In a previous article, we dealt with the new provisions that apply when companies abusively exploit a position of economic dependence of another company or provide for unfair contract terms in their agreements with other companies.
In this article, we deal with the prohibition of unfair market practices, which applies to consumers (B2C), and is now being extended to B2B relations by the new law.
Unfair market practices means misleading and aggressive market practices and all practices that favour acts that must be considered as a breach or infringement of the Code of Economic Law.
1. What are misleading market practices?
A market practice is considered to be misleading if it misleads or is likely to mislead an enterprise with respect to a number of elements, which leads or is likely to lead to a decision on a transaction that it would not have taken otherwise.
Misleading market practices may be accompanied by erroneous and therefore misleading information. But even if the information presented is factually correct, there can still be a misleading market practice. That is the case, according to the law, when a company, among others because of the way in which something is presented, is or can be deceived in respect of a number of elements, and it takes a decision on a transaction or might take a decision that it would not have taken otherwise.
These include the following:
- the existence or nature of the product;
- the main characteristics of the product;
- the scope of the company's commitments, the motivation of the market practice and the nature of the sales process, as well as any statement or symbol that suggests that the company or product has been sponsored or has a direct or indirect support;
- the price or method of calculating the price, or the existence of a specific price advantage;
- the need for a service, spare part, replacement or repair;
- the nature, characteristics and rights of the company or its intermediary;
- the rights of the other enterprise or the risks it may incur;
- any marketing activity of a product, including comparative advertising, creating confusion with another product, brand, trade name or other distinguishing featuring of a competitor;
- the company does not comply with the commitments included in a sectoral code of conduct to which it has committed itself;
- the communication of denigrating information with respect to another enterprise, its goods, services or activity.
Also hiding essential information (misleading omission) whereby a company takes a decision on a transaction that it would not otherwise have taken, is prohibited.
In this context, companies will have every interest in properly documenting all their actions, which again entails additional administrative formalities.
2. What are aggressive market practices?
A market practice is deemed aggressive in the event that an enterprise alters or is likely to alter, through harassment, coercion, including the use of physical force, or inappropriate influence, the freedom of choice or conduct of an enterprise with regard to a product and, therefore, leads or is likely to cause it to make a decision that it would not have made otherwise.
What does the term "inappropriate influence" mean? It means the abuse by a company of a dominant position vis-à-vis another company in order to exert pressure on it, even without resorting to physical force or threaten, which significantly limits its ability to make an informed decision. Here we refer to our previous article because in this context the prohibition of aggressive market practices is in line with the prohibition of abuse of economic dependence between companies, which is also introduced by this new law.
The new regulation on illegal market practices will come into effect on 1 September 2019.
However, this is not the case for the new prohibition on abuse of economic dependency, which will only enter into force on 1 June 2020, neither for the prohibition on unlawful terms which enters into force on 1 December 2020. The more, this prohibition is only applicable to agreements concluded after this date.
The question is whether it is appropriate to introduce such a far-reaching restriction on companies contractual freedom. The freedom of companies to conclude agreements is a very important element in their economic life.
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