Abuse of economic dependence
Belgian Competition Authority adds another tool to its enforcement toolkit
On 21 March, the Belgian Parliament adopted legislation introducing a new concept of abuse of economic dependence in Belgian competition law. The new provision will allow the Belgian Competition Authority (BCA) to establish and sanction abuses without the need to establish market dominance, i.e. when a supplier is economically dependent on a buyer or vice-versa. The introduction of this new legislation – which was originally inspired by alleged abuses in the food distribution sector – has been debated for a number of years and is aimed at protecting smaller trading partners from vertical abuses.
Similar legislation preventing abuse of relationships of economic dependence exists in a number of EU Member States, such as France, Germany, Austria, Portugal, Cyprus, Hungary and Italy.
The President of the Belgian Competition Authority has stated that recent abuse of economic dependence investigations in other EU Member States against internet platforms (e.g. HRS and Booking.com) convinced him of the need to prohibit these types of ‘vertical’ abuses in Belgian Competition law.
The new provision is reflected in Article IV.2/1 of the Code of Economic Law (CEL), which prohibits non-dominant undertakings from using their stronger market position to impose unfair conditions on smaller trading partners. In order to prove an infringement of the new Article IV.2/1 CEL, the BCA will need to demonstrate the fulfilment of three cumulative conditions, namely: (i) the existence of a relationship of economic dependence between two companies; (ii) an abuse; and (iii) an effect on competition on the Belgian market or a substantial part of it.
The prohibition applies in the relationship between two companies, in a situation where it can be established that company A is economically dependent on company B. Importantly, company B does not need to hold a dominant position on a relevant market. Economic dependence may be established where: (i) company A does not have alternative trading partners that are reasonably equivalent (‘reasonably’ requiring that they are available timely, at reasonable conditions and costs); and (ii) as a result, company B is able to impose trading conditions that could not be obtained in normal market circumstances.
The types of abuses covered by the provisions on abuse of economic dependence closely mirror those caught by the prohibition of abuse of dominance under Article IV.2 CEL and Article 102 of the Treaty on the Functioning of the European Union (TFEU), including for example refusal to deal, tying or bundling, imposing unfair trading conditions, or applying dissimilar conditions to equivalent transactions.
Effect on competition
An alleged abuse of economic dependence will only be prohibited if it is capable of affecting competition on the Belgian market or a substantial part thereof. We expect that the BCA will consider this condition to be easily met, as is the case in the event of abuse of dominance investigations.
The BCA has the power to fine companies up to 2% of their annual Belgian turnover if they are found to have abused a relationship of economic dependence. Although this fine cap is considerably lower than the 10% cap which applies in the event of violations of the general competition rules, a fine of up to 2% of a large company’s annual Belgian turnover may still be very significant.
Although the BCA has generally welcomed the adoption of legislation on abuse of economic dependence, its President and Prosecutor General have voiced some concern around the BCA’s ability to effectively enforce the new rules without additional government funding for the BCA.
At the same time, the Prosecutor General has indicated that the BCA will want to quickly determine the exact scope of the abuse of economic dependence rules through 'concrete dossiers'. It remains to be seen how the BCA will enforce this new provision in practice.
Additional procedural reform
Additional legislation is pending before the Belgian Federal Parliament which will introduce certain procedural reforms to the Belgian competition law rules. The pending reforms seek to improve the efficiency of the BCA, codify case law and BCA practice and further align the Belgian competition rules with EU law.
Set out below are the most noteworthy procedural amendments:
- Administrative closure of an investigation. Similar to the commitment procedure available at the EU level, the pending reform will grant BCA Prosecutors the explicit power to close an antitrust investigation without finding an infringement when the company under investigation offers commitments which the Prosecutor considers addresses the concerns. As is the case in the EU, these types of commitment decisions would not establish or acknowledge the existence of an infringement.
- Individual liability. The BCA will no longer have to prove that an individual is acting under an express mandate (e.g. labour contract or otherwise remunerated position) to be held personally liable for committing antitrust infringements. Instead, evidence demonstrating that the individual was acting “in the framework of the activities of the company” will be sufficient to establish its personal liability for the antitrust infringement.
- Deadlines. The pending legislation will modify some of the time limits applicable in merger control and antitrust cases before the BCA (e.g. a two-month deadline to respond to an antitrust statement of objections).
- Leniency. Individuals will be able to benefit from the leniency procedure. However, a company’s ability to benefit from leniency when it does not adduce any evidence of the infringement (but only acknowledges it) will be abolished.
- Fining. Currently, the 10% cap on fines for violations of competition law is calculated based on annual Belgian turnover. The pending procedural reform seeks to change this to “10% of the consolidated worldwide turnover”. The new ceiling will only be applicable for anticompetitive practices which take place after the entry into force of the new law.
It is unclear at this stage when these procedural reforms will be adopted by the Belgian Federal Parliament. The relevant legislation is currently pending before the Parliamentary Economic Committee for debate.
If you would like to discuss these developments in further detail, please get in touch with us.