SABAM (Competition - Abuse of a dominant position - Concept of 'unfair price' - Opinion) [2020] EUECJ C-372/19

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(Request for a preliminary ruling from the Ondernemingsrechtbank Antwerpen (Companies Court, Antwerp, Belgium))

(Reference for a preliminary ruling — Competition — Article 102 TFEU — Abuse of a dominant position — Concept of ‘unfair price’ — Royalties collected by a collective management organisation for communication to the public of musical works protected by copyright at a festival — Calculation method)

1. By the reference for a preliminary ruling the subject of this Opinion, the Ondernemingsrechtbank Antwerp (Companies Court, Antwerp, Belgium) refers a question to the Court of Justice for a preliminary ruling on the interpretation of Article 102 TFEU. That question arose in two disputes — the first between Belgische Vereniging van Auteurs, Componisten en Uitgevers CVBA (‘SABAM’) and the company Weareone.World BVBA (‘W.W’) and the second between SABAM and the company Wecandance NV (‘WCD’) — concerning the royalties collected by SABAM for the use of musical works in its repertoire at festivals organised by W.W and WCD.

2. Under the first paragraph of Article 102 TFEU, ‘any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States’. According to point (a) of the second paragraph of Article 102 TFEU, such abuse may, in particular, consist in ‘directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions’.

3. The main objectives of Directive 2014/26/EU, (2) adopted on the basis of Article 50(1), Article 53(1) and Article 62 TFEU and which entered into force on 9 April 2014, are (i) to improve the ability of the members of collective management organisations to exercise control over the activities of those organisations, (ii) to guarantee sufficient transparency by collective management organisations, and (iii) to improve the multi-territorial licensing of authors’ rights in musical works for online use. (3) To that end, it lays down, in particular, requirements necessary to ensure the proper functioning of the management of copyright and related rights by collective management organisations. (4) Article 16 of that directive, entitled ‘Licensing’, contained in Chapter 4 on ‘Relations with users’, provides, in paragraph 2, that:

‘Licensing terms shall be based on objective and non-discriminatory criteria. …

Rightholders shall receive appropriate remuneration for the use of their rights. Tariffs for exclusive rights and rights to remuneration shall be reasonable in relation to, inter alia, the economic value of the use of the rights in trade, taking into account the nature and scope of the use of the work and other subject matter, as well as in relation to the economic value of the service provided by the collective management organisation. Collective management organisations shall inform the user concerned of the criteria used for the setting of those tariffs.’

4. Article IV.2 of the Wetboek van economisch recht (Belgian Code of Economic Law) has the same content as Article 102 TFEU.

5. Directive 2014/26 was transposed into Belgian law by the Wet van 8 juni 2017 tot omzetting in Belgisch recht van de richtlijn 2014/26 (Law of 8 June 2017 transposing Directive 2014/26 into Belgian law), (5) which entered into force on 1 January 2018. Article 63 of that law amended Article XI.262 of the Belgian Code of Economic Law, paragraph 1 of which provides that ‘licensing terms shall be based on objective and non-discriminatory criteria. … Rightholders shall receive appropriate remuneration for the use of their rights. The tariffs applied for exclusive rights and rights to remuneration shall be reasonable in relation to, inter alia, the economic value of the use of the rights in trade, taking into account the nature and scope of the use of the works and services, as well as the economic value of the service provided by the collective management organisation. Collecting societies shall inform the user concerned of the criteria used for the setting of those tariffs’.

6. Pursuant to Article XI.248 of the Belgian Code of Economic Law, in the version applicable to the facts of the main proceedings, ‘collecting societies shall manage rights in the interests of rightholders. Rights shall be managed in a fair, diligent, effective and non-discriminatory manner. …’

7. In accordance with Article XI.279 of the Belgian Code of Economic Law, a monitoring unit for collecting societies for copyright and related rights, which is part of the Economic Inspectorate at the FOD Economie (Federal Public Service for the Economy), monitors, in particular, the rules on collecting, calculating and distributing royalties adopted by those societies.

8. SABAM, the applicant in the main proceedings, is a copyright management organisation under Belgian law. The defendant companies, W.W and WCD, are the organisers, respectively, of the Tomorrowland and Wecandance music festivals.

