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Print articleVertical Agreements: Regulation of Distribution Practices in Belgium
March, 2009 - Carmen Verdonck and Stefanie Vyncke
Carmen Verdonck and Stefanie Vyncke wrote the chapter on
Belgian Law in the 2009 edition of 'Getting The Deal Through: Vertical
Agreements'. This updated edition examines the regulation of distribution practices in jurisdictions worldwide.
Antitrust law
1. What are the legal sources that set out the antitrust law applicable to vertical restraints?
The main sources of law applicable to vertical restraints in Belgium are two Acts of 10 June 2006 on the protection of economic competition and on the establishment of a Competition Council, as coordinated by the Royal Decree of 15 September 2006 (‘the Competition Act’). The text of the Competition Act is published on the website of the competition authorities. The decisions of the Competition Council can be consulted here.
Article 2(1) Competition Act (equivalent to article 81(1) EC) prohibits agreements between undertakings that have as their object or effect the prevention, restriction or distortion of competition within Belgium.
Article 2(2) Competition Act renders agreements falling within this prohibition void, unless they satisfy the conditions for exemption under article 2(3) in a similar way as articles 81(2) and (3) EC.
Article 5(1) Competition Act confirms that the prohibition on restrictive practices is not applicable to agreements that benefit from an EU block exemption. The effect of the EU block exemptions is moreover extended by article 5(2) to situations where trade between member states is not affected.
Thus far no ‘Belgian’ block exemptions or guidelines in relation to vertical agreements have been issued.
A number of Royal Decrees have been adopted implementing the Competition Act regarding procedural issues, such as the filing of complaints.
Types of vertical restraint
2. List and describe the types of vertical restraints that are subject to antitrust law. Is the concept of vertical restraint defined in the antitrust law?
The Competition Act does not define vertical restraints or list specific vertical restraints covered by the prohibition of article 2 Competition Act. The Belgian courts and competition authorities have stated that the Competition Act should be interpreted in light of the jurisprudence of the ECJ and the CFI and the decisions and guidelines of the European Commission. The concept and types of vertical restraints subject to Belgian antitrust law are therefore nearly identical to the equivalent EC competition law concepts and types of vertical restraints.
Vertical restraints subject to Belgian antitrust law include resale price-fixing, export restrictions, non-compete clauses, exclusive and selective distribution.
Legal objective
3 Is the only objective pursued by the law on vertical restraints economic, or does it also seek to protect other interests?
The aim of the Competition Act is mainly economic (ie, to protect competition). In the application of the exemption to the prohibition on restrictive agreements under article 2(3) Competition Act, the interests of consumers are also taken into account, as well as the interests of the small and medium-sized companies. The protection of the interests of small and medium sized undertakings is also explicitly included in article 2(3) Competition Act which contains the four same conditions for exemption as article 81(3) EC but also adds to the criteria ‘which contribute to improving production or distribution or to promoting technical and economic progress’ the wording ‘or which enable small and medium-sized undertakings to assert their competitive position in the market concerned or internationally’ as an alternative ground for exemption.
Responsible agencies
4 What agency is responsible for enforcing prohibitions on anti-competitive vertical restraints? Where there are multiple responsible agencies, how are cases allocated? Do governments or ministers have a role?
The prohibition of anti-competitive vertical restraints can be enforced by the ordinary courts and by the Competition Council (‘Conseil de la Concurrence’), after investigation by the Competition Service (‘Service de la Concurrence’) under the supervision of the prosecutor (‘auditorat’).
The Competition Council is an independent administrative court, whereas the Competition Service is a department of the Ministry of Economic Affairs. The prosecutor is an independent person who leads investigations by the Competition Service.
If a request for preliminary measures is submitted, which the prosecutor considers is not justified, he can reject it. The requesting party can appeal this decision before the President of the Competition Council.
When the prosecutor considers that the request for preliminary measures is justified, the President of the Competition Council will take a decision based on the prosecutor’s report. This decision of the President of the Competition Council can be appealed to the Brussels Court of Appeal.
When a complaint is lodged with the prosecutor and he considers it unjustified, he can reject it. The complainant can appeal this decision to the Competition Council. If the prosecutor considers that the complaint is justified, he will submit a report to the Competition Council, which will then decide the case.
The minister of economic affairs can order a general investigation or an investigation of a particular sector of the economy. However, he has no influence on the outcome of the case. Furthermore, the minister is competent to introduce an appeal before the Court of Appeals in Brussels or the Supreme Court. Finally, the minister can also make written submissions to the courts and the Competition Council.
The ordinary courts also play an important role in the application and enforcement of the competition rules on vertical restraints, and frequently pronounce on the legality of distribution, agency or franchising agreements. They cannot impose fines, but can order a certain practice to stop, subject to a penalty payment and publicity measures. They can also award damages, to the extent that the conditions for the breach of the competition laws, the causal link and the damages can be proved.
Jurisdiction
5 What is the test for determining whether a vertical restraint will be subject to antitrust law in your jurisdiction? Has the law in your jurisdiction regarding vertical restraints been applied extraterritorially?
The Competition Act applies to all vertical restraints which affect competition on the Belgian market or part of it.
Foreign undertakings are therefore also subject to the Competition Act if they participate in restrictive agreements or concerted practices having an effect on the Belgian market.
Agreements concluded by public entities
6 To what extent does antitrust law apply to vertical restraints in agreements concluded by public entities?
The Competition Act applies to agreements between ‘undertakings’. The concept of ‘undertaking’ in the Competition Act has the same meaning as in EU competition law. Vertical restraints in agreements with public or state-owned entities will therefore be subject to anti¬trust law, to the extent that the agreement was concluded by the entity in the performance of an economic activity and not when ful¬filling its public task. This view has been confirmed by the Brussels Court of Appeal in a preliminary ruling (Brussels Court of Appeal, 31 January 2006, Jaarboek Handelspraktijken en Mededinging 2006, page 762).
Sector-specific rules
7 Do particular laws or regulations apply to the assessment of vertical restraints in specific sectors of industry? Please identify the rules and the sectors they cover.
On the basis of article 5 Competition Act, the EU Motor Vehicle Block Exemption and other EU block exemptions will apply also to agreements only having effect on the Belgian market.
When applying article 3(5) of the Motor Vehicle Block Exemption at the termination of dealerships for motor vehicles, the mandatory Belgian Act of 27 July 1961 on the unilateral termination of dealer¬ships should be taken into account.
General exceptions
8 Are there any general exceptions from antitrust law for certain types of vertical restraints? If so, please describe.
In order for the prohibition of article 2(1) of the Competition Act to apply, the vertical restraint must have an ‘appreciable effect’ on competition within Belgium or a relevant part of it. The Competition Council has been given the power to issue de minimis notices. However, no such notice has yet been issued. In practice, the Belgian competition authorities and courts seem to apply the European Commission’s de minimis notice (see for example Brussels Court of Appeal, 7 March 2006, Power Oil NV/DDD. Invest NV, Jaarboek Handelspraktijken en Mededinging 2006, page 773 or decision of the Competition Council of 10 October 2003, Case 2003-P/K-79).
Agreements
9 Is there a definition of ‘agreement’ – or its equivalent – in the antitrust law of your jurisdiction? When assessing vertical restraints under antitrust law does the agency take into account that some agreements may form part of a larger, interrelated network of agreements or is each agreement assessed in isolation?
There is no definition of ‘agreement’ in the Belgian Competition Act. The Belgian competition authorities and courts apply the same definition of ‘agreement’ as developed by European case law. Like the European Commission, the Competition Council will examine the agreement or concerted practice in the broader legal and economic context and take into account the existence of network effects of similar agreements applied by other undertakings. If the vertical restraints concluded by the supplier and its competitors have the cumulative effect of foreclosing market access, then any vertical restraints that contribute significantly to that foreclosure may be found to breach the Competition Act. The Brussels Court of Appeal thus ruled that the cumulative effect of three Belgian fruit auction houses, applying the same terms and conditions on sales, significantly restricted competition in the market (Court of Appeals of Brussels, 29 September 2004, Belgische Fruitveiling BVBA/Nationale Unie van Belgische exporteurs van Land-en Tuinbouwproducten VZW ea; Veiling Borgloon CVBA/Nationale Unie van Belgische exporteurs van Land-en Tuinbouwproducten VZW ea, Competition Council, Competition Council Annual Report 2004, see also Antwerp Court of Appeal, 14 March 2006, TBM, page 784).
