Dispute between AKKA/LAA and the Competition Council on the penalties imposed on the association is referred for re-examination
7 February, 2018
On 6 February, the Department of Administrative Cases of the Supreme Court annulled the judgment of the Administrative Regional Court in the case of dispute between "Copyright and Communication Consulting Agency/Latvian Authors Association" (hereinafter - AKKA/LAA) and the Competition Council regarding the fine of 45 645.83 LVL imposed on the association for abuse of a dominant position – unfair pricing. The Supreme Court referred the case for the re-examination in the Administrative Regional Court as a court of first instance.
The Supreme Court in the judgment states that, when re-examining the case, the court first of all should verify the validity of the institution's decision regarding the choice of markets used for the comparison of rates. Secondly, it is necessary to reassess whether royalties payable to authors should be taken into account when calculating the fine.
In view of the Supreme Court the institution has not sufficiently substantiated the similarity of the compared markets. The Supreme Court also points out that the lack of such substantiation can be remedied in court proceedings, presenting detailed information by the institution and, if necessary, providing evidence of comparable markets. It complies with the principles of the Administrative Procedure Law, which allows any party to proceedings to submit additional evidence of his/her allegations, in so far as the substantive statement of the institution's decision has not been changed. Representatives of the Competition Council at the siting of the Supreme Court explained in more detail the similarities between the Latvian, Lithuanian and Estonian markets. An explanation of this kind must be submitted to the Regional Court, which examines the case on the merits.
Regarding the amount of the fine, the Supreme Court in the judgment states that it is necessary to assess whether it is fair to calculate the fine from the value of the service provided by the applicant. If, in the light of the interdependence between the applicant and the authors, it is more likely to believe that they are a single economic unit and not merely mediation between other entities, then there are no grounds for not taking this fact into account when determining the fine. In this respect, taking into account the general objectives of the fine, it would also be necessary to assess the relationship between the object of the offense itself (the unfair price) and the one who gains benefit.
The Competition Council had found violations in operation of AKKA/LAA's when applying royalty rates for playing music in public – in shops and places of provision of services. By the decision of 2 April 2013, the Competition Council found that the applicant – AKKA/LAA – violated the prohibition set out in Section 13, Paragraph one, Clause 4 of the Competition Law and in Article 102 (a) of the Treaty on the Functioning of the European Union (abuse of a dominant position) and imposed a fine of LVL 45,645.83. When calculating the turnover of the last fiscal year for the imposition of a fine, the Competition Council also included the collected remuneration of the authors, indicating that according to competition law the net turnover of the associations should be calculated on the basis of similar principles as that of capital companies, providing that the calculation of the fine is not applied differently depending on the legal form of market participant.
Applicant filed an application requesting the annulment of the Competition Council's decision.
By the judgment of the Administrative Regional Court of 9 February 2015, the application is partially satisfied. The Court acknowledged that the Competition Council was right to find unfounded the application of unreasonably high rates for the use of authors' musical works in shops and in places of provision of services. At the same time, the court annulled the decision of the Competition Council regarding the fine imposed on the applicant and imposed on the Competition Council to issue a new administrative act within two months from the entry into force of the judgment, obliging the applicant to recalculate the fine, observing the factual findings and legal considerations established by the judgment.
The Supreme Court heard the case (No SKA-7/2018; A43012613) on 6 December due to cassation complaints received from the AKKA/LAA and the Competition Council. At the hearing, the court heard the parties to proceedings on the cassation complaints lodged and the answers provided by the Court of Justice of the European Union to the preliminary questions referred by the Supreme Court in the case.
Information prepared by Baiba Kataja, the Press Secretary of the Supreme Court
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