BREAKING: the CJEU sets new criteria to assess excessive pricing under competition law

Yesterday the Court of Justice of the European Union ruled on one of the hottest antitrust issues of 2017: excessive pricing.

It was Commissioner Vestager in late 2016 who set the antitrust radar of the European Commission on these conducts, which were considered a bit like unicorns until last year: traces of them were visible only on old handbooks. Following the Commissioner’s speech, the European Commission launched an investigation against Aspen Pharma for alleged excessive pricing in May 2017 (everywhere but in Italy, where Aspen had already been fined by the Italian Competition Authority, see here).

The judgment delivered yesterday by the CJEU is a preliminary ruling on a case referred by the Latvian Supreme Court in relation to an antitrust case involving the Latvian collecting society (AKKA/LAA). AKKA LAA, in its capacity as a legal monopolist in charge of granting licences for the public performance of musical works in commercial premises and service centres, had been fined by the local Competition Authority for having charged excessive rates. Interestingly, the Latvian Competition Authority had come to the conclusion that the rates charged by AKKA/LAA to its customers (i.e.: shops, restaurants, pub) were excessively high after having compared them: (i) with the rates charged by the collecting societies of neighbouring countries and (ii) with the rates charged in other Member States taking account of a “purchasing power parity” (PPP) index based on the gross domestic product.

The CJEU was required to shed some light on the criteria to use in order to say when too much is too much and it actually did so, coming to conclusions similar to the ones contained in AG Wahl’s Opinion.

Firstly, the Court recognised that there is not a single method to determine whether prices are unfair. However a good method is to compare rates charged in neighbouring countries if the Member States taken into account present similar features (i.e.: consumption habits, economy and citizen welfare). Furthermore, the Court combined the above described “geographic comparison” among neighbouring countries with a wider comparison among all the Member States by using a purchasing power parity index (“PPP”) index which helps overcoming the differences between countries with heterogeneous economic conditions.

Secondly, the Court explained that in order to have an abuse of dominant position, the rates charged by a dominant undertaking is to be regarded as “appreciably higherthan those charged in another Member State. On this notion, although there is no minimum threshold above which a rate must be regarded as “appreciably higher”, the difference between prices can be qualified as “appreciable” if it is both significant and persistent. Therefore, nor temporary, neither episodic. However, filling these definitions will be a matter for the national courts.

Thirdly, with specific regard to the sector of copyright collecting societies, the Court importantly stated that the remuneration collected by the societies and intended for right-holders must be included in the turnover for the purpose of calculating the amount of the fine. According to the CJEU, this comes from the circumstance that collecting societies and right-holders constitute an economic unit and, further, this is the only way to make sure that the fine is proportionate and dissuasive. Worthy to say, at the moment in Italy SIAE, the formerly monopolist collecting society, is under investigation for an alleged abuse of dominant position, so this provision on the method for assessing the turnover might have an immediate impact.

Although the considerations in the ruling seem particularly focused on the market for copyright collecting societies, it is not to be ruled out that these principles may find application in other fields. The pharmaceutical sector, for instance, with the Aspen Pharma case currently pending in Brussels, might be the first sector in which the new criteria provided by the Court are tested.

 

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