On 14 September 2017, the European Court of Justice (‘ECJ’) provided further guidance on how to identify an excessive pricing abuse under art. 102 lett. a) TFEU (Treaty on the Functioning of the European Union), one of the hardest to prove. This ruling is of particular interest given the investigations into excessive prices practices recently started in the pharmaceutical industry by national competition authorities, including the Italian Competition Authority (‘ICA’).
In the case at issue, the copyright collecting society AKKA/LAA, the only entity authorized to sell licenses for the public performance of musical works in Latvia, challenged the finding of an abuse of dominant position by the Latvian Competition Council. The national authority found that the licensing fees applied by AKKA/LAA were significantly higher than those charged in the neighboring Lithuania and Estonia, as well as higher than those charged in other Member States. After several appeals, the case was brought before the Latvian Supreme Court, which decided to stay the proceedings and refer some questions to the European Court of Justice.
With respect to the geographic comparison method adopted to examine whether the collecting society had charged unfair prices, the Court has confirmed the applicability of such method on condition that the reference Member States are selected in accordance with objective, appropriate and verifiable criteria and that the comparisons are made on a consistent basis. In making this assessment, due account will be taken of the different economic conditions across the European Union, which are closely linked to the different citizens’ purchasing power.
In regard to the conditions necessary to establish the existence of an abuse of dominant position, it is required to compare the fees and assess whether the difference is appreciable, that is significant and persistent. Such a difference is indicative of abuse of a dominant position and it is for the copyright collecting society to show that its prices are fair by reference to objective factors that have an impact on management expenses or the remuneration of right holders. In other words, if there is an appreciable difference among the fees, there will be a presumption of abuse of a dominant position, which may however be rebutted by the collecting society.
The guidance issued by the Court of Justice fits into well-settled case law on this point, thus reducing the legal uncertainty that has traditionally surrounded excessive pricing cases. The ruling is all the more important given that, just last year, the ICA referred to the European case-law on the subject when imposing a fine of € 5.2 million on a well-known pharmaceutical multinational. In fact, the Italian Competition Authority has fined the multinational for charging unfair prices for its anti-cancer drugs, by abusing its bargaining power when negotiating the price with the Italian regulator Agenzia Italiana del Farmaco (AIFA). In July this year the Italian administrative court of Lazio (TAR Lazio) has rejected the appeal brought by the multinational and confirmed the decision of the Italian Competition Authority. [TAR Lazio, Sec.I, 26/7/2017, n.8945- in Italian].
Ultimately, in order not to fall under the scrutiny of competition authorities, companies enjoying a dominant position in a particular market should more carefully consider how their market strategies may affect both competitors and consumers at national and European level.