The prohibition on abusing an undertaking's economic dependency, which came into force on August 22, 2020, targets a situation where an undertaking abuses the economically dependent position of another undertaking (e.g., a supplier or a customer) where one is an indispensable economic partner for the other.
As an extension of our article of 2021 on the subject, the time is ripe to review the current state of affairs on the provision that prohibits the abuse of economic dependency contained in Article IV.2/1 of the Code of Economic Law ("CEL"). Although jurisprudence is still generally sparse, there have been recent developments that provide fresh insights into its application.
First, by way of a reminder, three cumulative conditions must be demonstrated to conclude that an abuse of economic dependency exists:
- the existence of a position of economic dependence (implying 1. no reasonably equivalent alternative is available and 2. that an undertaking has the power to impose conditions/services that are unobtainable under normal market circumstances);
- an abuse of that position; and
- the potential for that abuse to affect competition on the Belgian market or a substantial part of it.
The CEL provides the Belgian Competition Authority (BCA) with specific authority to impose temporary measures, fines, and penalties. However, no formal decision has yet been adopted on this topic. Of the dozen complaints lodged before the BCA since this prohibition came into force, it appears that only one investigation is currently pending.
Recent jurisprudence
One of the most recent published judgments on this matter, dated October 20, 2021, concerns a dispute between a trader in building materials and a wholesaler of vaults (armed and prestressed ones) whereby the wholesaler refused to supply the trader. After hearing the argument on an alleged abuse of economic dependency, the Court of Appeal in Antwerp ruled that the mere fact that a certain supply relationship works more efficiently than another does not mean that a buyer (the trader in this case) is economically dependent.
Indeed, according to the Court, a situation of economic dependency occurs only when one undertaking can "reasonably be found in a situation where it is only able to get supplies from one particular undertaking," placing it in a situation of "economic submission." Since the undertaking in question had been able to obtain supplies elsewhere for many years, which constituted proof of reasonably equivalent alternatives being available, it was not found to be in such position. Therefore, the Court did not go on to assess the second step of the legal test on economic dependency of whether any services or conditions could have been imposed that are unobtainable under normal market circumstances.
An "abuse" of such position by refusing to supply the goods in question would presuppose an existing contractual relationship of considerable duration between the parties were such abuse capable of materializing, according to the Court. This is a new (and debatable) avenue of interpretation. This interpretation, therefore, seems to exclude any application of abuse of economic dependency in the case of a request for supplies from a new customer.
Lastly, the Court did not analyze the third condition as no detailed market analysis or data was put forward by the claimant to substantiate the claims made.
Only a day later, there was another judgment that was rendered by the Brussels Commercial Court, which also concerned a refusal to supply (a financial services agreement was suddenly terminated). The Court found that the second step of the first criterion was not fulfilled since the claimant had not provided proof that any services/conditions being unobtainable under normal market circumstances could have been imposed, although it did find that no reasonably equivalent alternative was available.
As no economic dependency was established in the case before it, the Court stated that no abuse of it could have arisen. It used similar reasoning to that used in the case mentioned above to find that the third criterion was not fulfilled. The Court referred to the absence of data on the strong market position of the allegedly abused and economically dependent undertaking, which could justify the finding that competition on the Belgian market or a substantial part of it was capable of being affected.
Comments
Although the preparatory works of the law introducing the prohibition on the abuse of economic dependency give some indication as to the interpretation of the conditions, it remains rather vague on certain essential aspects of the prohibition, and jurisprudence is therefore fundamental to interpret the law and ensure some legal certainty.
Unfortunately, the jurisprudence to date has proven not to be streamlined to the same extent, were it to judicate on every constitutive element of the prohibition at all. Indeed, while it has become clearer as to what could constitute an abuse (e.g., a sudden refusal to supply goods or services) and the fact that the notion of economic dependency has been clarified further by the jurisprudence (i.e., when there are no reasonable equivalent alternatives available and abnormal trading conditions can be imposed), this notion could be more precisely defined and the case law to date fails to provide sufficient clarity on the third condition of application (i.e., the affection of competition on the Belgian market or a substantial part of it).
Aside from the lack of evidence provided by the claimants themselves in these proceedings, as indicated above, this seems to arise from either the judge finding in these cases that the first and/or second conditions for application were not fulfilled, therefore withdrawing any potential use of such analysis, or from the fact that the conduct in question amounted "at least to negligent conduct in breach of fair commercial practices in the sense of article VI.104 CEL", allegedly allowing to escape such analysis as well. It is, however, clear from the applicable legal framework that the third condition cannot be underestimated as it is an independent one which must be cumulatively fulfilled for the provision to apply.
Outlook
The divergent, unclear, and sometimes incomplete interpretation of the CEL by the Courts to date leaves many questions unanswered from a business perspective and entails uncertainty as to what commercial conduct must be adopted for not infringing the prohibition.
For example, and although not explicitly required by the CEL and thus the legislator, it seems more likely for Courts to decide that practices fall under the prohibition when the allegedly abusive conduct is not justified (i.e., conducted with bad intent, arbitrarily or discriminately). What is clear, however, is that the devil may be in the case-specific detail when it concerns the application criteria provided in the CEL, which implies an in-depth assessment of each situation to which the prohibition is liable to apply.
Specific guidance from the BCA is expected on this matter.