It is recommended that undertakings review their existing and upcoming B2B agreements and where necessary modify them, to ensure that they comply with this new legislation and provide personnel with training to increase awareness of these new rules.
In recent years, the Belgian government and the EU have been concerned with the rise of unfair commercial practices between undertakings and the failure of existing mechanisms like competition law and general contract law to remedy these situations. This is especially an issue in the agricultural sector and in the contractual relationships between small and large undertakings. The Belgian parliament passed the act of 4 April 2019 which will introduce into the Belgian Code of Economic Law (BCEL) three new sets of rules governing the relationships between undertakings (B2B):
- Rules regarding unlawful contractual terms and conditions,
- Rules regarding the abuse of economic dependence,
- Rules regarding unfair market practices between undertakings.
Most of these new provisions will enter into force in the course of 2020, while the new rules on unfair B2B market practices are already in force today.
Unlawful terms and conditions
The most significant and far-reaching of the newly adopted changes is the introduction of unlawful contract clauses in B2B relationships. Until now, Belgian law had only addressed unlawful clauses in contracts between companies and consumers (B2C). The Belgian courts will now also be allowed to exercise control over and evaluate contractual clauses in B2B relationships.
The new provisions include a black list, a grey list and a catch-all provision. The black list contains four clauses which are illegal per se, while the grey list contains eight clauses which will be presumed unlawful in the absence of evidence to the contrary. These black and grey lists can be extended by Royal Decree for certain sectors or categories of products. In addition, the Belgian legislator also introduces a new catch-all provision that invalidates any contractual term or condition concluded between undertakings which, alone or in conjunction with one or more other terms, creates a ‘manifest’ imbalance between the rights and obligations of the parties. Since freedom of contract is still the fundamental principle in Belgian contract law and the catch-all provision is only meant to target ‘manifest’ imbalances, this catch-all provision should be interpreted restrictively.
Any contractual provisions that are contrary to the new rules are null and void. The rest of the agreement remains binding on the parties if it can continue to exist without the unlawful clauses. It is therefore recommended that parties include a severability clause in their agreement.
In the interest of legal certainty, the Belgian legislator has clarified that the new rules governing unlawful contractual terms and conditions in B2B relationships will only apply to agreements concluded, renewed or amended after the entry into force on 1 December 2020. Agreements concluded before this date are not affected by the new legislation, unless they are renewed or amended thereafter.
Abuse of economic dependence
In addition to anti-competitive agreements and concerted practices between undertakings (Art. IV. 1 BCEL) and abuse of dominance (Art. IV. 2 BCEL), the Belgian legislator has now introduced abuse of economic dependence as a third category of anti-competitive conduct. These new rules will enter into force on 1 June 2020 and will be enforced by the Belgian Competition Authority (BCA).
Abuse a position of economic dependence requires all of the following three elements:
- One of the companies is in a position of economic dependence, and
- The other company abuses that position, and
- The abuse is liable to affect competition on the relevant Belgian market or a substantial part thereof.
With regard to the first condition, economic dependence is defined by a two-step test. A company is in a position of economic dependence if:
- it does not dispose over a reasonable equivalent alternative within a reasonable time, on reasonable terms and at a reasonable cost, and
- it allows the other party to impose for its own benefit advantages or conditions which cannot be obtained under normal market conditions.
It follows that an abuse of economic dependence requires one company abusing the weaker position of another company in a way that affects Belgian competition. The existence of a situation of economic dependence alone is not enough. In an attempt to provide some clarity, the Belgian legislator has provided a list of 5 examples of what can be considered an abuse under the new act, including a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions and b) applying dissimilar conditions to equivalent transactions with economic partners, thereby placing them at a competitive disadvantage.
If an abuse of the economic dependence of another undertaking is established, the BCA may impose fines of up to 2% of the turnover of the abusing undertaking, as well as periodic penalties for failure to comply with its decision. A party that is confronted with an abuse of economic dependence can also bring a cease-and-desist action before the Belgian courts to put an end to the infringements.
Unfair market practices between undertakings
Finally, the new act introduces a new general prohibition on misleading and aggressive B2B commercial practices. In a B2C context, the distinction between misleading and aggressive market practices has existed for some time under Belgian law, while in the B2B context, the act only used to provide a general prohibition on unfair market practices (Art. VI.104 BCEL). With the entry into force of the new act, this distinction now also applies to B2B relationships. What is considered “misleading” or “aggressive” will be decided on a case-by-case basis and will largely depend on the factual circumstances of each case. The legislator provides a number of criteria to be taken into account, including for example a) the omission or provision of misleading information about the need for a service, part, replacement or repair and b) the use of threatening or abusive language or conduct. Similar rules that apply to B2C relationships can also provide guidance.
The new rules regarding misleading and aggressive B2B practices already entered into force on 1 September 2019.
As was already the case for B2C agreements, the Belgian legislator has opted to subject B2B agreements to new requirements which restrict the entrepreneurial freedom and the freedom of contract. On the one hand, these changes provide welcome solutions for existing imbalances and provide extra protection for the weakest party in a B2B relationship. On the other hand, one might wonder whether all companies need such a protection and whether these new requirements are not unduly restrictive. This is especially the case with regard to the newly adopted grey list and unlawful contractual clauses in general. It will be up to the courts to decide to what extent these new rules should be applied. In any event, it is recommended that undertakings review their existing and upcoming B2B agreements and where necessary modify them, to ensure that they comply with this new legislation and provide personnel with training to increase awareness of these new rules.