The Possibility of the Introduction of Business-to-Business Unfair Trading Practices Regulation in EU Law

This study is intended to provoke discussion on the practical effects of unfair trading practices (‘UTPs’) in the market and the necessity of new UTPs regulation at EU level.Section 2 addresses the notion of UTPs and their effects. UTPs in vertical business-to-business (‘B2B’) relations are defined as abusive practices in contradiction to good faith and fair dealing principles. They are unilaterally conducted by a stronger party who has a superior bargaining position (‘SBP’) against a weaker party who is as vulnerable as the individual consumer, especially in a situation where the weaker party may not rely on judicial proceedings or attempt arbitration due to fear of retaliation. In essence, such practices are represented by the transfer of costs incurred, and by the shift of entrepreneurial risk to the weaker party.UTPs may adversely affect businesses and in turn, may influence the economy. Such influence can be seen in many forms, as UTPs may increase the weaker party’s costs and reduce revenues, adversely affect company’s ability to invest and innovate, occur economic efficiency losses, undermine consumer interests, have negative effects on diverse social benefits, disrupt EU cross-border trade and hence, undermine the function of the Single Market.Section 3 explores the current legal situation in Europe. Whilst many Member States have introduced UTPs regulation in their own way depending on their national situation, at EU level there is no legally binding rule for tackling UTPs in general. The current EU frameworks are neither sufficient to cover myriad forms of UTPs nor to ensure an adequate level of protection for the smaller but efficient businesses. With regard to the necessity of new EU legislation, the EU legislative bodies take a proactive stance, albeit the Commission has taken a relatively prudent stance.Section 4 analyzes the feasibility of new EU legislation tackling UTPs. Preventing UTPs by regulation can be a double-edged sword in the market economy - whilst it brings several benefits to enterprises and contributes to a more level playing field, it can also generate and increase the risk of chilling competition by over-enforcement. It is necessary to take a well-balanced approach by arranging more principled justifications for intervention, e.g. the comprehensive and dynamic standard.The new EU legislation addressing UTPs (harmonization measure) can be justified by the fact that the current legal discrepancies between Member States may hinder cross-border trade and hence contribute to fragmentation of the Single Market. The author concludes that, albeit reasonable concerns and criticism, the necessity and utility of the UTPs regulation cannot be denied. If the new EU legislation adopts a prudent and well-balanced approach, it will minimize the negative effects of legal fragmentation and maximize the benefits of the UTPs/ASBP regulation