The Belgian Parliament has recently adopted new legislation which will be introduced into the Belgian code of economic law relating to the abuse of economic dependency, abusive clauses and unfair market practices between companies. Careful consideration should be given to these new rules by both franchisors and franchisees for both the drafting of the franchise agreement and their performance.
First of all, the law introduces a new area of enforcement in relation to Belgian competition law. Any practice that constitutes an abuse of another company's economic dependence will be illegal, provided that this practice is likely to affect the competition of the Belgian market or a substantial part of it.
The concept of economic dependence is defined as “a subordinate position of a company in relation to one or more other companies characterized by the absence of reasonably equivalent alternatives, which is available within a reasonable period of time, on reasonable terms and at reasonable costs, which allow this company/these companies to impose services or conditions that could not be obtained under normal market conditions.”
The Law provides examples of what could be considered as abuse:
To refuse a sale, a purchase, or other conditions of a transaction.
To impose, directly or indirectly, unfair sale or purchase prices or other unfair contractual conditions.
To limit production, sales or technical development to the detriment of consumers.
To apply different conditions for equivalent services to different economic partners, thereby placing them at a competitive disadvantage.
The fact that entering into contracts is conditional on the acceptance by the economic partner to perform additional services, which, by their nature or according to the commercial practices have no connection with the subject of these agreements.
As the abuse of economic dependence is intended to be included in Book IV of the Code of Economic Law, the Belgian Competition Authorities will be able to intervene and investigate any complaints or on its own initiative. Fines of up to two percent of annual revenue may be imposed, as well as penalty payments in case the prohibition is not respected by the company.
These provisions will come into force in June 2020.
Secondly, inspired by what already exists for consumers, the law prohibits the inclusion of abusive clauses in contracts between companies. A provision is considered abusive when it creates, alone or in combination with other clauses, a clear imbalance between the rights and obligations of the parties arising under the contract.
The unfairness of a contract term is assessed taking into account the nature of the products for which the contract was concluded and by referring, at the time of the execution of the contract, the circumstances in which it was concluded, the general economy of the contract, normal practice in the industry sector concerned, as well as all other clauses of the contract or of any other contract on which it may depend.
The law provides two lists of clauses. The first black list contains clauses which will always be considered as abusive such as the inclusion of an irrevocable commitment for one party, while the performance of the services depends on the discretion of the other party to the contract, to give a party the exclusive right to unilaterally interpret any clause of the contract; or in case of dispute, to cause the other party to waive any means of remedy against them.
The second list contains clauses which are presumed to be abusive, unless the contrary is proven. Examples include the right for a company to unilaterally change the price, characteristics or conditions of the contract without a valid reason; to automatically extend a contract of limited duration, without specification of a reasonable time while the party may give its notice of termination; to place the economic risk on the other party, while normally another party would bear this risk; to release a party of its liability for intentional and gross negligence, or in case of non-performance of an obligation which constitutes one of the principal performances of the contract. Those provisions will come into force in December 2020 and apply to all agreements entered into, renewed or amended after this date. They do not apply to the current contracts on that date.
Lastly, the law forbids any market practice that is considered to be misleading or aggressive towards another party if it has led or may lead this other party to make a decision about a transaction that it otherwise would not have made. Those provisions will come into force in September 2019.