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Excessive pricing: ECJ’s ruling in the Latvia’s case

On September 15, 2017, in case C-177/16, the European Court of Justice (“ECJ”) ruled that comparing prices between EU member states is a valid way to determine whether prices may be abusively excessive and competition regulators have a certain margin of discretion in deciding whether prices are excessive in the absence of a single adequate method for such an assessment.

The ECJ’s judgment follows a reference from Latvia’s Supreme Court and confirms the methodology used by the country’s enforcer when it fined the collective rights management organisation AKKA/LAA (i.e., the Consulting Agency on Copyright and Communications and the Latvian Authors’ Association) for abuse of dominant position in the form of excessive pricing.
More precisely, AKKA/LAA is a collective right society and the only authorised entity in Latvia for the sale of licences for the public performance of musical works. The Latvian Competition Council found that the licensing fees charged by AKKA/LAA were two/three times higherstock-photo-high-price-red-rubber-stamp-over-a-white-background-224781520 than those charged in Lithuania and Estonia and, as a result of the assessment under the purchasing power parity index (the “PPP index”) test, those fees were 50/100% higher than the average level charged in other Member States, with the exception of Romania. The infringement decision was unsuccessfully appealed before the Regional Administrative Court and subsequently before the Supreme Court, that referred the case to the ECJ to clarify the test applicable to excessive pricing abuses.

In the judgment under analysis, the ECJ has inter alia held that there is no minimum number of national markets to be compared with and it is necessary to consider a number which could give a sufficiently representative comparison of the basis of an ad hoc scrutiny of the circumstances of the case and based on objective, appropriate and verifiable criteria. If abusive conduct is limited to a specific group of customers or users, it is appropriate to compare pricing for that segment in other markets. In addition, there is no minimum threshold above which a rate must be regarded as appreciably higher and the PPP index must be used to align national differences in price for identical services.
The ECJ has also held that rates being appreciably higher is an indication of abuse provided that the difference is significant and persistent on the basis of the features of the market concerned. In any case, the dominant entity is not precluded from showing that the difference in prices is fair and does not qualify as excessive.

 

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