Competition law

Competition law is a complex and dynamic area of law that has a significant impact on the strategic and day-to-day decisions of every company in Belgium. Whether it concerns the conclusion of a distribution agreement, an acquisition, or the pricing of your products, competition rules play a crucial role. The objective is clear: to ensure free and fair competition in order to maximize consumer welfare by offering better products and services at the most competitive prices.

Our attorneys have deep expertise in this area and help companies navigate the competition law landscape. Below, we provide an overview of the main pillars of competition law. For a more detailed analysis of each topic, please click through to our specialized articles.

The legal framework

The fundamentals: Belgian and European law

The basis of competition law in Belgium is formed by two complementary but hierarchically ordered legal frameworks.

1. Book IV "Protection of competition“ of the Belgian Code of Economic Law (CEL).
2. European competition rules, primarily Articles 101, 102 and 106 of the Treaty on the Functioning of the European Union (TFEU)..

Both sources of law make a crucial basic distinction between, on the one hand, anticompetitive agreements, which must always involve at least two independent firms, and, on the other hand, abuse of a dominant position, which can target the behavior of a single firm.

The interaction of Belgian and European law

The question of which legislative framework is applicable depends on the geographic impact of the conduct. European competition law only applies if there is or may be an appreciable effect on trade between EU member states. If this is not the case, then in principle only Belgian competition law applies.

In practice, this does not actually make much difference. In fact, Belgian law is interpreted as much as possible in accordance with the European rules of the game. This "convergence" is reinforced by the primacy of European competition law when trade between member states is indeed affected. The concrete interaction is as follows:

• An agreement that admitted is under European competition law, must also be permitted in Belgium.
• An agreement or abuse of dominance that banned is under European law, must also be prohibited in Belgium. This is where the primacy of EU law comes into play.
• An important exception: unilateral conduct that is European-law not abuse of a dominant position may be dealt with more severely by the Belgian legislator. Belgium has made use of this possibility by including in Book IV WER a specific prohibition of abuse of a position of economic dependence.

In practice, thanks to this convergence, European competition law is always the fixed point of departure for any analysis, even in purely Belgian cases. This has led to a "European level playing field" that significantly increases legal certainty for companies.

Pillar 1: Anti-competitive agreements.

Both Article IV.1 IPR and Article 101 TFEU prohibit agreements between companies that restrict competition. However, this prohibition is not absolute and the analysis proceeds in two steps.

Step 1: Does the appointment fall under the prohibition?

To fall under the prohibition of Article IV.1 IPR and Article 101 TFEU, a number of cumulative conditions must be met. We explain the three most important ones below.

1. Two or more independent enterprises.

• A functional enterprise concept: Competition law uses its own functional concept of an enterprise. As soon as an entity carries out an economic activity on a market, it is considered an "enterprise. The legal form - whether it is a natural person, a legal entity, an association or even a government agency - is irrelevant.
• The economic unit: Companies belonging to the same group are considered a single company for the purposes of competition law. Where control relationships exist, there is an "economic unit. In practice, it therefore makes sense to consider the entire consolidation scope of a group as a single company.
• Importance for practice: This has important implications. An agreement between a Belgian and a French subsidiary of the same group to respect each other's home market does not fall under the cartel ban. After all, there is no collusion between independent companies. Should the same companies belong to different groups, the exact same agreement would be considered a very serious infringement (a so-called market sharing).

2. An interplay

• A broad term: The competition law concept of "agreement" is much broader than the law of obligations. In addition to formal contracts, it also includes concerted practices and decisions of associations of undertakings. A letter of intent, a gentlemen's agreement, informal alignment or even a tacit agreement will suffice.
• Agreement of will is sufficient: Once a will exists, there is an agreement, regardless of the form in which it is expressed or its legal enforceability. Only conduct that is actually unilateral escapes the prohibition, but the conditions for this are very strict.

3. Noticeable restriction of competition.

Even if there is collusion, the prohibition applies only when competition is noticeable is limited. Here, the distinction between target and consequence constraints is fundamental.