9. The remuneration for use of the SABAM repertoire at music festivals (6) is determined on the basis of ‘tariff 211’. At the time of the facts of the main proceedings, this applied two different charging criteria: the first involved the application of a minimum tariff calculated on the basis of the area with access to sound or the number of available seats; the second, applicable where the amount of royalties was higher, consisted of a degressive tariff in tranches calculated on the basis of artistic budget (7) or the gross receipts from ticket sales, whichever was higher, including tickets offered free of charge to sponsors. According to the file, the rates applied ranged from 6% to 2.50% (3.25% for 2017) and applied to 8 (9 from 2017) turnover tranches ranging from EUR 0.01 to more than EUR 3 200 000. The different versions of tariff 211 allowed the deduction of certain expenses from the base amount, in particular booking fees, value added tax (VAT) and municipal taxes. (8) Discounts were applied to this tariff on the basis of the ‘1/3-2/3 rule’, whereby: (i) if less than one third of the songs performed were in the SABAM repertoire, SABAM charged one third of the tariff; (ii) if more than one third and less than two thirds of the works performed were in its repertoire, SABAM charged two thirds of the tariff; (iii) in all other cases, the full tariff was charged. To qualify for these discounts, the event organiser had to produce a list of the musical works performed. That list had to be produced at least 10 days before the event or, from 2017 and for works performed live by DJs, no more than 30 days after the event, provided that the organiser used a monitoring company approved by SABAM.

10. By various summonses, (9) SABAM claimed the payment of royalties from the defendants for the use of its music repertoire during the Tomorrowland festival held in 2014, 2015 and 2016 (10) and the Wecandance festival held from 2013 to 2016. (11)

11. Before the referring court, W.W and WCD contested the validity of tariff 211, which they consider unfair on the ground that it does not correspond to the economic value of the service provided by SABAM. First, they submit that the 1/3-2/3 rule on the basis of which discounts are applied is insufficiently precise and that the technology exists to determine with greater precision which works from the SABAM repertoire are performed at the festival and for how long. (12) Secondly, they dispute the calculation of the tariff on the basis of artistic budget or gross receipts, without deducting non-music-related costs. In the light of those elements, they argue that the charging system adopted by SABAM for events such as those organised by the defendants in the main proceedings amounts to an abuse of a dominant position, prohibited under Article 102 TFEU.

12. It is common ground that SABAM has a de facto monopoly in Belgium in the market for the collection and distribution of rights revenue from the reproduction and communication of musical works to the public.

13. The referring court notes that it is impossible to calculate the precise economic value of the rights linked to the performance of musical works at events such as those at issue in the main proceedings, since such a calculation would need to take into account the appeal and popularity of each song performed. Therefore, calculating the remuneration due to the copyright management organisation would necessarily be an approximation. However, the referring court asks what level of precision is required to ensure that such remuneration is not deemed unfair and whether the charging system adopted by SABAM, in the light of the elements contested by the defendants, is compatible with Article 102 TFEU.

14. In those circumstances, the Ondernemingsrechtbank Antwerp (Companies Court, Antwerp) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:

‘Must Article 102 TFEU, whether or not read in conjunction with Article 16 of Directive [2014/26], be interpreted as meaning that there is abuse of a dominant position if a copyright management company which has a de facto monopoly in a Member State applies a remuneration model to organisers of musical events for the right to communicate musical works to the public, based among other things on turnover,

1. which uses a flat-rate tariff in tranches, instead of a tariff that takes into account the precise share (making use of advanced technical tools) of the music repertoire protected by the management company played during the event?

2. which makes licence fees dependent on external elements such as, inter alia, the admission price, the price of refreshments, the artistic budget for the performers and the budget for other elements, such as decor?’

15. Written observations pursuant to Article 23 of the Statute of the Court of Justice of the European Union were submitted by SABAM, W.W, WCD, the Belgian and French Governments and the European Commission. With the exception of the French Government, those parties and interested parties presented oral argument at the hearing on 27 May 2020.

