/ THE NEW B2B ACT ON ABUSE OF ECONOMIC DEPENDENCE, UNFAIR TERMS AND UNFAIR MARKET PRACTICES RETAIL LAW SERIES II
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THE NEW B2B ACT ON ABUSE OF ECONOMIC DEPENDENCE, UNFAIR TERMS AND UNFAIR MARKET PRACTICES
RETAIL LAW SERIES II
/ INTRODUCTION
The Law of 4 April 2019 amending the Code of Economic Law regarding abuses of economic dependence, unfair terms and unfair market practices between companies.
Purpose: to act against harmful practices: ‐ to the parties‐ to the competition
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/ 3 SECTIONS
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•Competition law•Book IV CEL•Objective: Tackling legal or economic imbalances arising from
unequal power relations
Abuse of economic
dependence
•Contract law•Title 3/1. Book VI CEL "Contracts concluded between
undertakings" (Art. VI.91/1 et seq.)•Objective: Better contractual balance in B2B relationships.
Unfair terms
•Market practices•Chap. 2, Title 4. Book VI CEL "Unfair market practices".•Objective: Strengthening the rules to offer more means of
protection against unfair market practices in B2B relations
Unfair marketpractices
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PART 1 UNFAIR TERMS
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/ CONTEXT
Protection against unfair terms limited to B2C (Directive 93/13) ‐Consumer = weak party
No or few rules governing B2B contracts‐ Competition law‐ Liability (Willful misconduct, fraud, personal injury and death)‐ Indexation
European directive but influence of neighbouring countries (France, Germany and Netherlands)
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/ SCOPE OF APPLICATION
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• Financial services• Public procurement contracts• Possible derogation by RD• Art. VI.91/1,§1 CEL
NO
• All other contracts, including T&Cs• Individually negotiated contracts• Not relevant: size of company, dominant
position, economic dependenceYES
/ GENERAL STANDARDS
General transparency standard Art. 91/2 CEL
• In a clear and comprehensible manner
General prohibition standard Art. 91/3 CEL
• Clauses that create a manifest imbalance between the rights and obligations of the parties
• Catch-all provision• Evaluation criteria• Contractual freedom: Main object of the contract and
price - product adequacy7
/ BLACK LIST
4 unfair terms (>< 33 B2C) without possibility of providing proof to the contrary (Art. 91/4 CEL). Are prohibited terms aiming to:‐ create an irrevocable obligation for the other party while the
business’s performance of the obligations is subject to a condition that depends for its realisation solely on the will of the business
‐ give the business the unilateral right to interpret any term in the contract;
‐ in the event of a dispute, oblige the other party to waive any remedy against the business; or
‐ irrefutably establish the other party's knowledge or acceptance of terms which that party had not been able to become acquainted with prior to the formation of the contract
Strict interpretation8
/ GREY LIST
8 terms presumed unfair until proven otherwise (Art. 91/5 CEL)
Demonstrate that the clause does not create a manifest imbalance between the rights and obligations of the parties.
Factors : ‐ Circumstances at the time of the conclusion of the contract‐ General economics of the contract‐ Commercial uses‐ Other clauses of this contract or a related contract‐ Nature of the products
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/ GREY LIST (II)
Are prohibited terms aiming to: give the business the right to unilaterally modify, without a valid
reason, the price, characteristics or terms of the contract;
tacitly extend or renew a fixed‐term contract, without providing a reasonable notice period;
place, without a counter‐part, the economic risk on a party if that risk would normally be borne by the other business or by another party to the contract;
inappropriately exclude or limit the legal rights of one party in the event of total or partial non‐performance or defective performance by the other business of any of its contractual obligations; 10
/ GREY LIST (III)
without prejudice to article 1184 of the Civil Code, bind the parties without providing a reasonable notice period;
discharge the business from its liability for its wilful misconduct, its gross negligence or that of its employees or, except in cases of force majeure, for the non‐performance of essential obligations that are the object of the contract;
limit the means of evidence that the other party may rely on; or
in the event of non‐performance or delay in the performance of the other party's obligations, fix damages amounts that are manifestly disproportionate to the harm that may be suffered by the business
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/ PENALTIES
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Possible penalties Comments
1. Nullity Consequences? Strict interpretation by the CJEU in B2C
not applied by analogy: court's discretion and possibility of restoring the balance
2. Cease-and-desist order By any interested person President of the Business Court (as in
summary proceedings) Competence of Ministers (fear factor) Penalty and publication order
3. Criminal penalty? No, except in bad faith (art. XV.84 CEL)
4. Precontractual liability
/ CONCLUSION
Highly criticized reform and vague provisions: corrective law?