Parent and related-company agreements
10 In what circumstances do the vertical restraints rules apply to agreements between a parent company and a related company (or between related companies of the same parent company)?
Article 2 Competition Act only applies to agreements between independent undertakings, and therefore not to those between a parent and its subsidiary nor between two undertakings controlled by the same ultimate parent company.
Agent–principal agreements
11 In what circumstances does antitrust law apply to agent–principal agreements in which an undertaking agrees to perform certain services on a supplier’s behalf for a commission payment?
There is no explicit provision for agents in the Competition Act. In the preparatory works to the Competition Act, the Belgian legislators clearly indicated their desire for equivalent provisions in the Belgian Competition Act to be interpreted in the same way as under EC competition law. It can therefore be expected that the courts and competition authorities will not apply antitrust law to agreements between a principal and a ‘genuine agent’, and will apply the same criteria as the European Commission and the European courts for qualification as a ‘genuine agent’.
Intellectual property rights
12 Is antitrust law applied differently when the agreement containing the vertical restraint also contains provisions granting intellectual property rights (IPRs)?
The EC Block Exemption 2790/99 and the Commission’s Vertical Guidelines apply to agreements granting IPRs where the granting of such IPRs is not the primary object of the agreements and the IPRs relate to the use, sale, or resale of the contract products by the buyer or its customer. If the primary object of the agreement relates to the licensing of IPRs, the applicability of the EC Technology Transfer Block Exemption and the related guidelines should be checked.
Analytical framework for assessment
13 Explain the analytical framework that applies when assessing vertical restraints under antitrust law.
The analytical framework used by the Belgian Competition authorities is very similar to the European framework.
Vertical restraints agreed by public entities while performing their public task, included in genuine agency agreements and agreements between companies belonging to a same corporate group, are excluded from the application of the antitrust law.
For other vertical agreements, it should first be checked whether the vertical agreement contains a hard-core restriction: fixing of minimum resale prices, certain restrictions on the customers to whom, or the territories into which, a buyer can sell the contract goods, restrictions on members of a selective distribution supplying each other or end users, and restrictions on component suppliers selling components as spare parts to the buyer’s finished products.
If the agreement does not contain a hardcore restriction, it should then be checked whether it can be considered de minimis, because it does not appreciably restrict competition on the Belgian market or a relevant part of it. The Commission’s de minimis notice will provide guidance.
Given that the EC block exemptions also apply in Belgium to agreements without an appreciable effect on trade between EU mem¬ber states, the agreement should then be checked to see whether it falls within the scope of the EC Vertical Agreements Block Exemption (or another EC Block Exemption such as the Technology Transfer Block Exemption) or not.
Finally, if the vertical agreement restricts competition but cannot be considered de minimis and does not fall within the scope of a Block Exemption, an ‘individual assessment’ of the agreement will be made to determine whether it falls within the scope of the prohibi¬tion of article 2(1) Competition Act or not, and, if it does, whether the conditions for exemption under article 2(3) Competition Act are satisfied or not. In making this assessment, the competition author¬ity and courts will closely follow European policy, in particular the Vertical Guidelines of the European Commission and the case law of the European courts.
14 To what extent does the agency consider market shares, market structures and other economic factors when assessing the legality of individual restraints? Does it consider the market positions and conduct of other suppliers and buyers in its analysis?
The Belgian competition authorities and courts do consider the market shares, market structures and other economic factors when assessing individual restraints. The Belgian regime and practice are in line with the European regime and practice in this respect. The com¬petition authorities and courts also refer to the criteria set out in the European Commission’s Notice on Agreements of Minor Importance (OJ 2001, C368/13). In this respect, see, for example Brussels Court of Appeal, 7 March 2006, Power Oil NV/DDD. Invest NV (Jaarboek Handelspraktijken en Mededinging 2006, page 773) or the decision of the Competition Council of 10 October 2003 (Case 2003-P/K-79). In the above-cited decisions, the Brussels Court of Appeal referred to the same levels of market shares as in the de minimis notice. An agreement between undertakings will therefore generally be deemed not to have an appreciable effect on competition, if the market share of each of the parties, which are not direct or potential competitors, does not exceed 15 per cent. If the parties are direct or potential competitors, their market share should not exceed 10 per cent for the agreement to be considered de minimis.
The Brussels Court of Appeal in the Power Oil NV/DDD decision, also considers the market structure, referring to the same de minimis notice. The threshold is lowered to 5 per cent if on a relevant market the competition is restricted because of the cumulative blocking effect of parallel networks of agreements which have similar effects on the market. In cases where the agreement contains a hardcore restriction, the competition authorities and courts do not further examine the appreciable effect of the restriction on competi¬tion (see for example: Competition Council, Case no. 2008-P/K-43 of 7 July 2008 Test-Achats c/ auto-écoles de Belgique; Brussels Court of Appeal, 23 January 2007, Limb Rechtsl, 2007, p307).
Block exemption and safe harbour
15 Is there a block exemption or safe harbour that provides certainty to companies as to the legality of vertical restraints under certain conditions? If so, please explain how this block exemption or safe harbour functions.
Article 5 Competition Act confirms that the prohibition on restrictive practices does not apply to agreements that benefit from an EC block exemption. The effect of the EC block exemptions is moreover extended in Belgium to situations where trade between EU member states is not affected. The EC Block Exemptions Regulations 2790/99, 1400/2002, 772/2004 therefore apply also to purely national situations. Article 50 Competition Act provides that ‘Belgian’ block exemptions can be issued in the form of a Royal Decree. However, no such ‘Belgian’ block exemptions have yet been adopted.
Types of restraint
16 How is restricting the buyer’s ability to determine its resale price assessed under antitrust law?
Vertical price-fixing is considered to constitute a hard-core restriction of competition for which no exemption can be obtained (Competition Council, 8 December 1998, No. 98-RPR-6, NV Gebroeders Mermans/NV Van Cauwenbergh, MB 10 November 1999, 41.940 and Brussels Court of Appeal 13 October 1998, NV Laroy-Duvo/Belgian Government, MB, 21 October 1998, 34,884). The determination of minimum resale prices is also considered as a restriction of competition per se. Maximum or recommended prices are, in principle, allowed, provided that the supplier does not use any pressure or other incentives to enforce them.
17 Have there been any developments in your jurisdiction in relation to resale price maintenance restrictions in light of the landmark US Supreme Court judgment in Leegin Creative Leather Products Inc v PSKS Inc. If not, is any development in this area anticipated? Has there been any more general discussion by the relevant agency (or any other influential stakeholder) of the policy in your jurisdiction regarding resale price maintenance?
In one case, the Brussels Court of Appeal also referred to the legal, factual and economic context of the agreement before concluding that the resale price maintenance clause breached antitrust law (Brussels Court of Appeal 13 October 1998, NV Laroy-Duvo/Belgian Government, MB 21 October 1998, 34,884). In general, however, Belgian case law to date has not assessed resale price fixing using a rule-of-reason-type analysis.
Given that Belgian competition law is interpreted and applied while taking into account European case law, it can be expected that a rule-of-reason-type analysis will only be introduced in respect of resale price maintenance clauses, to the extent that the EU Commission and the European courts start assessing fixed minimum resale prices using such analysis.
18 Have decisions relating to resale price maintenance addressed the possible links between such conduct and other forms of restraint? Have the decisions addressed the efficiencies that it is alleged can arise out of such restrictions?
