors such as (i) market power, (ii) the significant share of the undertaking in the turnover of dependent undertaking, (iii) the technology or know-how of the undertaking, (iv) brand reputation, product scarcity, the perishable nature of the product or consumer loyalty, (v) access to essential resources or facilities, (vi) the fear of serious economic harm, retaliation or the termination of business relationships, (vii) unusual commercial conditions (not imposed or granted to similar undertakings) and (viii) whether or not the economic dependence stems from the deliberate choice of the dependent undertaking or rather from a constrained choice.

Abusive conduct

An abuse of economic dependency may consist of (i) refusal to deal, (ii) imposing unfair trading conditions, (iii) limitation of production, distribution or technical development, (iv) applying dissimilar conditions to equivalent transactions or (v) tying or bundling.

This is a non-exhaustive list of types of abuse. Other practices may also fall within the scope of the prohibition.

Anticompetitive effect on the Belgian market

The third condition of the new provision requires a (potential) anticompetitive effect on the Belgian market or a substantial part of it. It is difficult to predict how this condition will be applied. It may reintroduce elements of market wide analysis akin to the assessment of abuse of dominance.

Enforcement

The rules can be enforced by the Belgian Competition Authority and by courts. In enforcing the new rules, the Belgian Competition authority can conduct dawn raids and impose fines (up to a maximum of 2% of the consolidated turnover of the infringing undertaking) or preliminary measures.