Belgium introduced new legislation to tackle abuses of power between companies
On 21 March 2019, Belgian parliament adopted the “Law amending the Economic Law Code with regard to the abuse of a dominant position”.
This law is still to be published in the Belgian Official Gazette, but will become an important tool for companies to protect themselves against abuses and unfair market practices by suppliers, customers (non-consumers) or competing companies.
“SMEs and the self-employed are often dependent on large suppliers or customers and have difficulty in standing up to them in disputes. With the new B2B legislation, small businesses will have more opportunities to enforce their rights. In addition, the Belgian Competition Authority will have the power to take action against companies that abuse their economic dominance over other companies. The aim is to protect the smooth flow of business and to make it easier to deal with rogue companies,” said Deputy Prime Minister Kris Peeters.
The law focuses on 3 pillars:
- a ban on abuse of economic dependence;
- a ban on abusive clauses;
- new rules on unfair B2B market practices.
The most important provisions are explained below.
1st pillar: abuse of economic dependence
The new law defines economic dependence as a “position of an undertaking in its relation towards one or more other undertakings that is characterised by the absence of reasonable equivalent alternatives, available in a reasonable period of time, under reasonable conditions and costs, allowing this other or these other undertakings to impose performances or conditions that could not be obtained under normal market conditions“.
According to the Act, the following practices may be considered as an abuse of economic dependence:
- refusing a sale or purchase;
- imposing unfair prices or other unfair trading conditions;
- limiting production, markets or technical development to the detriment of users;
- applying dissimilar conditions to equivalent transactions;
- making the conclusion of the contract dependent on accepting additional obligations which, by their nature or according to usual trade practices, have no connection with the subject matter of such contracts.
A party facing an abuse of economic dependence by its commercial partner may initiate proceedings before the Belgian courts in order to stop these abusive practices, notwithstanding its right to claim compensation for the damage suffered. Also, the Belgian Competition Authority may, ex officio or following a complaint, impose fines of up to 2% of the turnover of the undertaking concerned as well as penalty payments in the case of non-compliance with the Authority’s decision.
The new rules against abuse of economic dependence will enter into force 13 months following the publication of the Act in the Belgian Official Gazette; probably around May 2020.
2nd pillar: Unlawful contractual terms
Consumers have long been protected in their relations with businesses, but comparable protection for B2B contracts did not yet exist.
The new law now provides that, in a B2B environment, a contractual term is unlawful and prohibited if, whether or not in conjunction with other terms, it creates an apparent imbalance between the rights and obligations of the parties.
In addition to this general rule, the Act provides for a black list of clauses which are abusive and prohibited in all circumstances, such as:
- clauses with a condition the realisation of which depends solely on the will of one party;
- clauses giving a party the unilateral right to interpret a contractual provision;
- clauses whereby one party must waive any remedy against the other in the event of a dispute; and
- clauses which irrefutably establish the other party’s knowledge or acceptance of terms that it was not familiar with prior to the conclusion of the contract.
The Act also provides for a grey list of clauses which are presumed to be abusive unless the undertaking can prove that such clauses do not create a significant imbalance between the rights and obligations of the parties (“comply or explain”). This list includes, for example,
- clauses which give one party the unilateral right to modify the terms of the contract (e.g. the price) without a valid reason;
- clauses permitting extension or renewal without a reasonable notice period;
- clauses shifting the economic risks without a proper reason;
- clauses which ‘inappropriately’ limit or exclude the rights of a party in the event of contractual breach by the other party; and
- clauses excluding or limiting liability in the event of fraud or gross negligence.
The new rules with regard to unlawful contractual terms will enter into force on the first day of the 19th month following the publication of the Act in the Belgian Official Gazette, but only for agreements concluded, renewed or amended after that date of entry into force. Consequently, the new provisions do not apply to agreements still in force on the date of entry into force. They do also not apply to financial services or to public procurement contracts.
3rd pillar: Unfair market practices
In addition to a general prohibition of unfair market practices which already existed, a new prohibition on “misleading” and “aggressive” commercial practices in a B2B context was introduced.
The new law now also protects businesses and lays down specific rules for both misleading and aggressive market practices that may occur at all stages of a business relationship: during negotiations, during the performance of contractual obligations and following termination of the business relationship.
A commercial practice will be regarded as aggressive if, in its factual context, taking account of all its features and circumstances, by harassment, coercion, including the use of physical force, or undue influence, it significantly impairs or is likely to significantly impair the undertaking’s freedom of choice or conduct and could therefore cause it to take a transactional decision that it would not have otherwise taken.
The new rules with regard to unfair market practices will enter into force on the first day of the fourth month following the publication of the Act in the Belgian Official Gazette; probably around August 2020.
For more information on this topic, please contact CORBUS ADVOCATEN (email@example.com).
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