Unfair Market Practices Between Companies

You may have previously read in our previous post that it is against the law for businesses to take actions that are inconsistent with fair business practises and potentially jeopardise the interests of other businesses. There are numerous applications for the idea of unfair business practises. The Antwerp Court of Appeal clarifies what should be interpreted by the term “unfair market practises” in a judgement that was only just issued.

The Economic Code’s (hereinafter: WER) Article VI.104 outlines the general ban on unfair business practises between enterprises. Any action that a corporation does that violates fair market practises and endangers the legitimate business interests of one or more other companies is prohibited. Particularly unjust are businesses’ business practises towards other businesses that:

• are deceptive,
• are combative,
• aid or abet conduct that contravene or violate the WER.

A misleading market practise is one that may mislead an undertaking about crucial contract provisions that affect how it behaves economically and persuade it to make a decision it otherwise might not have made concerning a specific transaction. In other words, the second company cannot decide on a transaction because of a lack of information that was provided by the first company.

A market practise is considered to be aggressive if it severely restricts an undertaking’s freedom of choice. Such violence may take the form of intimidation, extortion, the use of physical force, or any other improper influence, like the exploitation of a multinational’s dominant position. An aggressive market practise is one that influences the other firm to make a choice on a deal that it otherwise would not have made.

Appeal Court of Antwerp

Both a public limited corporation (NV) and a private limited company (BVBA) are engaged in the advertising business, more specifically, in the leasing and subleasing of billboard facades. The latter was charged with slander, customer acquisition, third-party cooperation in breach of contract, and parasitic competition by the BVBA. In a judgement issued on November 20, 2019, the Antwerp Commercial Court determined that the NV had engaged in defamation and illegitimate customer acquisition on behalf of the BVBA. This ruling has been the subject of an appeal.

Article VI.104 WER is very flexible and has a wide range of applications. A number of these applications are also contained in the Antwerp Court of Appeal’s ruling from October 7, 2020. For instance, it looks at cases of defamation, third-party involvement in contract violations, illegal client acquisition, and parasitic competition.

1. Defamation/Badmouthing

Telling the co-contractors of another company that it is defrauding them and referring to it as a swindler and cheat constitutes slander.

A remark made by a person or a legal entity that contains a fact, an allegation, launches an attack, or makes critiques that, in the eyes of others, could harm the credibility or reputation of an economic operator, its goods, services, or activities is considered defamatory.

2. Third-Party Involvement in Contract Violations

The following requirements must be satisfied in order to hold a third party accountable for their participation in another party’s breach of contract:

• there must be a genuine contractual obligation,
• a breach of that obligation,
• knowledge of the obligation or a reasonable expectation of knowledge on the part of the third party,
• and participation on the part of the third party in the breach of the contractual obligation.

3. Unlawful Customer Acquisition

The act of contacting a rival’s clients is not illegal in and of itself. Only if additional conditions that make the acquisition illegal are proven will it be considered an unfair business practise. Therefore, actions that deceive customers or distort a competitor’s economic behaviour are forbidden.

4. Parasitic Rivalry

The business is also accused of engaging in parasitic competition by entering into a new lease agreement with a prospective customer while fully aware that the latter is still subject to a lease with the other business. The Court of Appeal rejects the claim as unjustified since it believes that active cloakroom advertising cannot be considered illegal in and of itself. After all, a market participant is free to approach prospective clients even if he is aware that they might be connected to another participant.

However, the Court does rule that the business has violated Article VI.104 WER when:

• while actively exploring the market and putting up a proposal for a rental arrangement for a façade, it denies itself precise information about a potential ongoing rental deal with a rival, its duration, and its termination terms;
• the business obtains a power of attorney to end a rental agreement with another business that includes a preferential right, and fails to notify the other business of the new rental agreement it has signed and the conditions necessary for it to exercise its preferential right;
• it does not disclose that it will be exempt from paying rent for the time it takes to find a subtenant by itself in an advertising letter it sends to prospective landlords regarding a rental proposal.

Conclusion

Article VI.104 WER’s goal is to promote honest and healthy competition. In 2019, the legislator thought that “weaker” corporations needed to be protected from abuses by “stronger” companies. However, it is debatable whether it is fair to enable the concepts of consumer law to permeate the B2B sector and to impose such extensive limitations on their contractual freedom. After all, economic life has always rested on the freedom to conduct business.

Therefore, it is crucial that businesses consider these laws against unfair business practises when entering into agreements with other businesses. The company whose professional interests have been or may be affected by a violation of the prohibition on unfair market practises may, as an interested party, bring an action for an injunction before the appropriate president of the Commercial Court, which may even be accompanied by measures of disclosure if granted. The affected corporation may also file a responsibility claim for damages if a specific unfair market practise also qualifies as an error that caused damage.

You can always use our assistance with the creation and evaluation of business contracts. After reading this post, if you still have any questions, don’t hesitate to contact us at joost.peeters@studio-legale.be or (32) 216 70 70.