Belgium
© Springer-Verlag Berlin Heidelberg 2015
Pierre Kobel, Pranvera Këllezi and Bruce Kilpatrick (eds.)Antitrust in the Groceries Sector & Liability Issues in Relation to Corporate Social ResponsibilityLIDC Contributions on Antitrust Law, Intellectual Property and Unfair Competition10.1007/978-3-662-45753-5_44. Belgium
4.1 Introduction
This contribution provides an overview of the application of competition and related rules on the grocery retail market in Belgium.1 Belgian competition law is modelled on European competition law, and some other rules that are applicable to the grocery retail sector are a reflection of European law as well. In the absence of specific Belgian case law, reference will therefore be made to European cases.
4.1.1 Economic Background
According to Eurostat data, more than half of Belgium’s farms are specialised in livestock (meat and dairy).2 Beef production is aimed specifically at consumption in Belgium, whereas pork meat is to a large extent subject to cross-border trade. Important crops include animal feed (corn), wheat, potatoes and sugar beet, as well as fruit and vegetables.
There are various intermediaries active in the delivery of agricultural produce to processors and consumers, including slaughterhouses and auction houses for fruit and vegetables. The processing of agriculture produce is to a large extent done by multinationals.
The supermarket sector is relatively concentrated in Belgium with three supermarket chains (Carrefour, Colruyt, Delhaize) of roughly equal size accounting for approximately 75 % of the market.3 In recent years, discount retailers have gained significant market share.
The larger supermarket chains in Belgium also sell over the Internet (with the consumer either having to pick up the groceries at the store or having them delivered to his home), but Internet sales only make up a very small part of their total turnover.
4.1.2 Legal Background
4.1.2.1 Competition Law
As indicated above, Belgian competition law is modelled on European competition law. It prohibits agreements and concerted practices that have as their object or effect the restriction of competition as well as the abuse of a dominant position. Just like under European competition law, resale price maintenance is prohibited per se. There are no provisions in Belgian competition law that are specifically aimed at the retail market, and the retail sector is subject to the general competition law rules.
Note that the Belgian Competition Act of 20064 is currently being replaced by a new Code of Economic Law, the relevant parts of which were published in the Belgian Official Gazette on 26 April 2013.5 The date of entry into force of most of the provisions of the new Code of Economic Law, which mainly introduces procedural changes, is still to be determined.6
4.1.2.2 Law Against Unfair Trade Practices
In addition to Belgian competition law, Article 95 of the Belgian Act on Market Practices and Consumer Protection of 20107 prohibits any action that is contrary to fair market practices that harms the professional interests of one or more other undertakings. This covers not only anticompetitive practices under competition law but also certain other practices considered to be unfair against other undertakings (such as misleading advertising or inappropriate sale practices).
The Belgian Act on Market Practices and Consumer Protection of 2010 prohibits (re)sale at a loss, whereby sale at a loss is defined as any sale at a price that is not at least equal to the price at which the company has purchased the good or the price that the company would need to pay to restock the good. To determine the purchase price (or price for restocking), rebates that the company received or would receive can be deducted if these rebates are certain and relate to the procurement of the good in question. Rebates that the company received or would receive for other reasons than the procurement of the good in question cannot be taken into account to determine the purchase price of the good.
The Belgian legislation provides that the prohibition on resale at a loss does not apply in certain circumstances:
in case of a liquidation or during the official sales periods;
in case a good can no longer be preserved (goods that reach the end of their shell life);
in case the product can no longer be sold at a price that is not at least equal to the purchase price, due to external circumstances; or
in order to align the price to the price at which the same or a competing product is sold by competitors.
It is contested whether the prohibition on resale at a loss is compatible with the European Unfair Commercial Practices Directive.8 In an order of 7 March 2013, which resulted from a request for preliminary ruling from the Commercial Court of Ghent, the Court of Justice of the European Union ruled that such a general prohibition of resale at a loss would be contrary to European law in case it pursues objectives relating to consumer protection.9 It is clear from the legislative history of the prohibition on resale at a loss in Belgium that the provision at least also pursues other objectives than consumer protection. Whether in addition it also aims at consumer protection is debated.
