Publication date: 22/08/2019
On 24 May 2019, the Belgian Act amending the Code of Economic Law with regard to (i) the abuse of economic dependence, (ii) unlawful contract clauses and (iii) unfair market practices between companies (the ‘B2B-Act’) was published in the Belgian official Gazette. The B2B-Act will undeniably have a huge impact on B2B-practices and B2B-contracts. In this e-zine, we outline the main features, obligations and prohibitions that every company needs to be aware of.
Unfair B2B market practices (entry into force on 1 September 2019)
The B2B-Act provides for additional rules on unfair business practices between companies. The already existing general prohibition of unfair business practices (Art. 104 CEL) is complemented with specific rules on misleading and aggressive business practices. These rules are predominantly inspired by the existing legal principles and provisions of consumer law. Hence, these rules are not entirely new. It will be interesting to see their application as of 1 September 2019 in a B2B context.
Abuse of economic dependence (entry into force on 1 June 2020)
Inspired by Articles 101 and 102 of the Treaty on the Functioning of the European Union (‘TFEU‘), the Belgian Code of Economic Law (‘CEL‘) prohibits anti-competitive agreements and the abuse of a dominant position. However, the threshold for establishing anti-competitive practices is often very high. For example, an alleged abuse of a dominant position will (in most cases) only be investigated when a company has a market share of at least 40 percent.
The B2B-Act seems to have (implicitly) lowered the threshold, by creating a new type of anti-competitive practice: the abuse of the economic dependence of another company. According to the B2B-Act, it is prohibited to abuse a position of economic dependence that one or more undertakings find themselves in, as a result of which competition may be affected in the relevant Belgian market or in a substantial part of it.
The position of economic dependence is defined by the B2B-Act as “a position of subordination of a company towards one or more other companies characterized by the absence of a reasonable equivalent alternative, available within a reasonable period of time, under reasonable conditions and at a reasonable cost, allowing this or each of these other companies to impose obligations or conditions that cannot be obtained under normal market conditions”.
The B2B-Act explicitly states that there may be an abuse in cases such as:
- the refusal of a sale, a purchase or other transaction conditions;
- the direct or indirect imposition of unfair purchase or selling prices or other unfair contractual conditions;
- the restriction of production, sales or technical development to the detriment of consumers;
- the application of different conditions to equivalent services with respect to economic partners, thereby placing them at a disadvantage in competition; or
- making the conclusion of agreements conditional upon the acceptance by the economic partners of additional services which, by their nature or according to commercial usage, have no connection with the subject matter of such agreements.
The new provisions regarding the abuse of economic dependence will enter into force on 1 June 2020. From then on, the Belgian Competition Authority may impose fines of up to 2% of the turnover of the company concerned if it concludes that the latter has abused the economic dependence of another company. Moreover, it cannot be excluded that the economically dependent company may launch proceedings under private law in order to exercise its rights.
Unlawful B2B-clauses (entry into force on 1 December 2020)
The prohibition of unlawful contract clauses in consumer contracts has been in force for a long time. The B2B-Act establishes a similar principle for B2B-contracts.
As with consumer contracts, the B2B-Act imposes a general prohibition on clauses that, alone or together with other clauses, create a manifest imbalance between the rights and obligations of the parties.
This general prohibition is complemented by a list of contract clauses that are always deemed unlawful (and therefore prohibited), the so-called black list. Are unlawful, the contract clauses that serve to:
- create an irrevocable commitment by the other party while the performance of the obligations of the company is subject to a condition, the realization of which depends exclusively on the will of the company;
- give the company the unilateral right to interpret any clause in the contract;
- have the other party renounce all means of recourse against the company in the event of a dispute; or
- irrefutably establish the knowledge or acceptance of clauses by the other party, while the latter was not actually able to become acquainted with said clauses prior to the formation of the contract.
In addition, the B2B-Act establishes a list of terms that are presumed to be unlawful, but for which proof to the contrary may be provided, the so-called grey list. This list encompasses contract clauses that are intended to:
- grant a company the right to modify the price, characteristics or conditions of the contract unilaterally and without valid reason;
- tacitly extend or renew a fixed-term contract, without providing a reasonable notice period;
- impose the economic risk on a party, without any counter-performance, while that risk would normally be borne by the other company or by another party to the contract;
- inappropriately exclude or limit the legal rights of one company in the event of total or joint non-performance or defective performance by the other company of any of its contractual obligations;
- bind the parties without the right to terminate the contract by means of a reasonable notice period (without prejudice to the possibility of dissolving the agreement, see Art. 1884 of the Belgian civil Code);
- exempt a company from its liability for its willful misconduct, gross negligence by itself or its employees or, except in cases of force majeure, for the non-performance of the essential obligations that are the object of the agreement;
- limit the means of evidence that the other party can rely on; or
- determine the compensation in the event of non-performance or delay in the performance of the other party’s obligations, establishing an indemnity that is manifestly disproportionate to the prejudice that may be suffered by the company.
The new provisions on unlawful B2B-clauses will enter into force on 1 December 2020. They will only apply to agreements concluded, renewed or amended after said date and not to contracts that were already in force.
Moreover, the provisions on unlawful B2B-clauses do not apply to financial services or public procurement. However, the B2B-Act ensures monitoring of the application of the new provisions and establishes the possibility to declare certain provisions applicable to the aforementioned sectors or to supplement the black list or grey list by means of a Royal Decree.
The way forward
The amended system has shuffled the cards so that smaller companies will often find themselves in a stronger position. We advise companies to start preparing for the phased entry into force of the B2B-Act. Standard contracts may need to be adapted. Business practices may need to change.