Short Reads

Court of Justice provides guidance on examining excessive prices as abuse of a dominant position

Court of Justice provides guidance on examining excessive prices as

Court of Justice provides guidance on examining excessive prices as abuse of a dominant position

02.10.2017 NL law

On 14 September 2017, the European Court of Justice answered preliminary questions from the Latvian Supreme Court. The Latvian Court sought guidance on how to establish whether the fees charged by a collective rights management organisation (CMO) are excessive and therefore constitute abuse of a dominant position in the sense of Article 102 TFEU. The Court of Justice confirmed that comparing the prices with those applied in other Member States, is an appropriate method to establish whether Article 102 TFEU has been infringed.

If the difference observed is significant and persists for a certain period of time, it may be qualified as appreciable, which in turn is an indication of abuse of dominance.

The Latvian competition authority had investigated the royalty fees charged by the Latvian CMO to shops and service centres. CMOs manage copyrights in musical works on a collective basis, which includes the granting of licences to users as well as collection of royalties. In many Member States, including Latvia, CMOs are monopolists.

Firstly, the Court of Justice explicitly confirmed that trade between Member States may be affected by the level of fees charged by a CMO which holds a monopoly and also manages the rights of foreign copyright holders. Article 102 TFEU is therefore applicable in these situations.

Secondly, the Court of Justice confirmed that the method based on a comparison of fees applied by comparable CMOs in other Member States is a valid method to determine whether the price charged by a CMO is excessive. The Court clarified that for such a comparison, it is not necessary for the competition authority to include all Member States as long as the reference Member States "are selected in accordance with objective, appropriate and verifiable criteria". The Court added that these criteria may include, among other things, economic and socio-cultural factors such as gross domestic product per capita and cultural heritage. In addition, the Court noted that there are siginicant differences in price levels for identical services between Member States, as expressed in the purchasing power parity (PPP) index. Consequently, the Court of Justice ruled that when comparing prices for identical services in Member States with different living standards, the PPP index must be taken into account.

Thirdly, the Court of Justice confirmed that there is no minimum threshold above which a fee must be regarded as "appreciably higher". However, the difference must be significant and persist for a certain length of time in order to be appreciable and therefore indicative of an abuse. In this specific case, the fees charged by the Latvian CMO were twice as high as those charged in the reference Member States and 50-100% higher than the EU-wide average. The fees were introduced about two years before the Latvian authority fined the CMO.

Next, the Court of Justice noted that even when it is established that there is an appreciable difference, it may be possible for a CMO to justify its prices and show that they are fair by reference to objective factors that have an impact on management expenses or the remuneration of rightholders.

While the preliminary ruling of the Court of Justice in this case addresses questions that are very specific to the area of royalty fees charged by CMOs for use of copyrighted music, they may also be relevant for assessing excessive pricing in other industries.

This article was published in the Competition Law Newsletter of October 2017. Other articles in this newsletter:

  1. Court of Justice landmark judgment: Intel's EUR 1.06 billion fine is sent back to the General Court
  2. Court of Justice upholds fine imposed on Philips and LG in the cathode ray tubes cartel
  3. Court of Justice clarifies that a change from sole to joint control requires EU clearance only if the joint venture is "full-function"
  4. Curaçao Competition Act entered into force on 1 September 2017
  5. District Court of Rotterdam dismisses Vodafone claims of abuse of dominance by KPN

Team

Related news

11.12.2019 EU law
Court of Appeal applies competition notion of undertaking in civil damages claim

Short Reads - The Court of Appeal of Arnhem – Leeuwarden recently applied the competition law notion of an 'undertaking' in a civil damages suit between TenneT and an entity belonging to the Alstom group of companies. The Court of Appeal ruled that Cogelex formed a single undertaking with its 48% shareholder Alstom. Cogelex could therefore be held liable under civil law for the competition law infringement of its 48% parent company. The Court of Appeal based its decision on a broad application of the ECJ’s reasoning in its Skanska judgment of 14 March 201

Read more

09.12.2019 BE law
Stibbe renforce sa pratique de droit européen et de la concurrence par la venue de Sophie Van Besien en qualité d’associée

Inside Stibbe - Bruxelles, le 9 décembre 2019 –  Stibbe a le plaisir d’accueillir Sophie Van Besien, avocate spécialisée en droit européen, droit de la concurrence et des marchés réglementés, en qualité de nouvelle associée au sein de son cabinet bruxellois. Son expertise permettra d’enrichir les prestations actuelles du cabinet au Benelux et de contribuer au développement de son activité en droit européen et en droit de la concurrence ainsi que des marchés réglementés. Sophie Van Besien rejoint Stibbe ce 9 décembre 2019.

Read more

09.12.2019 BE law
Stibbe expands EU/competition practice with new partner Sophie Van Besien

Inside Stibbe - Brussels, 9 December 2019 – Stibbe welcomes EU law, competition, and regulated markets lawyer Sophie Van Besien as a new partner in its Brussels office. Her expertise will enhance Stibbe’s service offering in the Benelux and contribute to the further development of its EU/competition and regulated markets practice. Sophie joins Stibbe on 9 December 2019.

Read more

05.12.2019 NL law
Big tech firms entering banking: be careful what you wish for

Short Reads - Big tech firms, whether entering or already active on payments markets, are under scrutiny. PSD2 has opened up the payments markets to non-bank companies, but this comes with both risks and opportunities. EU regulators are examining anticompetitive risks, for example the possibility of leveraging a strong position in one market into another market. Competition, innovation, privacy and security for financial transactions will all be hot topics as scrutiny increases on providers of payment services.

Read more

09.12.2019 BE law
Stibbe versterkt EU/competition praktijk met nieuwe vennote Sophie Van Besien

Inside Stibbe - Brussel, 9 december 2019 – Stibbe verwelkomt Sophie Van Besien, gespecialiseerd in Europees recht, mededingingsrecht en gereguleerde markten, als nieuwe vennote in het Brusselse kantoor. Sophie’s expertise zal Stibbe’s dienstverlening in de Benelux versterken en bijdragen aan de verdere ontwikkeling van zijn EU/competition en regulated markets praktijk. Sophie vervoegt Stibbe op 9 december 2019.

Read more

Our website uses functional cookies for the functioning of the website and analytic cookies that enable us to generate aggregated visitor data. We also use other cookies, such as third party tracking cookies - please indicate whether you agree to the use of these other cookies:

Privacy – en cookieverklaring