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21 August 2020 / news

Rules banning abuse of economic dependence enter into force

The Belgian rules on abuse of economic dependence enter into force on 22 August 2020, following the official publication of the Royal Decree of 31 July 2020 in the Belgian State Gazette, 12 August 2020.

Rules banning abuse of economic dependence enter into force

The concept of abuse of economic dependence (Article IV.2/1 Belgian Code of Economic Law) is a novelty in Belgian law aimed to prevent that a company abuses the relative economic dependence of another company (e.g. a specific supplier or customer).

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).

There is an infringement of Article IV.2/1 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 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.

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.

With the introduction of rules on the abuse of economic dependency Belgium is emulating Germany and France which already have similar rules in place. Practice will show how the new rules will be applied in Belgium. In France, for example, there are relatively few examples of effective enforcement of this provision.

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