Legal News

What is economic dependencey?

From 22 August 2020, the abuse of economic dependency has been sanctioned by the new B2B law.

Economic dependence refers to a situation in which an enterprise possesses a certain market power that allows it to exercise relative dominance over its partners and to impose performance and conditions that it would not be able to impose without this market power.

In relationships with subcontractors, franchises, exclusive sales concessions, distribution systems, etc., many companies work with partners on whom they depend to a certain extent and who have a certain market power.

The new B2B law prohibits companies from abusing the position of economic dependency of another company, as a result of which competition could be harmed on the respective Belgian market or on a substantial part of it.

These abusive practices are characterised by an imbalance in the position of companies in relation to each other.

In turn, the company that is in a position of economic dependence does not have a reasonable equivalent alternative available within a reasonable time, on reasonable terms and at a reasonable cost.

The law does not thereby prohibit economic dependency, but does prohibit its abuse.

An abuse of economic dependency occurs, for example, when:

a large retail chain suddenly terminates a long-standing commercial relationship with a small producer or supplier without reasonable notice,

an essential customer obtains low prices from a small partner because that large player threatens an abrupt termination of the trading relationship,

a major supplier suddenly and unilaterally increases its purchase prices without giving the possibility of switching to another equivalent source of supply within a reasonable period under reasonable conditions and at a reasonable cost,

a large international brewery directly imposes unfair contractual terms on small bars, etc.

Sanctions

If the Belgian Competition Authority finds that there is an abuse of economic dependency, it can impose fines on each of the companies involved of up to 2% of their turnover.

The Competition Authority can also impose periodic penalty payments of up to 2% of the average daily turnover for each day of delay, for example, to enforce provisional measures.

In addition, an agreement that was concluded with abuse of a position of economic dependence can be declared null and void.

Finally, the abuse of economic dependency can lead to an agreement being concluded or not. This may also involve the non-contractual liability of the companies concerned.

Entry into force

This regulation was the second part of the so-called B2B Act of 4 April 2019 to enter into force, namely on 1 June 2020. The other parts, i.e. a ban on unfair market practices and a ban on unfair terms in business-to-business contracts, entered into force on 1 September 2019 and 1 December 2020, respectively. The legislature introduced the new rules on business-to-business relationships through the so-called B2B Act of 4 April 2019.

Do you have any questions about the abuse of economic dependency?

Is there an abuse of economic dependency in the conclusion of my contract?

How can I avoid exposing myself to sanctions (fines, penalties, etc.) when concluding my contract?

Contact us immediately for a personal appointment. This can, of course, be done safely and completely online (our entire file management has been digital for years).

Defensis Law Firm

Joris Durinck

jdurinck@defensis.be

+32 (0)2 892 60 83 (direct)

 

Wouter Van Cutsem

wvancutsem@defensis.be

+32 (0)2 892 60 71 (direct)

+32 (0)2 892 60 70 (administration)