In the ‘Orthodontist case’, the Competition Council had to come to a decision on resale price maintenance practices linked to market partitioning (Competition Council, Case no. 2001-V/M-02 of 10 January 2001, Belgische Beroepsvereniging van Universitaire Specialisten in de Orthodontie/Landsbond Der Christelijke Mutualiteiten en Regionale Christelijke Ziekenfondsen). The Christelijke Mutualiteiten (‘CM’) (a health insurance fund) deter¬mined the conditions according to which a practitioner was approved as an orthodontist and published a list with the names of approved orthodontists which patients used to make their choice. The CM also imposed a maximum amount up to which treatment costs would be reimbursed and any additional costs to be borne by the patients. The Competition Council judged that the combination of these two restrictions constitute a prima facie breach of the Competition Law. In a more recent case, the Competition Council also suspected the Belgian Federation of Driving Schools, who clearly prohibited its members from ‘destabilising prices’ of market partitioning. The driving schools were also prohibited from attract¬ing clients from their competitors in a given territory. These facts led the Competition Council to rule that article 2 Competition Act had been breached and to fine the Federation (Competition Council, case no. 2008-P/K-43 of 7 July 2008).
19 How is restricting the territory into which a buyer may resell contract products assessed under antitrust law? In what circumstances may a supplier require a buyer of its products not to resell the products in certain territories?
Article 2 Competition Act was drafted, and has been interpreted, in the same way as Article 81 EC Treaty. By virtue of article 5 Competition Act, Regulation 2790/99 also applies to agreements without any significant effect on trade between EU member states. Also the Vertical Guidelines of the European Commission and European case law can be expected to be closely followed. (See for a recent example: Brussels Court of Appeal 23 January 2007, Limb Rechtsl 2007 (4), p. 297 in which the prohibition of a buyer from reselling in a certain territory was considered a significant restriction.)
20 Explain how restricting the customers to whom a buyer may resell contract products is assessed under antitrust law. In what circumstances may a supplier require a buyer not to resell products to certain resellers or end-consumers?
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect.
21 How is restricting the uses to which a buyer puts the contract products assessed under antitrust law?
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect.
22 How is restricting the buyer’s ability to generate sales via the internet assessed under antitrust law? Have the agencies issued decisions or guidance in relation to restrictions on internet selling? If so, what are the key principles?
There is no specific Belgian guidance on the subject, but Belgian case law has adopted the same position as the European competition authorities on the buyer’s restriction of sales via the internet. The Belgian Supreme Court’s judgment of 10 October 2002 in the case Makro / Beauté Prestige International ao (www.cass.be), when assessing a selective distribution system which restricted the buyer to generating sales via the internet, referred expressly to the Guidelines on Vertical Restrictions (2000/C 291/01) when explaining its decision. The Supreme Court stated that a vertical agreement cannot contain a restriction to sell via the internet, unless such restriction is objectively justified. In the case referred to, the Liège Court of Appeal had given a rather broad interpretation to the term ‘objective justification’. The restriction on the sale via the internet concerned luxury perfumes and cosmetics and the Liège Court of Appeal held that the restriction on internet sales was objectively justified by the nature of these products, requiring personal professional advice and therefore methods of sale which cannot be assured over the internet. The Supreme Court deciding on this case explicitly rejected the allegation that for internet sales only restrictions based on qualitative criteria in the use of internet can be imposed.
23 Briefly explain how agreements establishing ‘selective’ distribution systems are assessed differently under antitrust law.
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect (see for example Competition Council, 25 March 2003, case 2003-E/A-24, Diprolux SA, MB 14 October 2003, 49,831).
24 Are selective distribution systems more likely to comply with antitrust law where they relate to certain types of product? If so, which types of product and why?
Entirely in line with the European regime, under Belgian competition law, the luxury image of products can justify selective distribution. In the rare Belgian case law on selective distribution systems, most of the cases concerned jewellery (see for example Antwerp Court of Appeal, 22 November 1995, Van Sloun Juweliers BVBA / Les must de Cartier Belgique NV, Jaarboek Handelspraktijken en Mededinging, 1995, p345), or perfume, personal hygiene products and cosmetics (see for example Competition Council, 26 June 1995, case 95-PRA-1, Van Nieuwenhuysen/NV Parfums Christian Dior SAB, MB 26 July 1995, 20260; Competition Council, 25 March 2003, case 2003-E/A-24, Diprolux SA, MB 14 October 2003, 49.831; Belgian Supreme Court, 10 October 2002, Makro / Beauté Prestige International ao, www.cass.be). In the above-mentioned Makro case, the Liège Court of Appeal stated that cosmetics and luxury perfumes can be considered as sophisticated products and the results of special research processes, whose luxury image can be preserved through selective distribution, since the product will thus stand a better chance of achieving its rightful place at the points of sale.
25 Regarding selective distribution systems, are restrictions on internet sales by approved distributors permitted? If so, in what circumstances? Must internet sales criteria mirror offline sales criteria or would discrepancies be permitted?
In the aforementioned Makro case (Belgian Supreme Court, 10 October 2002, Makro / Beauté Prestige International ao, www.cass.be), the Supreme Court dismissed the appeal lodged against the decision of the Liège Court of Appeal which stated that the restrictions on internet sales were objectively justified, since the nature of the product required distribution via ‘first-rate’ points of sale, where appropriate, personal, professional advice could be assured. Thus, the suppliers could not only require a distributor to maintain a bricks-and-mortar store, but could even forbid them from selling online if such prohibition were objectively justified.
Belgian law has specific legislation which sets out certain additional rules for internet sales (cfr articles 77 to 83 of the Belgian Trade Practices Act of 14 July 1991 and articles 8 to 12 of the E-commerce Act of 11 March 2003) that do not apply to other sales.
26 Does the relevant agency take into account the possible cumulative restrictive effects of multiple selective distribution systems operating in the same market?
There is no case law known to us explicitly dealing with the cumula¬tive restrictive effects of multiple selective distribution systems operating in the same market.
27 Has the agency taken decisions dealing with the possible links between selective distribution systems and resale price maintenance policies? If so, what are the key principles in such decisions?
The Mons Court of Appeal, ruling on the legality of a selective distribution system, was of the opinion that a clause which requested the prior approval by the seller of advertisements placed by the buyer, could be prohibited if it constituted a form of indirect control of the prices, the number and the frequency of the advertisements and the reductions accorded (Mons Court of Appeal, 6 September 2004, DAOR 2005, 48).
Another decision of the Brussels Court of Appeal established the illegality of a selective distribution system used by holiday centres. The distribution network did not respect the conditions of objectivity and equality of the qualitative selection criteria on the basis of which the distributors were selected. Moreover, the Court held that given that resale prices were imposed on the resellers, the selective distribution network was prohibited per se (Brussels Court of Appeal, 22 April 1999, JLMB 1999, 1240 and TBH 1999, 418).
28 How is restricting the buyer’s ability to obtain the supplier’s products from alternative sources assessed under antitrust law?
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect.
(See for example Brussels Court of Appeal 29 October 2002, Etienne Decock/Danny Claerhout en Louis De Ketelaere, Jaarboek Handelspraktijken en mededinging 2002, p951).
29 Explain how restricting the buyer’s ability to stock products competing with those supplied by the supplier under the agreement is assessed under antitrust law.
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect.
30 How is requiring the buyer to purchase from the supplier a certain amount or minimum percentage of the contract products assessed under antitrust law?
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect.
31 Explain how restricting the supplier’s ability to supply to other resellers, or sell directly to consumers, is assessed under antitrust law.
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect.
32 To what extent are franchise agreements incorporating licences of IPRs relating to trademarks or signs and know-how for the use and distribution of products assessed differently from ‘simple’ distribution agreements under antitrust law?
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect.
