Unfair trade practices in a B2B environment
Earlier this year, on 21 March 2019 a new Act was adopted bringing a revolution of new rules towards the business community, in particular with regard to contract terms and dispute resolution. The Code Economic Law now contains new rules regarding (i) unfair contract terms, (ii) unfair market practices between companies and (iii) abuse of economic dependence.
Unfair contract terms
Although previously limited to business-to-consumer relations (“BtoC” or “B2C”), the prohibition of abusive terms, meaning “terms that create a clear imbalance between the rights and obligations of the parties” now also applies to business-to-business-relations (“BtoB” or “B2B”). In addition to the general prohibition of unfair terms, the legislator has taken initiative to introduce two categories of unfair terms, all of which are sanctioned by nullity, in particular:
- A “black” list of four clauses prohibited under all circumstances;
- A “grey” list of eight clauses “presumed to be unfair”, that create a clear imbalance between the rights and obligations of the parties and are therefore prohibited. Parties can rebut the presumption that a given clause is unfair by proving that, under the circumstances and characteristics of the contract, the clause is not unfair.
As in B2C-relations, the penalty will be the nullity of the clause deemed unfair, unless in case the contract cannot be continued without the relevant clause, in which case the contract as a whole would be void. The provisions on unfair clauses will enter into force on December 1st 2020, but only for contracts concluded, renewed or amended after that date of entry into force.
Unfair market practices
Article VI.104 of the Code of Economic Law already prohibits “any act contrary to fair market practices”. From now on, as in B2C relations, the following practices will be added:
- The prohibition of misleading market practices (Article VI.105 to VI.109 Code of Economic Law)
- The prohibition of aggressive market practices (Article VI.109/1 to VI.109/3 Code of Economic Law)
These practices can occur at any time during a contract: in negotiations, during the performance of the contract and at the end of the contract. In this case, legal action to stop such practices is likely to remain the most obvious enforcement instrument. In addition, Book XV of the Code of Economic Law provides criminal sanctions in case of violation of the new provisions concerning misleading and aggressive market practices. The provisions relating to misleading and aggressive unfair market practices has entered into force on September 1st, 2019.
Abuse of economic dependence
From now on, companies will be prohibited from abusing a position of economic dependence on another company, with an impact on the competition on the Belgian market or a substantial part thereof. The new law contains several examples of what can be deemed as abuse (for instance the refusal of a sale, purchase or other transaction conditions). An abuse of a position of economic dependence can be sanctioned by the Belgian Competition Authority with fines up to 2 % of the turnover of the company concerned. In addition, an abuse of a position of economic dependence may also give rise to claims under private law (e.g. damages, termination or annulment of all or part of a contract, etc.) The provisions relating to the abuse of economic dependence will enter into force on July 1st, 2020.
The entry into force of these new rules in the “B2B” area could radically change commercial practices and will undoubtedly restrict companies’ freedom of contract. It will thus be up to the courts, on the one hand, to show the necessary restraint when it comes to interfering in the relationship between companies, and on the other hand, up to the companies themselves to be well supported in the negotiation and drafting of commercial contracts. The new standards, on the one hand make it possible to maintain a high degree of flexibility, but on the other hand also create great legal uncertainty.
It is recommended that each company checks whether its general terms and conditions and its contracts are compliant with these new rules.