Abuse of position of Economic Dependence
Published on 7th Jan 2020
The new Belgian law governing the abuse of position of economic dependence enters into force 1 June 2020
The Act introduces the notion of a “position of economic dependence” in the CEL. This new notion allows for controlling situations that do not fall within the scope of competition law but which affect the functioning or the structure of the market. Economic dependence is defined as the position of subordination in which an enterprise finds itself towards another or several others, where this or these other enterprises can impose contractual terms or performance standards that cannot be obtained under normal market circumstances, due to the fact that this enterprise does not have any reasonable and available alternative, at reasonable costs and conditions.
Factors demonstrating the existence of economic dependence
The following factors could be relevant to determine a position of economic dependence :
- the relative market power of the enterprise;
- the significant share of the enterprise in the turnover of another (allegedly dependent) enterprise
- the technology or know-how controlled by the potentially dominant enterprise;
- the strong reputation of the potentially dominant enterprise's brand, the scarcity or the perishable nature of a product or the purchasing loyalty of consumers;
- access to essential resources or facilities;
- fear of serious economic harm, retaliation or termination of contractual relationship;
- the granting of special conditions (such as discounts) to an enterprise on a regular basis, which are not granted to other enterprises in similar cases; and
- the deliberate or constrained choice to place oneself in a position of economic dependence (for instance, an enterprise created to meet the specific needs of another company and which subsequently does not diversify its partnerships).
Only abuse is prohibited
The economic dependence is only prohibited if (i) it there is an abuse and (ii) it is capable of affecting competition on the relevant Belgian market or a substantial part thereof.
Under the Act, the following practices could be deemed to constitute an abuse of economic dependence:
- refusing sales or purchases;
- tying and bundling;
- imposition of sales prices or unequitable sales terms;
- applying different terms and conditions to different enterprises that deliver the same goods or services; or
- limiting production, market or technical development to the detriment of users.
As these infringements are deemed to be a new category of anticompetitive agreement, the Belgian competition authorities are competent to investigate and penalise these infringements. In this respect, the Belgian Competition College can, ex officio or following a complaint (lodged by a natural or legal person, at the request or order of a minister), impose fines of up to 2% of the domestic and export turnover of the enterprise found to have committed an abuse of economic dependence, or periodic penalty payments of 2% of their daily turnover until they cease their abusive practice(s). The turnover at stake is the annual turnover realised on the domestic and export market during the accounting year preceding the College’s decision to fine.
Besides the proceedings before the Belgian competition authorities, abuse of a position of economic dependence may also give rise to private legal claims before the Belgian Courts (such as an action for damages, injunctive relief or the annulment of all or part of a contract).