16. The issue of the criteria for calculating remuneration for the use of musical works in the SABAM repertoire at music festivals has long been at the centre of disputes between the collecting society and the organisers of such events. One of the most recent chapters in this saga is the decision of 12 April 2018 by which, at the request of several festival organisers (not including the defendants in the main proceedings) and the federation representing them, the Voorzitter van de Nederlandstalige rechtbank van koophandel te Brussel (President of the Dutch-language Commercial Court in Brussels, Belgium) found that SABAM had infringed Article 102 TFEU with regard, inter alia, to the elements of the tariff applied to festivals, contested by W.W and WCD in the main proceedings. (13) As a result of that decision, as set out by the referring court, SABAM altered — only temporarily, it would seem — the system of discounts which vary according to the number of works in its repertoire performed during the festival, replacing the 1/3-2/3 rule with 10% tranches. Up to 50% of the costs of private security and public assistance were also deductible from gross receipts. According to the file, SABAM brought an appeal against that decision before the Hof van beroep te Brussel (Brussels Court of Appeal, Belgium), which delivered a judgment on 10 April 2019 seeking an opinion from the Commission on the application of Article 102 TFEU to the tariff structure of SABAM and other collecting societies pursuing similar objectives and holding a monopoly in other Member States of the European Union. That court also asked the Commission for information on similar appeals pending in other Member States or of any measure examined at the EU level. The Commission issued its opinion on 8 May 2020. That opinion was entered in the present proceedings by a measure under Article 62 of the Rules of Procedure of the Court of Justice.

17. First of all, since the question referred for a preliminary ruling by the referring court is whether the application of a particular method of calculating a price — in this instance, the royalties payable to a collective management organisation for the communication to the public of musical works in its repertoire — is abusive, consideration must be given to point (a) of the second paragraph of Article 102 TFEU, which, as we have seen, prohibits a dominant undertaking from imposing ‘unfair purchase or selling prices or other unfair trading conditions’.

18. In this Opinion, I will, first of all, analyse the case-law of the Court on unfair pricing, with particular reference to the tariffs of copyright collecting societies. I will then proceed to examine — separately and in the light of the principles set out — the elements of SABAM’s tariff structure highlighted in the question referred for a preliminary ruling, on which the referring court seeks clarification from the Court. I will begin with the method of determining the basic amount to which SABAM’s royalty rate is applied, that is to say, the element mentioned in the second part of the question referred for a preliminary ruling. I will then consider the system of flat-rate discounts to which the referring court refers in the first part of its question for a preliminary ruling.

19. In its written observations, the Commission also touched on the question of whether the tariff structure adopted by SABAM was discriminatory within the meaning of point (c) of the second paragraph of Article 102 TFEU. Some of the arguments put forward at the hearing by W.W also indirectly referred to the idea of discriminatory pricing. However, I will not comment on this issue, since it is not apparent from the order for reference that the Ondernemingsrechtbank Antwerp (Companies Court, Antwerp) also intended to question the Court on this point.

20. Lastly, although the question referred for a preliminary ruling also concerns Article 16 of Directive 2014/26, the Ondernemingsrechtbank Antwerp (Companies Court, Antwerp) seeks clarification from the Court only on the interpretation of the concept of abuse of a dominant position — a concept that does not feature, explicitly at least, in Directive 2014/26. I will thus confine myself in my analysis to considering Article 102 TFEU and, in particular, the situation referred to in point (a) of the second paragraph of that article.

2. Case-law on abuse of a dominant position through excessive pricing and its application to the tariffs of collective management organisations

21. Unlike in other legal systems, such as in the United States, EU competition law regards as an anticompetitive practice any abuse of a dominant position that consists of ‘directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions’. For a long time, the Commission and the national competition authorities pursued that type of anticompetitive practice on a rather limited basis. In recent years, however, there has been a revival of the concept of ‘unfair prices’, as evidenced by the growing number of cases handled by the national competition authorities and the Commission, and by the cases brought before the Court. For the most part, those cases have concerned the prices of medicines and the tariffs applied by collective management organisations. (14)

22. To explain this situation (the reluctance to use the concept and its subsequent resurgence, albeit only in some economic sectors), it should be noted that the identification of a price as unfair and thus contrary to competition law is an extremely difficult process and one that is fraught with the risk of false positives (which occur when a price is mistakenly considered to be above the competitive price), or worse, the distortion of competition law in a form of dirigisme that replaces market dynamics with a framework of economic relations corresponding to the regulator’s subjective preferences. In addition, the erosion of profit margins may be a disincentive to improving the quality of the product or service, to innovation and to the entry of new competitors. Ultimately, therefore, it is consumer welfare — the main (and some would say the only) objective of competition law — that suffers.