• Target limitations:
  • These are agreements whose target in itself is harmful to competition. There is no need to prove its concrete negative effects on the market.
  • Between competitors classically involves agreements on prices, the division of markets or customers, production restrictions and bid rigging (bid rigging).
  • Between non-competitors (e.g. in a vertical relationship between supplier and buyer), the main examples are resale price maintenance (the imposition of resale prices) and certain absolute territorial or customer restrictions. These are usually on the "black list" of the applicable block exemption.
• Consequence limitations:
  • This is the residual category: any restriction that is not a target restriction is assessed for its effects. Here it must be shown that the agreement has appreciable negative effects on competition.
  • The De Minimis Communication from the European Commission offers safe harbor here. An aggregate market share threshold of 10% applies to agreements between competitors; an individual threshold of 15% applies to agreements between non-competitors. Below these thresholds, the restriction is presumed not to be appreciable.
  • An competition clause in a distribution agreement, for example, is generally considered a consequential restriction and thus must be specifically assessed for its effects.

Step 2: Does the appointment qualify for an exemption?

An agreement that constitutes an appreciable restriction of competition, and thus falls under the prohibition of Article IV.1 WER and Article 101 TFEU, is sanctioned with absolute nullity. However, she can escape that nullity if she qualifies for an exemption (sometimes called a "waiver"). This is analyzed through two possible avenues: the group exemptions or an individual exemption.

1. The group exemptions: a safe harbor

For certain, frequently occurring categories of agreements, the European Commission has adopted specific regulations that create a "safe harbor". These Block Exemption Regulations (BERs) act as a kind of "tick-the-box" checklist: if your agreement meets all the conditions of the relevant BER, it is automatically exempt from the ban without the need for further economic analysis.

The value of these European IMPs for companies in Belgium is particularly significant. Indeed, Article IV.3 WER stipulates that these regulations have effect in the Belgian legal order, even for agreements without an appreciable effect on trade between member states. Thus, an agreement that would enjoy a European IMP if it had a European dimension automatically enjoys a Belgian exemption.

An IMP is usually structured according to a set pattern:

• Definitions: The Regulation starts with a list of definitions that are crucial to its scope. For example, the definition of a "non-compete clause" in the IMP for vertical agreements (Regulation 2022/720) not only an absolute prohibition, but also an obligation for a distributor to purchase more than 80% of its needs from one supplier.
• Market share thresholds: To benefit from the safe harbor, the market shares of the parties involved must not exceed certain thresholds. These thresholds vary by type of agreement (e.g., 30% for vertical agreements , 25% for R&D agreements between competitors ). The aim is to ensure that the exemption does not apply to companies with too much market power.
• The blacklist (hardcore restrictions): This is an exhaustive list of restrictions deemed so harmful as to prevent the application of the IMP to the entire agreement exclude. A single blacklist provision, such as resale price maintenance or certain forms of absolute territorial protection, is enough to remove the entire agreement from safe harbor.
• The gray list (excluded restrictions): These are provisions that cannot themselves benefit from the IMP, but - unlike the blacklist - do not "infect" the rest of the agreement. If the rest of the agreement meets the conditions, the exemption continues to apply to it. The prerequisite is that the excluded provision is separable from the rest of the agreement. Competition clauses that exceed a certain duration are often on this list.

Currently there are important IMPs for agreements on, among other things Research & Development (R&D). , specialization , Vertical agreements (such as distribution) , technology transfer (such as licensing) and specific rules for the motor vehicle sector.

2. The individual exemption: a self-assessment

When an agreement is not covered by an IMP (e.g., because the market shares are too high ), the last lifeline is the individual exemption. Parties are then "condemned" to self-assessment (self-assessment) using four cumulative conditions.

This process is inherently uncertain, as there is no way to seek prior green light from a competition authority. Only when the agreement is challenged before a court or examined by an authority will it be judged whether the self-assessment was correct.

