When Are Prices 'Excessive': Did The Latvian Competition Authority Strike The Right Note?

The European Court of Justice (ECJ) has just ruled that competition regulators have a "certain margin for manoeuvre" in deciding whether prices are excessive, and that there is no single adequate method for such an assessment.

In 2013, the Latvian Competition Council fined the Consulting Agency on Copyright and Communications and the Latvian Authors' Association (AKKA/LAA) over €32,000 for abuse of a dominant position. AKKA/LAA is a collective rights society: the only authorised entity in Latvia which can sell licences for the public performance of musical works for which it controls the copyright.

The Competition Council found that the licensing fees charged by AKKA/LAA were two to three times higher than those charged in Lithuania and Estonia. After assessing the fees in line with the purchasing power parity index (PPP index), the fees were 50%-100% higher than the average level charged in all other Member States. Only Romania charged higher fees to shops and service centres with a surface area between approximately 85.5m2 and 140m2.

AKKA/LAA appealed to the Regional Administrative Court, arguing that the Competition Council failed to compare the licensing fees in four additional Member States with similar economic criteria to Latvia. This failed, and AKKA/LAA appealed to the Supreme Court, claiming that the Regional Administrative Court did not set out objective and verifiable criteria to justify its view that the Latvian licensing fees were capable of comparison with fees in Estonia and Latvia, and the Regional Administrative Court's decision was based on territorial, historical and cultural factors, instead of economic criteria.

The Latvian Supreme Court referred seven questions to the ECJ, three of which concerned the measure of excessive pricing. The ECJ found that:

There is no minimum number of national markets to be compared. The number which will give a sufficiently representative comparison depends on the circumstances of the case. The reference Member States must be selected in accordance with objective, appropriate and verifiable criteria, which may include consumption habits, gross domestic product per head and cultural and historical heritage. Comparisons between reference Member States must be consistent. The PPP index must be used to align national differences in price for...