The prohibition of abuses of economic dependence, as recently introduced into Belgian competition law (see Ashurst's April 2019 newsletter article here), is now in force.
Background
A Royal Decree amending the Belgian Code of Economic Law with regard to the prohibition of abuses of economic dependence was published in the Official Journal of Belgium on 12 August 2020. This Royal decree confirms the competence of the Belgian Competition Authority ("BCA") to enforce the prohibition and sanction companies abusing the economic dependence of other firms with fines of up to 2% of a company's worldwide turnover. Companies suffering such abuses can submit a complaint to the BCA's investigation service.
With this new law, the Belgian lawmaker intends to protect, in particular, small and medium-sized companies from unfair practices by other companies that are indispensable trading partners for them. Relationships between food producers and supermarket chains, as well as between franchisers and franchisees, were cited as examples of relationships susceptible to such abuses. However, the prohibition has a much wider reach and could potentially apply to a lot of operators across various economic sectors such as, for example, digital platforms, sport associations or infrastructure managers acting as 'gatekeepers' in certain markets.
The prohibition
The application of the prohibition is subject to three conditions. For the prohibition to apply there must to be evidence of:
- a relationship of economic dependence;
- an abuse; and
- an actual or potential impact on competition in the Belgian market (or a substantial part thereof).
Economic dependence
According to the law, a company is in a position of economic dependence if it is dependent on one or more other companies to carry out its activities and there is no "reasonably equivalent alternatives available within a reasonable period of time, on reasonable terms and at reasonable costs". Whether or not a company depends on another will likely be assessed, in each case, on the basis of concrete elements pertaining to their business relationship and the broader market context, including such factors as:
- the market share of the company alleged to be an indispensable trading partner;
- whether or not that company accounts for a significant share of the sales or purchases of the its allegedly 'dependent' partner;
- whether the former company holds indispensable knowhow or technology, or an indispensable input or infrastructure of any kind;
- that company's brand reputation;
- the possibility for suppliers or customers to switch.
Abuse
The notion of abuse is defined in the same manner as under the prohibition of abuses of dominance, allowing the BCA to rely on existing antitrust case-law. Accordingly, it is likely that all types of conduct which may potentially be regarded as an abuse of dominance will also be capable of giving rise to an abuse of economic dependence. The law broadly clarifies that abusive conduct may consist of imposing "services or conditions that could not be obtained under normal market circumstances."
With thanks to Antoine Accarain of Ashurst for his contribution.