Draft legislation to amend the rules on resale at a loss is currently being considered by the Belgian government.
4.1.2.3 Other Laws and Regulations Applying to the Retail and Grocery Sector
There is no specific legislation on the structure of the grocery retail market or the behaviour of large-scale grocery retailers, but certain legislation indirectly affects the ability of large-scale grocery retailers to develop and to take advantage of their size.
First of all, the Act on the Authorization of Trade Establishments of 200410 provides that new retail outlets of 400 m2 (or the expansion of retail outlets to this size) require an authorisation from the municipality in which they will be located. In case the outlet exceeds 1,000 m2, the National Socioeconomic Committee for Retail needs to issue an opinion on the request, taking into account the urban environment of the outlet and also consumer protection and employment. This legislation is sometimes perceived as protecting small and medium-sized retailers from the entry of large-scale (food or non-food) retail multinationals in their municipality.
According to the OECD and the European Commission, this legislation acts as a barrier to entry into local retail markets, but in its 2012 Report on the Price Level of Supermarkets (see below), the Belgian competition authority concludes that the effect of this legislation is limited.
Second, Belgium has relatively strict rules on trading hours, which are furthermore strengthened by agreements between labour unions and retailers (organisations). These rules are often seen as a protection for smaller retailers that do not have the means to offer as extensive opening hours as large retailers.
The Act Against Payment Delays in Commercial Transactions of 200211 provides that payment terms cannot be manifestly unfair, taking into account all relevant circumstances, good trading practices and the nature of the good or service. This rule can be enforced through actions before the courts, with a possibility for the president of the relevant court to grant an injunction following summary proceedings. Such cases are rare.
There are no specific rules on Internet retail stores, and, to the extent relevant, they are therefore subject to the same regulations as brick and mortar stores.
No price control of grocery products exists anymore since the abolition of the maximum price of bread on 1 July 2004. However, the new Code of Economic Law of 3 April 2013 introduces the possibility for the Belgian competition authority to impose temporary measures for a period of 6 months in case of ‘a problem concerning prices or margins, an abnormal price evolution or a structural market problem’.12 It remains to be seen how this will be applied.
4.1.3 Market Studies
The Belgian competition authority in February 2012 published a Report on the Price Level of Supermarkets.13
This Report was commissioned by the Belgian minister of the economy on March 2011 after the Price Observatory, a body of the ministry of economy, had pointed out that consumer prices for groceries in Belgium were higher than in neighbouring countries (in particular, in the Netherlands and also, to a more limited extent, in France and Germany) and the European average. According to the Price Observatory, inflation for grocery prices was also higher in Belgium than in neighbouring countries.
The Report assessed the scale and the possible causes of the higher grocery prices in Belgium as compared to those in neighbouring countries and the European average. The characteristics of the Belgian supermarket sector were analysed, such as the size of supermarkets in Belgium, the concentration of the sector, its profitability and the ability to open new retail outlets. Also, the costs of the retail sector, in terms of personnel, procurement, tax, etc., were considered. The study also devoted attention to the impact of regulation: competition law, rules on establishment of new outlets, rules on sales at a loss, the regulation of opening hours, social regulation, etc.
The Report concluded that grocery prices were indeed higher in Belgium than in neighbouring countries (food was up to 12.5 % more expensive in Belgium than in the Netherlands).
The following factors were listed as explaining some of the price difference:
VAT is slightly higher in Belgium than in neighbouring countries.
Labour costs are slightly higher in Belgium than in neighbouring countries.
Procurement costs are likely to be slightly higher in Belgium than in neighbouring countries.
The characteristics of the retail market in Belgium with (1) the low profitability of one of the major retail chains (Carrefour), which prevents it from being aggressive on price, and (2) the “best price” policy of one of the other major retail chains (Colruyt), which reduces the incentive of other supermarkets to reduce prices.