33 Explain how a supplier’s warranting to the buyer that it will supply the contract products on the terms applied to the supplier’s most-favoured customer or that it will not supply the contract products on more favourable terms to other buyers is assessed under antitrust law. Would the analysis differ where the buyer commits to ‘most favoured’ terms in favour of the supplier?
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect.
Notifying agreements
34 Is there a formal procedure for notifying agreements containing vertical restraints to the agency? Is it necessary or advisable to notify it of any particular categories of agreement? If there is a formal notification procedure, how does it work? What type of ruling (if any) does the agency deliver at the end of the procedure? And how long does this take? Is a reasoned decision published at the end of the procedure?
Since the entry into force of the new Competition Act on 1 October 2006, there is no longer a formal procedure for notifying agreements containing vertical restraints to the Belgian competition authorities.
Agency guidance
35 If there is no formal procedure for notification, is it possible to obtain guidance from the agency as to the antitrust assessment of a particular agreement in certain circumstances?
The Competition Act does not provide for the right or the possibility of obtaining guidance from the competition authorities on particular vertical restraints. In practice, the prosecutors may be willing to provide their view informally.
Such views, however, are not binding on the Competition Council.
Complaints procedure for private parties
36 Is there a procedure whereby private parties can complain to the agency about alleged vertical restraints?
Complaints of antitrust infringements, including vertical restraints, can be filed with the prosecutor. The form and content of a complaint are determined by the Royal Decree of 31 October 2006 which prescribes the use of a ‘PK Form’ (MB 21 November 2006, page 64, 624 or electronically).
The form enumerates a limited number of formal and material requirements to be fulfilled and the information to be provided (description of the practice, the nature of the products, market positions, the alleged infringements, etc).
If the prosecutor considers that the complaint is not justified, he can reject it. The complainant can appeal this decision to the Competition Council within 30 days. If the prosecutor considers that the complaint is justified, the Competition Council will decide the case on the basis of the prosecutor’s report and a hearing. There is no legal time limit for decisions to be taken by the prosecutor or the Competition Council, and the procedure may take years.
However, interim measures can be applied for. Depending on the circumstances, proceedings may, however, be speeded up by the authority (for example the Football TV Rights case in 2005 where the investigation began on 21 June 2005 and the decision was taken on 29 July 2005, before the start of the new football season).
Enforcement
37 How frequently is antitrust law applied to vertical restraints by the agency? What are the main enforcement priorities regarding vertical agreements?
The competition authority used to allocate most of its resources to merger review proceedings, to which strict deadlines apply. Since the increase of the thresholds for Belgian merger control and the entry into force of the new Competition Act on 1 October 2006, more resources have become available for the investigation of restrictive practices, including vertical agreements. However, it seems that the authorities are focusing more on hardcore cartels and abuses of dominant position. To date, very few rulings on vertical agreements have been made.
The ordinary courts, however, frequently apply antitrust law to vertical restraints, especially in cases regarding resale price main¬tenance, exclusivity and non-compete undertakings in distribution agreements.
38 What are the consequences of an infringement of antitrust law for the validity or enforceability of a contract containing prohibited vertical restraints?
Antitrust law is considered to be part of public order law, therefore the agreements or decisions forbidden under article 2(1) Competition Act are automatically void under article 2(2) Competition Act. This nullity is an absolute nullity, which works ex tunc. Under Belgian law, the severability principle applies, and, therefore, in principle, only the prohibited clauses become automatically null and void, not necessarily the whole agreement (Brussels Court of Appeal 23 January 2007, Limb Rechtsl 2007(4), page 297). The nullity of the contractual provision only leads to the nullity of the agreement, if the null and void provision is inextricably linked to the remainder of the agreement in view of the will expressed by the parties and the structure of the agreement (Brussels Court of Appeal 28 June 1995, Jaarboek Handelspraktijken & Mededinging 1995, page 576). Previous case law explicitly stated that the nullity of the clause breaching antitrust law was absolute, and the duration of a non-compete clause in breach of antitrust law cannot be reduced by a judge to a legal duration (Brussels Court of Appeal 28 June 1995, Jaarboek Handelspraktijken & Mededinging 1995, page 576). However, a more recent opinion of the Competition Council and a judgment of the Brussels Court of Appeal allow the excessive duration of a non- compete clause to be reduced by a judge to a duration that would be valid under antitrust law (Brussels Court of Appeal, 7 March 2006, Power Oil NV/DDD. Invest NV, Jaarboek Handelspraktijken en Mededinging 2006, p773).
39 May the agency impose penalties itself or must it petition the courts or another administrative or government agency? What sanctions and remedies can the agency or the courts impose when enforcing the prohibition of vertical restraints? What notable sanctions or remedies have been imposed? Can any trends be identified in this regard?
The Competition Council can impose administrative fines of up to 10 per cent of the annual turnover of the undertaking (Belgian turnover and turnover realised by exports) and penalty payments of a fixed amount per day that cannot exceed 5 per cent of the aver¬age daily turnover of the undertaking, subject to the decision. The Competition Council can decide on the merits, but also impose provisional measures and endorse engagements offered by the parties. The Competition Council cannot award damages.
Parties wishing to obtain damages have to introduce a claim before the ordinary courts, which will make a decision on the merits, and may grant provisional measures or a cease and desist order, with penalty payments and publication measures. The ordinary courts cannot, however, impose administrative fines or penalties.
To date, hardly any fines have been imposed by the Competition Authorities for vertical restraints. Ordinary courts have ordered cease-and-desist orders, mostly accompanied by periodic penalty payments.
Since 2005, the Competition Council has also started to endorse engagements (see for example Distri-One v Coca-Cola Enterprises Belgium, 2005-I/O-52, 30 November 2005, and Banksys/UNIZO/FNUCM, 2006-I/O-12, 31 August 2006).
Given the increased number of dawn raids carried out by the competition authorities, and the general increase in the number of investigations carried out by the competition service, an increase in the number of decisions on restrictive practices has already led to an increase in the amount of fines imposed by the competition authority.
Investigative powers of the agency
40 What investigative powers does the agency have when enforcing the prohibition of vertical restraints?
The authorities have investigative powers that closely mirror the powers of the Commission. They can request information from the parties concerned as well as from third parties. They can carry out ‘dawn raids’ on business premises and vehicles and, with the authority of an examining magistrate (‘juge d’instruction’), on private homes and vehicles. During these ‘dawn raids’ they can take copies of documents, take oral or written statements, seize goods and seal private and business premises. The prosecutor can also launch sector enquiries.
Private enforcement
41 To what extent is private enforcement possible? Can non-parties to agreements containing vertical restraints obtain declaratory judgments or injunctions and bring damages claims? Can the parties to agreements themselves bring damages claims? What remedies are available? How long should a company expect a private enforcement action to take?
Procedures based on competition law can be invoked to invalidate contractual commitments, to obtain indemnification of damages suffered as a result of an infringement of competition law or to obtain the discontinuation (or prevention) of allegedly anti-competitive practices.
The Competition Act does not contain any provisions on such private actions. Therefore, the general principles of contract law, judicial law and tort law will be applicable. In order to obtain dam¬ages, the fault, damages and causal link between the fault and the damages have to be proved. Proceedings on the merits to obtain damages may take several years. Therefore, until recently, private enforcement in Belgium very often took the form of actions for cease and desist orders on the basis of the Trade Practices Act. Given that the concept of ‘unfair trading practices’ in the Act also covers infringements of the antitrust rules of the Competition Act, the Presidents of the Commercial Courts can issue cease and desist orders, possibly accompanied by periodic penalty payments and publication measures, on the basis of the Trade Practices Act for breaches of antitrust law. Such proceedings allow the victim of the restrictive practices to obtain the termination of the practices in a very short time period (between a few days and a couple of weeks). The Commercial Court granting a cease and desist order on this basis is, however, not entitled to award damages.
Belgian Law in the 2009 edition of 'Getting The Deal Through: Vertical
Agreements'. This updated edition examines the regulation of distribution practices in jurisdictions worldwide.
