First application of Belgian rules on abuse of economic dependence

We previously reported on the new Belgian prohibition to abuse economic dependence which has come into force on 22 August 2020 (see our article of 17 August 2020 here and a recording of our webinar here for more information).

In what likely constitutes the first precedent under the new law, on 28 October 2020 the President of the Ghent Commercial Court imposed a cease-and-desist order and periodic penalty payment for a refusal to supply, characterising such refusal as an abuse of economic dependence.

The case concerned a designer, manufacturer and supplier of, among others, children's clothing that had abruptly refused to supply a retailer, thereby ending the commercial relations. This decision was allegedly made for breach of contract. For the retailer, the loss of this contract essentially meant the end of his business, which by nature is seasonal.

The President swept away the contract law arguments and held that in any event it was necessary to check whether the contested behaviour constituted an unfair market practice (which includes infringements of competition law).

The President then went on to establish the existence of a position of economic dependence as the retailer would not have been able to find alternative supplies in such short notice. In this particular sector (fashion retail), orders and supplies for a seasonal collection need to be made sufficiently in advance, at the risk of missing an entire season. The President then indicated that in this particular case the supplier made an abuse of this situation of economic dependence because:

• The supplier was aware that the retailer would not have been able to find alternative supplies in such short notice. The President qualified this awareness as bad faith which was further illustrated by the fact that the supplier had given the impression to the retailer, up until the refusal, that the deliveries would be made (eg by handing over promotion material relating to the winter season).
• The supplier had been aware of the payment situation of the retailer for a long time before the refusal to supply.
• The supplier was shown to have had a broader commercial strategy to push independent retailers out of the market and to supply consumers directly (online or offline).

On that basis, the President ruled the supplier's behaviour to be arbitrary and to constitute an abuse of economic dependence or at least an infringement of the rules on unfair market practices.

No analysis of anti-competitive effects on the Belgian market or a substantial part thereof were made. Presumably, this was not considered to be necessary as the prohibition to abuse economic dependence was invoked in combination with the rules regarding unfair market practices. This would of course be different in a case before the Belgian Competition Authority.

Should you need assistance, have any further questions regarding this client alert or competition law generally, please do not hesitate to contact any of the individuals listed or your usual contact at Simmons & Simmons.

Simmons & Simmons advised counsel to the retailer in this case.