Beware not to limit the examination of the contract to lists of unfair terms: the general rule of prohibition exists!
Justify or explain certain risky terms ‐ pre‐contractual documents
Have your contracts and T&C’s reviewed by legal experts
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/
PART 2 UNFAIR COMMERCIAL PRACTICES
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/ TABLE OF CONTENTS
1. INTRODUCTION2. PREVIOUS REGIME3. NEW REGIME
1. MISLEADING COMMERCIAL PRACTICES2. AGGRESSIVE COMMERCIAL PRACTICES
4. PENALTIES
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/ 1. INTRODUCTION
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1 SEPTEMBER 2019
/
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SCOPE:
• Any company ( )
• Financial services and public procurement Unfair commercial terms
/ OBJECTIVE
• Give businesses effective tools to fight unfair commercial practices
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/
HOW: General standard supplemented (VI.104) by prohibition of more detailed practices (VI.104/1):
• Misleading commercial practices (VI.105‐VI.109)• Aggressive commercial practices (VI.109/1–VI.109/3)• Facilitates an act that infringes book VI or XV.83-86
and 126
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/2. PREVIOUS REGIME (VI.104‐VI.108 CEL)
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• Unfair commercial practices towards “persons other than consumers”
• General prohibition unfair commercial practices (VI.104)
• Prohibition of certain types of advertising/commercial practices (e.g. sending unsolicited goods)
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/3. NEW REGIME
(VI.103/1 – VI.109/1 ET SEQ)
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• Misleading commercial practices • Misleading information• Misleading omission (VI.105/1)
• Aggressive commercial practices (VI.109/1 et seq.)
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3.1 MISLEADING COMMERCIAL PRACTICES(VI.105 EN VI.105/1)
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/ TWO CATEGORIES
Information
No (timely communication of) essential information
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/
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Misleadingcommercial
practice
Commercial practice
False informationregarding one or more
items (10)
Causes or is likely to cause the other
undertaking to take a decision regarding a transaction that it
otherwise would not have taken
Factually correct that misleads or
can mislead (including general
presentation) regarding one or more
items (10)
/
25
Existence or nature of the product The company/intermediary’s rights, characteristics, nature (i.e. identity, qualifications, status, recognitions, connections, etc)
Main characteristics of the product (availability, advantages, composition, geographical origin, etc.)
The other company’s rights or the risks it may incur
Scope of the company‘s commitments, the company’s motives, nature of the sales process, declarations/symbols that give the impression that the company/product receives sponsoring or support
Any marketing activity concerning a product, including comparative advertising, creating confusion with another product, trade mark, trade name or other distinctive sign of a competitor
Price or price calculation method, existence of a specific price advantage
Non‐compliance with obligations contained in an industry code of conduct by which it has undertaken to be bound (provided that these commitments are no declarations of intent, but firm and verifiable)
The necessity of a service, spare part, replacement or repair
The communication of disparaging elements with respect to another enterprise, its goods, services or activity
/
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Misleadingcommercial
practices
Commercial practice
Concealing essential information
presenting in an unclear, unintelligible,
ambiguous or untimely manner
Which causes or is likely to cause the other undertaking to take a decision that it otherwise would not have
taken
Ommittingessential
information
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3.2 AGGRESSIVE COMMERCIAL PRACTICES
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/
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Aggressivecommercial
practices
Commercial practice
Significantly altersor is likely to
significantly alter a company's
freedom of choice regarding a
product
Causes or is likely to cause the other
undertaking to take a decision that it
otherwise would not have taken
Makes use of (i)“inappropriate
influences” (ii) coercion or (iii)
intimidation
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Factors taken into account
Time, place, nature and persistence of commercial practice
Use of threatening or abusive language or behaviour
Deliberate exploitation of certain setbacks or circumstances of such gravity that it can impair the judgement of the other company, and this with a view to influencing its decision concerning the product
Any non‐contractual obstacle (chargeable or disproportionate) imposed by a company upon the other company when the latter wishes to assert its contractual rights (e.g. terminating the contract or choosing another product/company)
Threating with measures that are not legally possible
The contractual position of a company vis‐à‐vis another company29