Antitrust law
1. What are the legal sources that set out the antitrust law applicable to vertical restraints?
The main sources of law applicable to vertical restraints in Belgium are two Acts of 10 June 2006 on the protection of economic competition and on the establishment of a Competition Council, as coordinated by the Royal Decree of 15 September 2006 (‘the Competition Act’). The text of the Competition Act is published on the website of the competition authorities. The decisions of the Competition Council can be consulted here.
Article 2(1) Competition Act (equivalent to article 81(1) EC) prohibits agreements between undertakings that have as their object or effect the prevention, restriction or distortion of competition within Belgium.
Article 2(2) Competition Act renders agreements falling within this prohibition void, unless they satisfy the conditions for exemption under article 2(3) in a similar way as articles 81(2) and (3) EC.
Article 5(1) Competition Act confirms that the prohibition on restrictive practices is not applicable to agreements that benefit from an EU block exemption. The effect of the EU block exemptions is moreover extended by article 5(2) to situations where trade between member states is not affected.
Thus far no ‘Belgian’ block exemptions or guidelines in relation to vertical agreements have been issued.
A number of Royal Decrees have been adopted implementing the Competition Act regarding procedural issues, such as the filing of complaints.
Types of vertical restraint
2. List and describe the types of vertical restraints that are subject to antitrust law. Is the concept of vertical restraint defined in the antitrust law?
The Competition Act does not define vertical restraints or list specific vertical restraints covered by the prohibition of article 2 Competition Act. The Belgian courts and competition authorities have stated that the Competition Act should be interpreted in light of the jurisprudence of the ECJ and the CFI and the decisions and guidelines of the European Commission. The concept and types of vertical restraints subject to Belgian antitrust law are therefore nearly identical to the equivalent EC competition law concepts and types of vertical restraints.
Vertical restraints subject to Belgian antitrust law include resale price-fixing, export restrictions, non-compete clauses, exclusive and selective distribution.
Legal objective
3 Is the only objective pursued by the law on vertical restraints economic, or does it also seek to protect other interests?
The aim of the Competition Act is mainly economic (ie, to protect competition). In the application of the exemption to the prohibition on restrictive agreements under article 2(3) Competition Act, the interests of consumers are also taken into account, as well as the interests of the small and medium-sized companies. The protection of the interests of small and medium sized undertakings is also explicitly included in article 2(3) Competition Act which contains the four same conditions for exemption as article 81(3) EC but also adds to the criteria ‘which contribute to improving production or distribution or to promoting technical and economic progress’ the wording ‘or which enable small and medium-sized undertakings to assert their competitive position in the market concerned or internationally’ as an alternative ground for exemption.
Responsible agencies
4 What agency is responsible for enforcing prohibitions on anti-competitive vertical restraints? Where there are multiple responsible agencies, how are cases allocated? Do governments or ministers have a role?
The prohibition of anti-competitive vertical restraints can be enforced by the ordinary courts and by the Competition Council (‘Conseil de la Concurrence’), after investigation by the Competition Service (‘Service de la Concurrence’) under the supervision of the prosecutor (‘auditorat’).
The Competition Council is an independent administrative court, whereas the Competition Service is a department of the Ministry of Economic Affairs. The prosecutor is an independent person who leads investigations by the Competition Service.
If a request for preliminary measures is submitted, which the prosecutor considers is not justified, he can reject it. The requesting party can appeal this decision before the President of the Competition Council.
When the prosecutor considers that the request for preliminary measures is justified, the President of the Competition Council will take a decision based on the prosecutor’s report. This decision of the President of the Competition Council can be appealed to the Brussels Court of Appeal.
When a complaint is lodged with the prosecutor and he considers it unjustified, he can reject it. The complainant can appeal this decision to the Competition Council. If the prosecutor considers that the complaint is justified, he will submit a report to the Competition Council, which will then decide the case.
The minister of economic affairs can order a general investigation or an investigation of a particular sector of the economy. However, he has no influence on the outcome of the case. Furthermore, the minister is competent to introduce an appeal before the Court of Appeals in Brussels or the Supreme Court. Finally, the minister can also make written submissions to the courts and the Competition Council.
The ordinary courts also play an important role in the application and enforcement of the competition rules on vertical restraints, and frequently pronounce on the legality of distribution, agency or franchising agreements. They cannot impose fines, but can order a certain practice to stop, subject to a penalty payment and publicity measures. They can also award damages, to the extent that the conditions for the breach of the competition laws, the causal link and the damages can be proved.
Jurisdiction
5 What is the test for determining whether a vertical restraint will be subject to antitrust law in your jurisdiction? Has the law in your jurisdiction regarding vertical restraints been applied extraterritorially?
The Competition Act applies to all vertical restraints which affect competition on the Belgian market or part of it.
Foreign undertakings are therefore also subject to the Competition Act if they participate in restrictive agreements or concerted practices having an effect on the Belgian market.
Agreements concluded by public entities
6 To what extent does antitrust law apply to vertical restraints in agreements concluded by public entities?
The Competition Act applies to agreements between ‘undertakings’. The concept of ‘undertaking’ in the Competition Act has the same meaning as in EU competition law. Vertical restraints in agreements with public or state-owned entities will therefore be subject to anti¬trust law, to the extent that the agreement was concluded by the entity in the performance of an economic activity and not when ful¬filling its public task. This view has been confirmed by the Brussels Court of Appeal in a preliminary ruling (Brussels Court of Appeal, 31 January 2006, Jaarboek Handelspraktijken en Mededinging 2006, page 762).
Sector-specific rules
7 Do particular laws or regulations apply to the assessment of vertical restraints in specific sectors of industry? Please identify the rules and the sectors they cover.
On the basis of article 5 Competition Act, the EU Motor Vehicle Block Exemption and other EU block exemptions will apply also to agreements only having effect on the Belgian market.
When applying article 3(5) of the Motor Vehicle Block Exemption at the termination of dealerships for motor vehicles, the mandatory Belgian Act of 27 July 1961 on the unilateral termination of dealer¬ships should be taken into account.
General exceptions
8 Are there any general exceptions from antitrust law for certain types of vertical restraints? If so, please describe.
In order for the prohibition of article 2(1) of the Competition Act to apply, the vertical restraint must have an ‘appreciable effect’ on competition within Belgium or a relevant part of it. The Competition Council has been given the power to issue de minimis notices. However, no such notice has yet been issued. In practice, the Belgian competition authorities and courts seem to apply the European Commission’s de minimis notice (see for example Brussels Court of Appeal, 7 March 2006, Power Oil NV/DDD. Invest NV, Jaarboek Handelspraktijken en Mededinging 2006, page 773 or decision of the Competition Council of 10 October 2003, Case 2003-P/K-79).
Agreements
9 Is there a definition of ‘agreement’ – or its equivalent – in the antitrust law of your jurisdiction? When assessing vertical restraints under antitrust law does the agency take into account that some agreements may form part of a larger, interrelated network of agreements or is each agreement assessed in isolation?
There is no definition of ‘agreement’ in the Belgian Competition Act. The Belgian competition authorities and courts apply the same definition of ‘agreement’ as developed by European case law. Like the European Commission, the Competition Council will examine the agreement or concerted practice in the broader legal and economic context and take into account the existence of network effects of similar agreements applied by other undertakings. If the vertical restraints concluded by the supplier and its competitors have the cumulative effect of foreclosing market access, then any vertical restraints that contribute significantly to that foreclosure may be found to breach the Competition Act. The Brussels Court of Appeal thus ruled that the cumulative effect of three Belgian fruit auction houses, applying the same terms and conditions on sales, significantly restricted competition in the market (Court of Appeals of Brussels, 29 September 2004, Belgische Fruitveiling BVBA/Nationale Unie van Belgische exporteurs van Land-en Tuinbouwproducten VZW ea; Veiling Borgloon CVBA/Nationale Unie van Belgische exporteurs van Land-en Tuinbouwproducten VZW ea, Competition Council, Competition Council Annual Report 2004, see also Antwerp Court of Appeal, 14 March 2006, TBM, page 784).