The four cumulative conditions for an individual exemption are:

1. Efficiency gains: The agreement must contribute to the improvement of production or distribution, or to technical or economic progress.
2. User's fair share: A fair share of those benefits (e.g., lower prices, better products) should accrue to consumers.
3. Indispensability: The restrictions on competition imposed should not go beyond what is strictly necessary to achieve the efficiency gains.
4. No elimination of competition: The agreement should not allow the parties to eliminate competition for a substantial part of the products.

In practice, it is almost impossible to obtain an individual exemption for target restrictions (the "hardcore" cartels). The European Commission suspects that these agreements do not meet the conditions, and this presumption is quasi irrebuttable in practice. Thus, self-assessment is particularly relevant for consequential restrictions. To help parties with this, the Commission has published several guidelines, such as the Horizontal Guidelines and the Vertical Guidelines.

3. Cartels

Within anticompetitive agreements, cartels deserve a separate mention. They are the most heavily fined infringements of competition law.

By definition, a cartel is a 'target restriction'. This means that the mere agreement itself is prohibited, without the competition authority having to examine whether the agreement actually led to negative effects (such as higher prices). Even a cartel that was never implemented is already outlawed. At most, any consequences play a role in determining the amount of the fine.

The most classic examples of cartels are agreements between competitors on:

• Pricing (price agreements).
• Market Distribution, which can be done on a territorial basis (e.g., an agreement to respect each other's home markets) or on a customer basis (e.g., an agreement to leave each other's historical customers alone).

Cartels can never enjoy block exemption. Moreover, there is a strong presumption that they also do not qualify for an individual exemption. Although this presumption is rebuttable in theory, in practice it is quasi-impossible to justify a cartel. So cartels are prohibited by definition.

Because participants are aware of the risk of very high fines, cartels are usually organized in secret and as little evidence as possible is created. To facilitate the discovery of these secret arrangements, the Belgian Competition Authority (BMA) and the European Commission have created a leniency procedure. Through this procedure, a cartel participant can "denounce" the cartel to the authorities. In exchange for cooperation, the company can count on (i) full immunity against fines, if it is the first to uncover the cartel and (ii) a penalty reduction, if it provides useful information later in the proceedings. This leniency procedure is very successful in practice and is the trigger for the majority of cartel investigations initiated.

Want to know more about how to make your distribution, licensing or collaboration agreements competition-proof? Read all about it on our page on restrictive agreements and exemptions.

Pillar 2: Abuse of a dominant position

The second pillar of competition law, found in Article IV.2 WER and Article 102 TFEU, focuses on the unilateral conduct of companies. The rule is clear: it is not prohibited to hold a dominant position, but it is prohibited to abuse that position. The analysis therefore consists of two steps: first, whether a dominant position exists, and if so, whether it is abusive.

Step 1: Establishing dominance

To correctly estimate a firm's market position, the "relevant market" must first be defined. It consists of both a geographic market and a product market (for example: the Belgian market for the sale of beer in the on-trade).

Then the position of players in that relevant market is measured, with their market shares being a very important lead. When calculating those market shares, the value of sales (revenue) is generally preferred, but in practice, sales volumes (such as car sales registration figures) or best estimates are often used.

Using market shares, a number of important rules of thumb apply:

• Market share under 40%: There is a rebuttable presumption that the company not dominance.
• Market share above 50%: With a stable market share of 50% or more, there is a rebuttable presumption that the company has well holds a dominant position. It is then up to the company itself to show that, despite its large market share, it is not dominant.
• Market share between 40% and 50%: In this zone, additional factors should be examined, such as the market shares of the other players, the existence of entry barriers, or the "must have" nature of the products of the company in question.
• Market share above 70%: From this level, a strong and very difficult to rebut presumption of dominance applies.

Step 2: Identifying abuse

A dominant firm is subject to stricter rules than its competitors. A so-called "special responsibility" rests on her not to harm competition by her conduct. The abuses that a dominant firm can commit are generally classified into two categories.

