New legislation extending consumer protection measures to B2B relationships
Today a new legislation was published adding three sets of new rules for B2B relationships to the Code of Economic Law: unfair contract terms, abuse of economic dependency and unfair market practices between undertakings. The ratio legis underlying this legislation is that small and medium-sized companies often do not have the necessary means to act against abuses of large companies. These new rules will have a considerable impact on contracting and business practices.
Unfair B2B contract terms
The new law introduces rules prohibiting and invalidating unfair contract terms in B2B relationships, similar to those applicable to B2C relationships. Applying the same test as for B2C contracts, an unfair term in a B2B contract is the one that creates a significant imbalance between the rights and obligations of the parties. If a contract contains such unfair term, the term will be deemed null and void. The contract itself will, however, remain binding on the parties if it can continue to exist without the unfair term.
This general prohibition is accompanied by two lists of specific contract terms: a black list of unfair terms which are prohibited without further assessment; and a grey list of terms which are presumed to be unfair unless there is evidence to the contrary.
The black list includes terms that aim to:
- create an irrevocable obligation for the other party while the performance of the obligations of the company is subject to a condition of which the achievement depends solely on the will of the company;
- confer on a party the right to unilaterally interpret a contractual provision;
- in the event of a dispute, have the other party renounce any means of recourse against the company; or
- irrefutably establish the other party’s knowledge or acceptance of terms of which that party did not have actual knowledge prior to the conclusion of the contract.
The grey list includes terms that aim to:
- give the company the right to unilaterally modify, without due cause, the price, characteristics or terms of the contract;
- tacitly extend or renew an agreement of definite term without providing a reasonable notice period;
- place, without compensation, the economic risk on one party, where that risk is normally borne by the other party or by another party to the contract;
- inappropriately exclude or limit the legal rights of a party in the event of total or partial non-performance or defective performance of the other party’s contractual obligations;
- without prejudice to Article 1184 of the Civil Code, bind the parties without providing a reasonable notice period;
- discharge the company from its liability for its wilful misconduct, its gross negligence or that of its employees, or, except in cases of force majeure, for the non-performance of essential obligations that are the subject matter of the contract;
- limit the means of proof the other party may rely upon; or
- in the event of non-performance or delay in the performance of the other party’s obligations, fix damages which are manifestly disproportionate to the damage that may be suffered by the company.
By royal decree both the black and grey list can be supplemented for specific sectors or for specific categories of products.
If a company claims to be harmed by a grey list term, it is up to the co-contracting party to provide evidence to the contrary, i.e. that in the specific case the term does not create a significant imbalance between the rights and obligations of the parties. The abusive nature of a contract term will be assessed taking into account the following elements: the specific nature of the goods or services, all circumstances surrounding the conclusion of the contract, the overall economic balance of the contract, the applicable commercial practices, as well as all other terms of the contract or of another contract on which it depends.
The new rules on unfair B2B contract terms do not apply to financial services, nor to public procurement contracts, unless provided otherwise by royal decree.
These new rules will enter into force on 1 December 2020, but only for contracts concluded, renewed or modified after that date of entry into force.
The abuse of economic dependency
Furthermore, the new law introduces an additional category of restrictive competition practices, besides restrictive agreements and the abuse of a dominant position. Companies will also be prohibited from abusing a position of economic dependency of another company, by which competition on the relevant Belgian market or a substantial part thereof can be affected.
A ‘position of economic dependency’ is defined in the law as “a position of subjugation of an undertaking towards one or more other undertakings characterised by the absence of a reasonable equivalent alternative, available within a reasonable period of time, at reasonable terms and expense, allowing one or all of these undertakings to impose performances or conditions that could not be obtained under normal market circumstances”.
The law provides that the economic dependency of a company can be abused in the following situations:
- the refusal of a sale, a purchase or other transaction terms;
- the direct or indirect imposition of unfair purchase or sales prices or other unfair contractual terms;
- the restriction of production, sales or technical development to the detriment of users;
- the application of dissimilar conditions to equivalent obligations towards economic partners, thereby putting them at a disadvantage in competition; or
- the fact that the conclusion of contracts is made dependent on the acceptance by the economic partners of additional obligations which, by their nature or according to commercial usage, have no connection with the subject matter of such contracts.
The Belgian Competition Authority will monitor compliance with these new rules, either acting on a complaint or on its own initiative. An abuse of a position of economic dependency can be sanctioned with a fine of up to 2% of the turnover of the company concerned. The Authority may also impose penalty payments (“dwangsommen” / “astreintes”) of up to 2% of the average daily turnover for each day the failure continues.
Besides that, an abuse of a position of economic dependency may also give rise to claims for damages, a cessation order or claims for the annulment of the entire contract or part of it.
The rules on abuse of economic dependency will enter into force on 1 June 2020.
Unfair B2B practices
Finally, the new law introduces specific rules for misleading and aggressive market practices between businesses, similar to the rules existing for market practices towards consumers. The Code of Economic Law now not only provides consumers but also companies with effective tools to combat unfair misleading or aggressive commercial practices.
The rules on unfair B2B practices will enter into force on 1 September 2019.
ValérieVerstraetenAssociate Attorney at Law
Valérie Verstraeten is a member of the Loyens & Loeff Litigation and Risk Management Practice Group in Belgium and of the firmwide Privacy & Data Protection Team. She is an associate in our Brussels office.T: +32 2 743 43 65 M: +32 4 72 68 56 02 E: email@example.com
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