Parent and related-company agreements
10 In what circumstances do the vertical restraints rules apply to agreements between a parent company and a related company (or between related companies of the same parent company)?
Article 2 Competition Act only applies to agreements between independent undertakings, and therefore not to those between a parent and its subsidiary nor between two undertakings controlled by the same ultimate parent company.
Agent–principal agreements
11 In what circumstances does antitrust law apply to agent–principal agreements in which an undertaking agrees to perform certain services on a supplier’s behalf for a commission payment?
There is no explicit provision for agents in the Competition Act. In the preparatory works to the Competition Act, the Belgian legislators clearly indicated their desire for equivalent provisions in the Belgian Competition Act to be interpreted in the same way as under EC competition law. It can therefore be expected that the courts and competition authorities will not apply antitrust law to agreements between a principal and a ‘genuine agent’, and will apply the same criteria as the European Commission and the European courts for qualification as a ‘genuine agent’.
Intellectual property rights
12 Is antitrust law applied differently when the agreement containing the vertical restraint also contains provisions granting intellectual property rights (IPRs)?
The EC Block Exemption 2790/99 and the Commission’s Vertical Guidelines apply to agreements granting IPRs where the granting of such IPRs is not the primary object of the agreements and the IPRs relate to the use, sale, or resale of the contract products by the buyer or its customer. If the primary object of the agreement relates to the licensing of IPRs, the applicability of the EC Technology Transfer Block Exemption and the related guidelines should be checked.
Analytical framework for assessment
13 Explain the analytical framework that applies when assessing vertical restraints under antitrust law.
The analytical framework used by the Belgian Competition authorities is very similar to the European framework.
Vertical restraints agreed by public entities while performing their public task, included in genuine agency agreements and agreements between companies belonging to a same corporate group, are excluded from the application of the antitrust law.
For other vertical agreements, it should first be checked whether the vertical agreement contains a hard-core restriction: fixing of minimum resale prices, certain restrictions on the customers to whom, or the territories into which, a buyer can sell the contract goods, restrictions on members of a selective distribution supplying each other or end users, and restrictions on component suppliers selling components as spare parts to the buyer’s finished products.
If the agreement does not contain a hardcore restriction, it should then be checked whether it can be considered de minimis, because it does not appreciably restrict competition on the Belgian market or a relevant part of it. The Commission’s de minimis notice will provide guidance.
Given that the EC block exemptions also apply in Belgium to agreements without an appreciable effect on trade between EU mem¬ber states, the agreement should then be checked to see whether it falls within the scope of the EC Vertical Agreements Block Exemption (or another EC Block Exemption such as the Technology Transfer Block Exemption) or not.
Finally, if the vertical agreement restricts competition but cannot be considered de minimis and does not fall within the scope of a Block Exemption, an ‘individual assessment’ of the agreement will be made to determine whether it falls within the scope of the prohibi¬tion of article 2(1) Competition Act or not, and, if it does, whether the conditions for exemption under article 2(3) Competition Act are satisfied or not. In making this assessment, the competition author¬ity and courts will closely follow European policy, in particular the Vertical Guidelines of the European Commission and the case law of the European courts.
14 To what extent does the agency consider market shares, market structures and other economic factors when assessing the legality of individual restraints? Does it consider the market positions and conduct of other suppliers and buyers in its analysis?
The Belgian competition authorities and courts do consider the market shares, market structures and other economic factors when assessing individual restraints. The Belgian regime and practice are in line with the European regime and practice in this respect. The com¬petition authorities and courts also refer to the criteria set out in the European Commission’s Notice on Agreements of Minor Importance (OJ 2001, C368/13). In this respect, see, for example Brussels Court of Appeal, 7 March 2006, Power Oil NV/DDD. Invest NV (Jaarboek Handelspraktijken en Mededinging 2006, page 773) or the decision of the Competition Council of 10 October 2003 (Case 2003-P/K-79). In the above-cited decisions, the Brussels Court of Appeal referred to the same levels of market shares as in the de minimis notice. An agreement between undertakings will therefore generally be deemed not to have an appreciable effect on competition, if the market share of each of the parties, which are not direct or potential competitors, does not exceed 15 per cent. If the parties are direct or potential competitors, their market share should not exceed 10 per cent for the agreement to be considered de minimis.
The Brussels Court of Appeal in the Power Oil NV/DDD decision, also considers the market structure, referring to the same de minimis notice. The threshold is lowered to 5 per cent if on a relevant market the competition is restricted because of the cumulative blocking effect of parallel networks of agreements which have similar effects on the market. In cases where the agreement contains a hardcore restriction, the competition authorities and courts do not further examine the appreciable effect of the restriction on competi¬tion (see for example: Competition Council, Case no. 2008-P/K-43 of 7 July 2008 Test-Achats c/ auto-écoles de Belgique; Brussels Court of Appeal, 23 January 2007, Limb Rechtsl, 2007, p307).
Block exemption and safe harbour
15 Is there a block exemption or safe harbour that provides certainty to companies as to the legality of vertical restraints under certain conditions? If so, please explain how this block exemption or safe harbour functions.
Article 5 Competition Act confirms that the prohibition on restrictive practices does not apply to agreements that benefit from an EC block exemption. The effect of the EC block exemptions is moreover extended in Belgium to situations where trade between EU member states is not affected. The EC Block Exemptions Regulations 2790/99, 1400/2002, 772/2004 therefore apply also to purely national situations. Article 50 Competition Act provides that ‘Belgian’ block exemptions can be issued in the form of a Royal Decree. However, no such ‘Belgian’ block exemptions have yet been adopted.
Types of restraint
16 How is restricting the buyer’s ability to determine its resale price assessed under antitrust law?
Vertical price-fixing is considered to constitute a hard-core restriction of competition for which no exemption can be obtained (Competition Council, 8 December 1998, No. 98-RPR-6, NV Gebroeders Mermans/NV Van Cauwenbergh, MB 10 November 1999, 41.940 and Brussels Court of Appeal 13 October 1998, NV Laroy-Duvo/Belgian Government, MB, 21 October 1998, 34,884). The determination of minimum resale prices is also considered as a restriction of competition per se. Maximum or recommended prices are, in principle, allowed, provided that the supplier does not use any pressure or other incentives to enforce them.
17 Have there been any developments in your jurisdiction in relation to resale price maintenance restrictions in light of the landmark US Supreme Court judgment in Leegin Creative Leather Products Inc v PSKS Inc. If not, is any development in this area anticipated? Has there been any more general discussion by the relevant agency (or any other influential stakeholder) of the policy in your jurisdiction regarding resale price maintenance?
In one case, the Brussels Court of Appeal also referred to the legal, factual and economic context of the agreement before concluding that the resale price maintenance clause breached antitrust law (Brussels Court of Appeal 13 October 1998, NV Laroy-Duvo/Belgian Government, MB 21 October 1998, 34,884). In general, however, Belgian case law to date has not assessed resale price fixing using a rule-of-reason-type analysis.
Given that Belgian competition law is interpreted and applied while taking into account European case law, it can be expected that a rule-of-reason-type analysis will only be introduced in respect of resale price maintenance clauses, to the extent that the EU Commission and the European courts start assessing fixed minimum resale prices using such analysis.
18 Have decisions relating to resale price maintenance addressed the possible links between such conduct and other forms of restraint? Have the decisions addressed the efficiencies that it is alleged can arise out of such restrictions?