23. Normally in a competitive market, high prices are corrected by the fact that because they are high they attract new entrants, thereby increasing supply and resulting in lower prices. The market is thus self-correcting. This is the main thrust of all currents of economic thought which emphasise the ability of markets to self-correct. It was advanced by the Chicago school, which heavily influenced North American antitrust practice.

24. However, it is not always possible for markets to self-correct, least of all where there are legal barriers to the entry of other operators, for example because a legal monopoly exists. There might also be a de facto monopoly in markets where multiple factors — such as consumer habits, the absence of alternatives to the monopolist’s product or service, lock-in effects, ‘network effects’ in multi-sided markets, economies of scale enjoyed by the monopoly holder — can make the entry of new competitors especially difficult.

25. Moreover, it is not always the case that there is a maximum price that the consumer is willing to pay for a product, with a result that, in those situations, there are no obstacles to the introduction of excessive prices. In the case of a life-saving medicine, for example, the only spending limit is the financial capacity of the purchaser (whether the patient or the national health service). However, even where less fundamental values than human life are at stake, there may be cultural or behavioural factors that mean that the consumer is willing to pay an extremely high price. In order to attend a concert of a world-famous rock star, who is the idol of millions of young people, the price may be limited only by the financial resources at the fan’s disposal.

26. In cases such as those described in the previous two points, the failure of competition law to intervene would result in a false negative since — according to the concept of market self-correction — the price would mistakenly be considered not to be above the competitive price. In cases of this type, there is more at issue than simply the distortion of competition. Indeed, this could amount to an attack on some of the fundamental values of our society, such as social equality, where there is a point at which differences in the possession of basic goods cannot depend on earning capacity without undermining social cohesion. In our society, healthcare — and thus the availability of medicines considered essential — and the consumption of culture are intrinsic aspects of belonging to a community. In those areas, therefore, the issue of ‘unfair prices’ is more acute. This is especially the case during an economic recession or when there is heightened public awareness of social inequality. The concept of excessive prices characterises EU competition law precisely because it is framed within a legal system and is engendered by an economic culture which makes reference to the ‘social market economy’ (Article 3(3) TEU).

27. It follows from the foregoing that the Commission, the national competition authorities and the national courts, when applying the concept of excessive prices, are faced with a Procrustean dilemma. On the one hand, there is the risk of antitrust over-enforcement based on false positives, which ultimately erode efficiency and consumer welfare. On the other, there is the risk of under-enforcement due to false negatives, which, in addition to eroding consumer welfare, may have, as mentioned in the previous point, wider negative repercussions.

28. To negotiate such a problematic area, the Court has identified methods which have been specified in the subsequent development of case-law. In the light of that case-law, it is possible to build a fairly detailed picture of the methods and criteria that must be used to classify a price as unfair and contrary to point (a) of the second paragraph of Article 102 TFEU. These were covered in depth by Advocate General Wahl in his Opinion in Autortiesību un komunicēšanās konsultāciju aģentūra — Latvijas Autoru apvienība. (15) They are reiterated here, together with several points more closely linked to the features of the case at issue in the present Opinion.

29. The Court’s leading case in unfair pricing is the famous judgment of 14 February 1978, United Brands and United Brands Continentaal v Commission (16) (‘United Brands’), (17) in which, as in the earlier judgment of 13 November 1975, General Motors Continental v Commission, (18) the Court defines a price as excessive ‘because it has no reasonable relation to the economic value of the product supplied’. (19) Not every high price charged by an undertaking in a dominant position in a given market is, therefore, excessive and contrary to Article 102 TFEU, but only those prices that are ‘disproportionate’ or ‘exorbitant’.