/
Factors taken into account
Time, place, nature and persistence of commercial practice
Use of threatening or abusive language or behaviour
Deliberate exploitation of certain setbacks or circumstances of such gravity that it can impair the judgement of the other company, and this with a view to influencing its decision concerning the product
Any non‐contractual obstacle (chargeable or disproportionate) imposed by a company upon the other company when the latter wishes to assert its contractual rights (e.g. terminating the contract or choosing another product/company)
Threating with measures that are not legally possible
The contractual position of a company vis‐à‐vis another company30
/ 4. PENALTIES
Cease and desist order (President Commercial Court)• Any interested person, professional groups, consumer interest
associations (except VI.104 CEL)
• Specific ministers (misleading + aggressive)• Except art. VI.104 or VI.104/3 CEL
Qualification as fault/causal link/damages liability claim
Criminal fine: 208 EUR ‐ 80.000 EUR (aggressive + misleading)
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/
PART 3 ABUSE OF ECONOMIC DEPENDENCE
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/ ABUSE OF ECONOMIC DEPENDENCE‐ CONTEXT
Existence of a prohibition on the abuse of a dominant position (competition law)
Dominant position = economic power held by an undertaking that enables it to prevent effective competition from being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of consumers
Legal void if a company does not have a dominant position
‐ Typical example: mass distribution
Neighbouring countries (e.g. France, Germany): existence of specific regimes in the case of relative market power
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/ ABUSE OF ECONOMIC DEPENDENCE‐ PRINCIPLE Since 22 August 2020, introduction of the concept of
economic dependence
‐ An undertaking’s position of subjection regarding one or more other undertakings characterised by the absence of a reasonably equivalent alternative available within a reasonable period of time, under reasonable conditions and at reasonable costs, allowing the undertaking or each of them to impose benefits or conditions that could not be obtained under normal market circumstances.
Two criteria
‐ no reasonably equivalent alternative is available within a reasonable time, under reasonable conditions and at reasonable cost; and
‐ ability to impose benefits or conditions that could not be obtained under normal market circumstances. 34
/ ABUSE OF ECONOMIC DEPENDENCE ‐ ASSESSMENT
Assessment factors
‐ the relative market power of the other company;
‐ a significant proportion of the other company's turnover, it being understood that the higher that proportion, the greater the risk of dependence;
‐ the technology or know‐how held by the other undertaking;
‐ the strong notoriety of a brand, the rarity of a product, the perishable nature of a product or the loyalty of consumers to buy it;
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/ ABUSE OF ECONOMIC DEPENDENCE ‐ ASSESSMENT
Assessment factors
‐ access to essential resources or infrastructure by the latter;
‐ fear of serious economic disadvantage, retaliation or termination of contractual relations;
‐ the regular granting to a company of special conditions, such as discounts, which are not granted to other companies in similar cases;
‐ its deliberate choice or, on the contrary, forced to place itself in a position of economic dependence.
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/ ABUSE OF ECONOMIC DEPENDENCE ‐ PROHIBITION
Prohibition
‐ It is prohibited for one or more undertakings to abuse a position of economic dependence in which one or more undertakings are in a position of economic dependence towards it or them, if competition is liable to be affected thereby on the Belgian market concerned or a substantial part of it.
3 cumulative conditions
‐ a position of economic dependence,‐ an abuse, and‐ a potential effect on the market concerned or on a
substantial part of it.
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/ ABUSE OF ECONOMIC DEPENDENCE ‐ PROHIBITION
Examples of potential abuses (given in the law itself)
‐ the refusal of a sale, purchase or other transaction conditions;
‐ the direct or indirect imposition of unfair purchase or sale prices or other transaction conditions;
‐ limiting production, markets or technical development to the prejudice of consumers;
‐ applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
‐ making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. 38
/ ABUSE OF ECONOMIC DEPENDENCE – SANCTIONS
Sanctions (Belgian Competition Authority)
‐ Cessation of abuse,
‐ Fine (max. 2% of the national and export turnover of the companies concerned), and
‐ Penalties (max. 2% of average daily turnover per day of delay).
Application by Courts and Tribunals
‐ The Act’s main purpose is its application by the BCA,
‐ But an action for an injunction or an action on the merits is always possible,
‐ Finally, the Ministry of Economics Affairs’ Economic Inspection service is also competent. 39
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Thank you for your attention, any question?
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See you next timeRetail Law Series III – 23/12
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