In the ‘Orthodontist case’, the Competition Council had to come to a decision on resale price maintenance practices linked to market partitioning (Competition Council, Case no. 2001-V/M-02 of 10 January 2001, Belgische Beroepsvereniging van Universitaire Specialisten in de Orthodontie/Landsbond Der Christelijke Mutualiteiten en Regionale Christelijke Ziekenfondsen). The Christelijke Mutualiteiten (‘CM’) (a health insurance fund) deter¬mined the conditions according to which a practitioner was approved as an orthodontist and published a list with the names of approved orthodontists which patients used to make their choice. The CM also imposed a maximum amount up to which treatment costs would be reimbursed and any additional costs to be borne by the patients. The Competition Council judged that the combination of these two restrictions constitute a prima facie breach of the Competition Law. In a more recent case, the Competition Council also suspected the Belgian Federation of Driving Schools, who clearly prohibited its members from ‘destabilising prices’ of market partitioning. The driving schools were also prohibited from attract¬ing clients from their competitors in a given territory. These facts led the Competition Council to rule that article 2 Competition Act had been breached and to fine the Federation (Competition Council, case no. 2008-P/K-43 of 7 July 2008).
19 How is restricting the territory into which a buyer may resell contract products assessed under antitrust law? In what circumstances may a supplier require a buyer of its products not to resell the products in certain territories?
Article 2 Competition Act was drafted, and has been interpreted, in the same way as Article 81 EC Treaty. By virtue of article 5 Competition Act, Regulation 2790/99 also applies to agreements without any significant effect on trade between EU member states. Also the Vertical Guidelines of the European Commission and European case law can be expected to be closely followed. (See for a recent example: Brussels Court of Appeal 23 January 2007, Limb Rechtsl 2007 (4), p. 297 in which the prohibition of a buyer from reselling in a certain territory was considered a significant restriction.)
20 Explain how restricting the customers to whom a buyer may resell contract products is assessed under antitrust law. In what circumstances may a supplier require a buyer not to resell products to certain resellers or end-consumers?
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect.
21 How is restricting the uses to which a buyer puts the contract products assessed under antitrust law?
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect.
22 How is restricting the buyer’s ability to generate sales via the internet assessed under antitrust law? Have the agencies issued decisions or guidance in relation to restrictions on internet selling? If so, what are the key principles?
There is no specific Belgian guidance on the subject, but Belgian case law has adopted the same position as the European competition authorities on the buyer’s restriction of sales via the internet. The Belgian Supreme Court’s judgment of 10 October 2002 in the case Makro / Beauté Prestige International ao (www.cass.be), when assessing a selective distribution system which restricted the buyer to generating sales via the internet, referred expressly to the Guidelines on Vertical Restrictions (2000/C 291/01) when explaining its decision. The Supreme Court stated that a vertical agreement cannot contain a restriction to sell via the internet, unless such restriction is objectively justified. In the case referred to, the Liège Court of Appeal had given a rather broad interpretation to the term ‘objective justification’. The restriction on the sale via the internet concerned luxury perfumes and cosmetics and the Liège Court of Appeal held that the restriction on internet sales was objectively justified by the nature of these products, requiring personal professional advice and therefore methods of sale which cannot be assured over the internet. The Supreme Court deciding on this case explicitly rejected the allegation that for internet sales only restrictions based on qualitative criteria in the use of internet can be imposed.
23 Briefly explain how agreements establishing ‘selective’ distribution systems are assessed differently under antitrust law.
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect (see for example Competition Council, 25 March 2003, case 2003-E/A-24, Diprolux SA, MB 14 October 2003, 49,831).
24 Are selective distribution systems more likely to comply with antitrust law where they relate to certain types of product? If so, which types of product and why?
Entirely in line with the European regime, under Belgian competition law, the luxury image of products can justify selective distribution. In the rare Belgian case law on selective distribution systems, most of the cases concerned jewellery (see for example Antwerp Court of Appeal, 22 November 1995, Van Sloun Juweliers BVBA / Les must de Cartier Belgique NV, Jaarboek Handelspraktijken en Mededinging, 1995, p345), or perfume, personal hygiene products and cosmetics (see for example Competition Council, 26 June 1995, case 95-PRA-1, Van Nieuwenhuysen/NV Parfums Christian Dior SAB, MB 26 July 1995, 20260; Competition Council, 25 March 2003, case 2003-E/A-24, Diprolux SA, MB 14 October 2003, 49.831; Belgian Supreme Court, 10 October 2002, Makro / Beauté Prestige International ao, www.cass.be). In the above-mentioned Makro case, the Liège Court of Appeal stated that cosmetics and luxury perfumes can be considered as sophisticated products and the results of special research processes, whose luxury image can be preserved through selective distribution, since the product will thus stand a better chance of achieving its rightful place at the points of sale.
25 Regarding selective distribution systems, are restrictions on internet sales by approved distributors permitted? If so, in what circumstances? Must internet sales criteria mirror offline sales criteria or would discrepancies be permitted?
In the aforementioned Makro case (Belgian Supreme Court, 10 October 2002, Makro / Beauté Prestige International ao, www.cass.be), the Supreme Court dismissed the appeal lodged against the decision of the Liège Court of Appeal which stated that the restrictions on internet sales were objectively justified, since the nature of the product required distribution via ‘first-rate’ points of sale, where appropriate, personal, professional advice could be assured. Thus, the suppliers could not only require a distributor to maintain a bricks-and-mortar store, but could even forbid them from selling online if such prohibition were objectively justified.
Belgian law has specific legislation which sets out certain additional rules for internet sales (cfr articles 77 to 83 of the Belgian Trade Practices Act of 14 July 1991 and articles 8 to 12 of the E-commerce Act of 11 March 2003) that do not apply to other sales.
26 Does the relevant agency take into account the possible cumulative restrictive effects of multiple selective distribution systems operating in the same market?
There is no case law known to us explicitly dealing with the cumula¬tive restrictive effects of multiple selective distribution systems operating in the same market.
27 Has the agency taken decisions dealing with the possible links between selective distribution systems and resale price maintenance policies? If so, what are the key principles in such decisions?
The Mons Court of Appeal, ruling on the legality of a selective distribution system, was of the opinion that a clause which requested the prior approval by the seller of advertisements placed by the buyer, could be prohibited if it constituted a form of indirect control of the prices, the number and the frequency of the advertisements and the reductions accorded (Mons Court of Appeal, 6 September 2004, DAOR 2005, 48).
Another decision of the Brussels Court of Appeal established the illegality of a selective distribution system used by holiday centres. The distribution network did not respect the conditions of objectivity and equality of the qualitative selection criteria on the basis of which the distributors were selected. Moreover, the Court held that given that resale prices were imposed on the resellers, the selective distribution network was prohibited per se (Brussels Court of Appeal, 22 April 1999, JLMB 1999, 1240 and TBH 1999, 418).
28 How is restricting the buyer’s ability to obtain the supplier’s products from alternative sources assessed under antitrust law?
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect.
(See for example Brussels Court of Appeal 29 October 2002, Etienne Decock/Danny Claerhout en Louis De Ketelaere, Jaarboek Handelspraktijken en mededinging 2002, p951).
29 Explain how restricting the buyer’s ability to stock products competing with those supplied by the supplier under the agreement is assessed under antitrust law.
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect.
30 How is requiring the buyer to purchase from the supplier a certain amount or minimum percentage of the contract products assessed under antitrust law?
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect.
31 Explain how restricting the supplier’s ability to supply to other resellers, or sell directly to consumers, is assessed under antitrust law.
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect.
32 To what extent are franchise agreements incorporating licences of IPRs relating to trademarks or signs and know-how for the use and distribution of products assessed differently from ‘simple’ distribution agreements under antitrust law?
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect.
33 Explain how a supplier’s warranting to the buyer that it will supply the contract products on the terms applied to the supplier’s most-favoured customer or that it will not supply the contract products on more favourable terms to other buyers is assessed under antitrust law. Would the analysis differ where the buyer commits to ‘most favoured’ terms in favour of the supplier?
Please see our answer to question 19. The Belgian regime is entirely in line with the European regime in this respect.
