TILIA LAW: Abuse of economic dependence 03/02/2020

BELGIUM INTRODUCES A NEW COMPETITION LAW INFRINGEMENT

Abuse of economic dependence

Belgian competition law in a nutshell

The substantive provisions of Belgian competition law are based on EU competition law. Are prohibited:

  • anticompetitive agreements and assimilated practices (“all agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition on the Belgian market or a substantial thereof”); and
  • abuses of a dominant position (“any abuse by one or more undertakings of a dominant position on the Belgian market or a substantial part thereof”).

Is there an enforcement gap?

As of June 1, 2020, Belgian competition law introduces a new type of infringement, the so-called abuse of economic dependence. This new provision is intended to fill a perceived enforcement gap. Purely unilateral conduct is not covered by the prohibition of anti-competitive agreements, and if such conduct emanates from an undertaking that is not in a dominant position on the relevant market, it will not be covered either by the prohibition of abuses of a dominant position. Therefore, up to now, such conduct could not be challenged under Belgian competition law, even if it had clear anti-competitive effects.

Officials at the Belgian Federal Public Service for the Economy claim to be confronted frequently with such type of behavior.

Filling the (perceived) gap: abuse of economic dependence

As of June 1, 2020 it will be “prohibited for one or more undertakings to abuse a position of economic dependence of one or more other undertakings, where competition may be affected on a relevant market in Belgium or a substantial part thereof”. For the new prohibition to apply, three conditions must be met: (i) one or more undertakings are in a position of economic dependence, (ii) one or more undertakings abuse that position and (iii) as a result of such abuse, competition may be affected on a relevant market in Belgium or a substantial part thereof.

The new rules on abuses of economic dependence are not meant to replace the existing rules on abuses of a dominant position, but will apply in parallel.

What is a position of economic dependence?

A position of economic dependence is characterized by the absence of a reasonably equivalent alternative (within a reasonable timeframe, at reasonable terms and conditions and at reasonable costs). In other words, the economically dependent undertaking is economically, legally, factually  or contractually obliged to have recourse to the products or services offered by the undertaking on which it depends, which allows the latter to impose terms and conditions that could not be obtained under normal market conditions.

Legislative history lists certain criteria that, individually or collectively, may be indicative of a position of economic dependence:

  • the relative market power of both undertakings;
  • the share represented by the dominant undertaking in the turnover of the dependent undertaking;
  • technology or know-how available to the dominant undertaking;
  • a high level of brand awareness or consumer loyalty;
  • the scarcity or the perishable nature of the product;
  • access to essential resources or infrastructure;
  • fear of serious economic harm, retaliation or contract termination;
  • granting special conditions, such as discounts, on a regular basis that are not granted to other undertakings in similar positions;
  • is the economic dependence a result of a deliberate and free choice of the economically dependent undertaking or was it coerced?

The new provision aims to capture situations where there exists a substantial degree of economic power in relation to one or more specific undertakings, but not necessarily in relation to the relevant market as a whole (the latter situation would amount to a ”classic” dominant position).

What conduct amounts to an abuse of economic dependence?

The wording of the new offence is almost identical to that used to define abuses of a dominant position. Examples of abuses of economic dependence include:

  • directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
  • limiting production, markets or technical development to the prejudice of consumers;
  • applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
  • making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

Given the high degree of similarity between the wording of the two provisions (abuse of a dominant position versus abuse of economic dependence), it is safe to assume that existing case law on abuses of a dominant position may serve as a starting point for the analysis of alleged abuses of economic dependence.

The new provision adds one particular example of abusive conduct, namely the refusal to sell, purchase or enter into other types of transactions. However, under certain conditions, such conduct (if engaged in by an undertaking in a dominant position) would also amount to an abuse of a dominant position (even if such conduct is not expressly mentioned in the text of the law).

As is the case for abuses of a dominant position, the types of conduct listed in the law are mere examples of abusive conduct. The scope of the provision is much wider and covers any type of anti-competitive conduct (be it exclusionary or exploitative) in relations with economically dependent undertakings.

What effects are required on the Belgian market?

Also here, the wording of the new provision mirrors the existing provision on abuses of a dominant position: the prohibition applies only if the abuse of a position of economic dependence may (negatively) affect competition on a relevant market in Belgium or a substantial part thereof.

This condition is important because it shows that the new prohibition is not simply aimed at situations that may be perceived as unfair from a contractual point of view. A (likely) negative effect on competition on a relevant market in Belgium is required, which ultimately means that the conduct at issue risks harming consumer welfare.

What are the sanctions?

The Belgian Competition Authority is tasked with the prosecution of abuses of economic dependence and benefits in that respect from the same powers of investigation and enforcement as for other violations of competition law.

However, the following differences apply: 

  • the maximum fine amounts to 2% of turnover (Belgian turnover + export turnover) of the undertaking (instead of 10% of worldwide turnover);
  • the maximum daily penalty amounts to 2% of average daily turnover (Belgian turnover + export turnover) of the undertaking (instead of 5% of worldwide turnover).

Other sanctions (which can be imposed in the context of normal court proceedings) are:

  • nullity and unenforceability;
  • damages;
  • injunctive relief; 
  • collective redress (only open to SMEs).

Date of entry into effect

June 1, 2020

Alain Vanderelst

Partner

Tilia Law