30. How can it be determined whether the price lacks any reasonable relation to the economic value of the service provided? The Court defined a two-part test for that purpose in United Brands. The first part is to determine whether there is a significant difference, that is a disproportion, between the price actually charged by the dominant undertaking in the relevant market and the price that, hypothetically, the undertaking would have charged had there been effective competition in the market (‘the benchmark price’). The Court points out that the disproportion can be assessed objectively by taking into account the size of the profit margin of the dominant undertaking, which is the ratio between the cost of production borne by that undertaking and the price charged by it. If the answer to that question is that there is a disproportion, the second part of the test seeks to determine ‘whether a price has been imposed which is either unfair in itself or when compared to competing products’ (20) (‘the United Brands test’).

31. On the basis of that test, simply observing a disproportion between the price and costs of production and an excessive profit margin does not, therefore, automatically mean that the price is unfair — that is to say, has no reasonable relation to the economic value of the service provided. To reach that conclusion, it is necessary to proceed to the second part of the analysis. This requires an assessment of whether the difference between the price and costs of production is in itself indicative of an unfair price or whether the unfairness results from a comparison with the prices charged by competing undertakings. (21) While the assessment carried out in the first part of the test and the assessment of the unfairness per se of the price, carried out in the second part, essentially focus on the profit margin of the dominant undertaking, the comparison with the prices of competing products introduces an assessment based on a point of comparison.

32. The analysis of prices/costs of production provided for by the United Brands test, as well as the alternative methods of determining the profit margin, require, in most cases, complex investigations and often only arrive at approximate results.

33. For that reason, the case-law and the Commission’s practice have also recognised other stand-alone analysis methods, (22) based, as provided for in the second phase of the United Brands test, on a comparison between the price considered unfair and various benchmarks, some of which are taken from the same relevant market, others from outside it. Those benchmarks are: (i) prices previously charged by the dominant undertaking for the same products in the same relevant market; (23) (ii) prices charged by the dominant undertaking for different (24) or related (25) or similar (26) products or for different types of customers; (27) (iii) prices charged by the dominant undertaking for the same product in different regions of the same relevant market (28) or in other geographic markets; (29) (iv) prices charged by non-dominant competing undertakings in the same relevant market; (30) and (v) prices charged by other undertakings for the same or comparable products in other markets. (31) The legitimacy of using alternative methods to the comparison between price and costs of production, based in particular on the comparison of prices charged in the relevant Member State with those applied in other Member States, was recently confirmed by the Court in AKKA/LAA specifically with regard to the tariffs of collective management organisations. (32)

34. In the Court’s view, the choice of the most appropriate method of analysis, as well as the assessment of unfair prices in general, (33) must take into account all the circumstances of the case. (34) That choice depends in particular on the product or service in question, the characteristics of the market, the availability of relevant data and the type of contractual counterparties of the dominant undertaking. In United Brands, for example, the Court observed that, taking into account the product in question and the accessibility of data on UBC’s costs structure, the analysis of price and costs of production was a more reliable criterion than the one used by the Commission, based on the comparison of the prices charged by UBC in the national markets under investigation and in a national reference market, chosen, according to the Court, on the basis of incorrect assessments. (35) In other cases, however, such as intangible assets, an analysis based on the comparison of prices and costs of production could prove complex, as well as inadequate for explaining the underlying economic situation.

35. In other words, as the Court expressly acknowledged in AKKA/LAA, there is no single adequate method for making the comparison between the unfair price and the benchmark price, nor for defining the framework for such a comparison. (36) Instead, the Court seems to favour an approach based on the combined use of several comparison criteria, each of which could be indicative of the existence of an unfair price or of corroborating or discrediting the data resulting from the application of one or more other criteria. (37)

36. In my view, that approach, shared by Advocate General Wahl in his Opinion in the AKKA/LAA case, is valid. All the methods of analysis described above have inherent limitations. Therefore, to avoid false positives or false negatives, they require verification or correction using other criteria that, depending on the circumstances of each case, are found to be relevant. (38)

