SME’s better informed regarding Belgian competition law

Belgium is a PME’s country. 

Since many of those do not have a legal department, it is important to inform businesses as best as possible on the current legislation that could affect the conduct of their activities. 

In an open economy such as the Belgian one, some knowledge of Belgian competition law can be primordial. To this end, the Belgian Competition Authority has published, on 4th July 2016, a practical guide for Belgian SME’s. 

A brief summary of this guide is provided below.

You are free to consult the guide by clicking on the following links for the guide in Dutch or French. 

The guide is made up of four main points:

1. The competition rules applicable in Belgium;
2. The absolute prohibitions; 
3. The consequences of violating the prohibition of restrictive   practices; and
4. Guidance to develop an adapted compliance program.

1. The competition rules applicable in Belgium

The guide usefully reminds that competition rules ensue from Belgian law (CEL) as well as European law (TFEU). Those rules are generally quite similar.

1.1 Prohibition of restrictive practice

There exist two types of restrictive practices: the prohibited agreements and the abuse of a dominant position.

1.1.1 Prohibited agreements

The prohibited agreements include all contracts and agreements that aim to restrict competition or that lead to restraints of competition.

There are however exceptions that apply provided that the conditions are fulfilled.

Furthermore, the European Commission published a number of block exemptions, among which the exemption for vertical restraints is relevant for SME’s. Except the hard-core restrictions that we approach later below, most of the potential restrictive measures are allowed if the market share of the suppliers and purchasers is smaller than 30% and if the contract term is less than 5 years.

Besides, the Commission published a communication on the agreements whose impact is considered as too weak to really restrain the competition.

1.1.2 Abuse of dominant position

A company in a dominant position on a market of goods or services cannot abuse of it. Some SME’s could be in such a dominant position, for example in a niche market. The abuse could consist of the application of excessive, too low or discriminatory prices or even of refusal to supply.

1.2 Control of concentrations

Finally, business concentrations are also controlled. 

Those operations must be notified and first approved if the companies involved total together a turnover of more than 100 million euros and at least two of them have a turnover of at least 40 million euros in Belgium.

That could concern the SME’s, and a company with a turnover of 40 million euros must be watchful in case of takeover.

2. The absolute prohibitions

It is strictly prohibited to:

• fix the prices between competitors;
• impose selling prices or minimum selling prices to distributors;
• proceed to geographical distributions of markets between competitors;
• conclude agreements with competitors to limit production.

3. The consequences of violating the prohibition of restrictive practices

Companies involved are naturally subject to fines that could amount to 10% of the consolidated turnover in Belgium. 

The natural persons who commit infringements also run the risk of fines that could amount to 10.000 euros.  

In case of agreement on public contracts, criminal sanctions including imprisonment can be inflicted.

For information, a previous contribution concerning the new leniency guidelines in case of cartel deals with the conditions to be fulfilled by companies to benefit from immunity and with the immunity from prosecution for natural persons.

At the contractual level, the prohibited clauses are judged null and the prejudiced persons can claim compensation.

4. A compliance program adapted to the company

Besides the compliance programs to tax, social or environmental law that may already exist in a company, the Belgian Competition Authority provides advice to establish a compliance program to competition law.

The first step is the assessment of the risks, and particularly the determination of the company’s position on the market (dominant position, market shares, concluded agreements,…).

It might be appropriate to draft a code of conduct, to be drawn especially to the attention of the people exposed to the risks.

It is also useful to designate a responsible for compliance, as a contact point and adviser but also as rapporteur to the shareholders and directors of the company.

People exposed to the risk should ideally be in training upon taking up office as well as occasionally during their carrier to be able to identify the pitfalls and to acquire the right reflexes.

5. Conclusion

This guide gives out a lot of practical and useful information to SME’s. However, it is not exhaustive and principally aims at raising awareness of the companies on competition law.

It constitutes therefore only a first prevention tool against violations of competition law rules.

A company whose activities might lead to an application of the competition law rules or that considers an operation referred to in above points 1 and 2 must absolutely consult a legal counsel.

Of course, we are available to help you to avoid any problem related to competition law, to assist you with any operation (takeover, sale or merger) or to accompany you in the relationship with the Belgian Competition Authority.