• Exclusionary abuses: These are behaviors aimed at keeping remaining (or potential) competitors out of the market. Examples include:
  • Price related: Applying excessively low "predatory pricing" (predatory pricing), "choke prices" (margin squeeze) or conditional discount systems that bind customers.
  • Non-price related: Imposing exclusive purchase obligations, an unjustified refusal to supply, or the practice of tying and bundling.
• Exploitation abuses: These are behaviors in which the dominant firm uses its market power to exploit its customers. The main examples are:
  • Charging excessively high prices.
  • Discriminating between different customers without objective justification.

Are you facing a supplier or customer who appears to be abusing their market power? Find out your rights on our page on abuse of dominance.

A Belgian specialty: abuse of economic dependence

Since August 1, 2020, Belgium supplements the classic prohibition of abuse of a dominant position with a prohibition of abuse of a position of economic dependence. This instrument, laid down in Article IV.2/1 WER, does not exist in European competition law but is reflected in the legislation of numerous other member states.

For a prohibited abuse, three cumulative conditions must be met.

1. A position of economic dependence

This first condition is clearly distinct from the concept of dominance. A dominant position involves absolute market power in the market as a whole, whereas economic dependence involves the relative market power of a firm vis-à-vis a specific trading partner.

Specifically, it is perfectly possible for a supplier with a market share of only 30% not to be dominant, yet be such an important trading partner for its customers that they have no reasonable and equivalent alternative available to them. Under these circumstances, the supplier may have the ability to impose conditions that would be unachievable under normal market conditions. Buyers are then in a position of economic dependence on their supplier.

2. Abuse of that position

Next, there must be abuse. Given the recent nature of the prohibition, legal practice in the coming years will have to clarify this. The law already provides that the conduct that can constitute an abuse of a dominant position can also lead to an abuse of a position of economic dependence.

3. A possible impairment of competition.

Finally, the abuse must be capable of affecting competition in the relevant Belgian market or a substantial part of it. This third condition is crucial. It emphasizes that this prohibition belongs to competition law and not to general legislation on unfair market practices. This means that the problem must transcend the mere contractual relationship between the two parties and be capable of having a broader impact on competition in the market.

Are you an SME and feeling pressured by a major trading partner? Read more about these specific protections on our abuse of economic dependency page.

Pillar 3: Merger control (mergers and acquisitions)

A separate area of competition law, often considered an "outlier," is merger control. Unlike other competition rules that penalize past behavior, this is a prior ("ex ante") control procedure conducted by the Belgian Competition Authority (BMA) and the European Commission.

Control applies if there is a "concentration" that exceeds certain "turnover thresholds.

What is a "concentration?

A concentration occurs when there is a change of control over an enterprise or parts thereof. This change may result from an equity transaction, the transfer of assets or even the provision of specific contractual rights. The most classic example is a majority shareholder selling its entire shareholding to an acquirer.

A specific case is the creation of a joint venture, where an important distinction applies:

• Full-function joint venture ("full-function joint venture"): This is the creation of a joint venture that permanently performs all the functions of a normal enterprise. The creation of such an enterprise is a concentration.
• Partial joint venture: The creation of a joint venture that does not perform all the functions does not constitute a concentration. This is the case, for example, if the joint venture is limited to producing parts that are then supplied to the parent companies. Such partial joint ventures are assessed under the anti-competitive agreement rules.

What revenue thresholds apply?

If there is a concentration, the turnover thresholds determine whether the European Commission or national authorities have jurisdiction.

• European thresholds: If the thresholds in the European Merger Regulation (Regulation 139/2004) are met, the concentration must be notified to the European Commission. The Commission's decision then applies to the entire EU.
• Belgian thresholds: If the European thresholds are not met, but the Belgian thresholds (from Book IV WER) are, the BMA must consider the concentration. In this case, the BMA's decision only applies to Belgium.

Vigilance is needed if European thresholds are not exceeded. When the companies concerned operate in several member states, it is necessary to check whether thresholds in other member states are exceeded in addition to the Belgian thresholds.