Notifying agreements
34 Is there a formal procedure for notifying agreements containing vertical restraints to the agency? Is it necessary or advisable to notify it of any particular categories of agreement? If there is a formal notification procedure, how does it work? What type of ruling (if any) does the agency deliver at the end of the procedure? And how long does this take? Is a reasoned decision published at the end of the procedure?
Since the entry into force of the new Competition Act on 1 October 2006, there is no longer a formal procedure for notifying agreements containing vertical restraints to the Belgian competition authorities.
Agency guidance
35 If there is no formal procedure for notification, is it possible to obtain guidance from the agency as to the antitrust assessment of a particular agreement in certain circumstances?
The Competition Act does not provide for the right or the possibility of obtaining guidance from the competition authorities on particular vertical restraints. In practice, the prosecutors may be willing to provide their view informally.
Such views, however, are not binding on the Competition Council.
Complaints procedure for private parties
36 Is there a procedure whereby private parties can complain to the agency about alleged vertical restraints?
Complaints of antitrust infringements, including vertical restraints, can be filed with the prosecutor. The form and content of a complaint are determined by the Royal Decree of 31 October 2006 which prescribes the use of a ‘PK Form’ (MB 21 November 2006, page 64, 624 or electronically).
The form enumerates a limited number of formal and material requirements to be fulfilled and the information to be provided (description of the practice, the nature of the products, market positions, the alleged infringements, etc).
If the prosecutor considers that the complaint is not justified, he can reject it. The complainant can appeal this decision to the Competition Council within 30 days. If the prosecutor considers that the complaint is justified, the Competition Council will decide the case on the basis of the prosecutor’s report and a hearing. There is no legal time limit for decisions to be taken by the prosecutor or the Competition Council, and the procedure may take years.
However, interim measures can be applied for. Depending on the circumstances, proceedings may, however, be speeded up by the authority (for example the Football TV Rights case in 2005 where the investigation began on 21 June 2005 and the decision was taken on 29 July 2005, before the start of the new football season).
Enforcement
37 How frequently is antitrust law applied to vertical restraints by the agency? What are the main enforcement priorities regarding vertical agreements?
The competition authority used to allocate most of its resources to merger review proceedings, to which strict deadlines apply. Since the increase of the thresholds for Belgian merger control and the entry into force of the new Competition Act on 1 October 2006, more resources have become available for the investigation of restrictive practices, including vertical agreements. However, it seems that the authorities are focusing more on hardcore cartels and abuses of dominant position. To date, very few rulings on vertical agreements have been made.
The ordinary courts, however, frequently apply antitrust law to vertical restraints, especially in cases regarding resale price main¬tenance, exclusivity and non-compete undertakings in distribution agreements.
38 What are the consequences of an infringement of antitrust law for the validity or enforceability of a contract containing prohibited vertical restraints?
Antitrust law is considered to be part of public order law, therefore the agreements or decisions forbidden under article 2(1) Competition Act are automatically void under article 2(2) Competition Act. This nullity is an absolute nullity, which works ex tunc. Under Belgian law, the severability principle applies, and, therefore, in principle, only the prohibited clauses become automatically null and void, not necessarily the whole agreement (Brussels Court of Appeal 23 January 2007, Limb Rechtsl 2007(4), page 297). The nullity of the contractual provision only leads to the nullity of the agreement, if the null and void provision is inextricably linked to the remainder of the agreement in view of the will expressed by the parties and the structure of the agreement (Brussels Court of Appeal 28 June 1995, Jaarboek Handelspraktijken & Mededinging 1995, page 576). Previous case law explicitly stated that the nullity of the clause breaching antitrust law was absolute, and the duration of a non-compete clause in breach of antitrust law cannot be reduced by a judge to a legal duration (Brussels Court of Appeal 28 June 1995, Jaarboek Handelspraktijken & Mededinging 1995, page 576). However, a more recent opinion of the Competition Council and a judgment of the Brussels Court of Appeal allow the excessive duration of a non- compete clause to be reduced by a judge to a duration that would be valid under antitrust law (Brussels Court of Appeal, 7 March 2006, Power Oil NV/DDD. Invest NV, Jaarboek Handelspraktijken en Mededinging 2006, p773).
39 May the agency impose penalties itself or must it petition the courts or another administrative or government agency? What sanctions and remedies can the agency or the courts impose when enforcing the prohibition of vertical restraints? What notable sanctions or remedies have been imposed? Can any trends be identified in this regard?
The Competition Council can impose administrative fines of up to 10 per cent of the annual turnover of the undertaking (Belgian turnover and turnover realised by exports) and penalty payments of a fixed amount per day that cannot exceed 5 per cent of the aver¬age daily turnover of the undertaking, subject to the decision. The Competition Council can decide on the merits, but also impose provisional measures and endorse engagements offered by the parties. The Competition Council cannot award damages.
Parties wishing to obtain damages have to introduce a claim before the ordinary courts, which will make a decision on the merits, and may grant provisional measures or a cease and desist order, with penalty payments and publication measures. The ordinary courts cannot, however, impose administrative fines or penalties.
To date, hardly any fines have been imposed by the Competition Authorities for vertical restraints. Ordinary courts have ordered cease-and-desist orders, mostly accompanied by periodic penalty payments.
Since 2005, the Competition Council has also started to endorse engagements (see for example Distri-One v Coca-Cola Enterprises Belgium, 2005-I/O-52, 30 November 2005, and Banksys/UNIZO/FNUCM, 2006-I/O-12, 31 August 2006).
Given the increased number of dawn raids carried out by the competition authorities, and the general increase in the number of investigations carried out by the competition service, an increase in the number of decisions on restrictive practices has already led to an increase in the amount of fines imposed by the competition authority.
Investigative powers of the agency
40 What investigative powers does the agency have when enforcing the prohibition of vertical restraints?
The authorities have investigative powers that closely mirror the powers of the Commission. They can request information from the parties concerned as well as from third parties. They can carry out ‘dawn raids’ on business premises and vehicles and, with the authority of an examining magistrate (‘juge d’instruction’), on private homes and vehicles. During these ‘dawn raids’ they can take copies of documents, take oral or written statements, seize goods and seal private and business premises. The prosecutor can also launch sector enquiries.
Private enforcement
41 To what extent is private enforcement possible? Can non-parties to agreements containing vertical restraints obtain declaratory judgments or injunctions and bring damages claims? Can the parties to agreements themselves bring damages claims? What remedies are available? How long should a company expect a private enforcement action to take?
Procedures based on competition law can be invoked to invalidate contractual commitments, to obtain indemnification of damages suffered as a result of an infringement of competition law or to obtain the discontinuation (or prevention) of allegedly anti-competitive practices.
The Competition Act does not contain any provisions on such private actions. Therefore, the general principles of contract law, judicial law and tort law will be applicable. In order to obtain dam¬ages, the fault, damages and causal link between the fault and the damages have to be proved. Proceedings on the merits to obtain damages may take several years. Therefore, until recently, private enforcement in Belgium very often took the form of actions for cease and desist orders on the basis of the Trade Practices Act. Given that the concept of ‘unfair trading practices’ in the Act also covers infringements of the antitrust rules of the Competition Act, the Presidents of the Commercial Courts can issue cease and desist orders, possibly accompanied by periodic penalty payments and publication measures, on the basis of the Trade Practices Act for breaches of antitrust law. Such proceedings allow the victim of the restrictive practices to obtain the termination of the practices in a very short time period (between a few days and a couple of weeks). The Commercial Court granting a cease and desist order on this basis is, however, not entitled to award damages.
Footnotes: lgiumThe above is merely intended to comment on the relevant issues of Belgian law and is not intended to provide legal advice. Before taking action or relying on the comments and the information given, the addressees should seek specific advice on the matters which concern them. For any further information please contact Carmen Verdonck ALTIUS Brussels - main office Tour & Taxis Havenlaan 86C box 414 Avenue du Port 1000 Brussels Belgium tel +32 2 426 14 14 fax +32 2 426 20 30 [email protected] |