The notification and suspension requirement

A concentration that exceeds the notification thresholds must be notified to the competent authority. Hand in hand with this notification obligation goes an obligation to suspend ("standstill" obligation): the companies may not implement the concentration until they get the green light. Failure to comply with this duty to suspend is described as gun jumping and can lead to heavy fines.

After application, a procedure starts with strict deadlines. This usually includes a first phase for an initial review. If that leaves doubts about admissibility, a second, more in-depth investigation phase is opened. Certain transactions may be subject to a simplified procedure.

The material test and potential commitments

The substantive test applied by authorities is whether the concentration has the effect of significantly impeding effective competition in the relevant market. This may be particularly the case if the concentration creates or strengthens a dominant position.

To address any concerns of the authorities, the companies concerned may offer undertakings in the course of the procedure. A typical example is the sale of a part of the target company to a competitor in order to ensure that sufficient counterweight remains in the marketplace.

Are you planning an acquisition or merger? Make sure you map out the competition law aspects in good time. More information can be found on our page on merger control.

Enforcement: from high fines to compensation claims

Competition law enforcement is complementary and occurs along two tracks: public enforcement by specialized authorities and private enforcement before civil courts.

Public enforcement: the competition authorities

Public enforcement is conducted at the Belgian level by the Belgian Competition Authority (BMA), under the supervision of the Market Court (and the Court of Cassation). At the European level, the European Commission is competent, under the supervision of the Union courts (the General Court and the Court of Justice). These authorities work closely together within the 'European Competition Network' (ECN).

• Start of procedure: An investigation may be initiated ex officio ("ex officio") or following a complaint. For cartels, however, the most common trigger is an application for leniency by one of the participants.
• Structure in Belgium: Belgium has a two-tier system, where the investigation is conducted by the Auditorate and the decision is taken by the Competition College. In practice, however, in many cases the Auditorate also has decision-making power, for example to dismiss or settle cases.
• Possible outcomes: An investigation may lead to a prohibition decision, a settlement, a decision in which the companies make binding commitments, or a dismissal. Both the BMA and the Commission can also impose interim measures in urgent cases. The BMA has historically used the latter option more often than the Commission.
• Fines and penalties: The authorities can impose very high fines, up to a maximum of 10% of global group turnover. In calculating fines, the BMA is largely guided by the European Commission's fining guidelines. In addition to fines, periodic penalty payments can also be imposed.
• Personal liability in Belgium: A Belgian peculiarity is that not only companies but also natural persons involved in certain cartel infringements can be fined. They risk an administrative fine of 100 to 10,000 euros. For bid rigging, they can even be criminally charged. These individuals can file a personal leniency application. The European Commission can only impose fines on companies and not on natural persons.

Private enforcement: the role of the courts

Businesses and consumers can also invoke competition law directly in the ordinary courts. This can be done both as a defense and attack remedy.

• Competition law as a defense:
  • A company sued for a breach of contract (e.g., the breach of a non-competition clause) may argue the unenforceability of the clause for conflict with competition law.
  • It is also invoked as a defense to a claim for third-party complicity in another's breach of contract. A classic example is a trader outside a selective distribution network who is accused of having purchased goods from an approved member, in violation of its contract. The trader may question the validity of the prohibition on resale in the network under competition law.
• Competition law as a means of attack (damages):
  • A company can also seek damages from another company that has committed a violation of competition law. The European Commission very deliberately promotes this form of enforcement as a complement to public enforcement.
  • A textbook example is claims for damages by victims of a price cartel. Cartels are subject to a rebuttable presumption that they caused damages (usually in the form of excessive prices). It is up to the cartel participants to rebut that presumption.

Are you the victim of a competition infringement or is your company under investigation? Contact us for specialized assistance. Learn more on our page about enforcement and procedures.

Conclusion

Competition law is an essential part of corporate law in Belgium and the EU. A proactive and informed approach is not a luxury, but a necessity in order to avoid risks and take advantage of opportunities. Our firm is ready to assist you with specialized advice and strategic guidance in all facets of this complex area of law.

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