37. Just as there is no single method of comparing unfair prices with benchmark prices, there is no unequivocal answer to the fundamental question of the threshold above which the disproportion between those prices is likely to lead to the abuse of a dominant position in the market and to require the intervention of the antitrust authorities. The answer to that question requires the economic value of the goods or services provided to be determined and for a reasonable profit margin to be established for the dominant undertaking, which logically cannot be an abstract process. In that connection, the Court held in AKKA/LAA that, regarding the comparison between the rates charged by the dominant undertaking in one Member State and those charged in other Member States, there is no ‘minimum threshold above which a rate must be regarded as “appreciably higher”, given that the circumstances specific to each case are decisive in that regard’. Consequently, a difference between rates may be qualified as ‘appreciable’ if it is both significant and persistent — in other words, not temporary and episodic. (39)

38. Where the evidence gathered using the different methods described above points to the existence of unfair prices, the dominant undertaking has the option of justifying its price structure and the difference between its prices and the benchmark price by relying, inter alia, on the difference between the situation in the market in which it operates and that of the relevant geographic markets, (40) the structure of its production costs, the need for a return on capital (41) or to recover additional costs, for example research and development costs, (42) or costs arising from the application of national legislation. (43) Nevertheless, the Court has ruled that the inefficiencies of the dominant undertaking cannot justify the imposition of unfair prices. (44)

39. The traditional monopoly (45) of collective management organisations has given rise to numerous actions by competition authorities at both the national and European levels concerning, inter alia, the pricing policy pursued by those collective management organisations.

40. In its judgment of 9 April 1987, Basset (46) (‘Basset’), which concerned the charging by the French copyright management organisation, SACEM, of a supplementary mechanical reproduction fee in addition to the right of public performance of recorded musical works in discotheques, the Court held, in essence, that the copyright royalties collected for such performance, the amount of which is calculated on the basis of the turnover of the discotheque, must be regarded as the normal exploitation of copyright and that their collection does not in itself constitute an abuse of a dominant position. (47) However, it specified that the amount of the royalty or of the combined royalties charged by a collective management organisation with a dominant position in the market could constitute an abuse in so far as it resulted in unfair conditions being imposed. (48)

41. The cases giving rise to the judgments of 13 July 1989, Tournier (49) (‘Tournier’) and Lucazeau and Others (50) (‘Lucazeau’) concerned the level of royalties collected by SACEM from discotheques. It was contended that these were appreciably higher than those applied in other Member States and that the rates charged bore no relation to those charged to other large-scale users of recorded music, such as television and radio stations. (51) The Court has clarified that when an undertaking holding a dominant position imposes scales of fees for its services which are appreciably higher than those charged in other Member States and where a comparison of the fee levels has been made on a consistent basis, that difference must be regarded as indicative of an abuse of a dominant position. In such a case it is for the undertaking in question to justify the difference by reference to objective dissimilarities between the situation in the Member State concerned and the situation prevailing in all the other Member States. The Court also held that the fact that the proportion of receipts taken up by collection, administration and distribution expenses rather than by payments to copyright holders is considerably higher than that of copyright management societies in other Member States is not a valid reason, since the possibility cannot be ruled out that it is inefficiencies due to the lack of competition in the market that accounts for that difference. (52) Lastly, in Tournier, the Court ruled that the fact that a blanket or flat-rate royalty was charged can only be criticised by reference to the prohibition on unfair price practices ‘if other methods might be capable of attaining the same legitimate aim, namely the protection of the interests of authors, composers and publishers of music, without thereby increasing the costs of managing contracts and monitoring the use of protected musical works’. (53)

42. In the case which gave rise to the judgment of 11 December 2008, Kanal 5 and TV 4 (54) (‘Kanal 5’), in which the royalties levied by the Swedish collective management organisation, STIM, for the television broadcast of musical works protected by copyright were alleged to be unfair, the Court adopted the principle already expressed in Tournier, stating that rates calculated on the basis of the revenue of television broadcasting companies and the amount of music broadcast, (55) which are in themselves legitimate, may nevertheless be abusive when ‘another method exists which enables the use of those works and the audience to be identified and quantified more precisely and that method is capable of achieving the same legitimate aim, which is the protection of the interests of composers and music editors, without however leading to a disproportionate increase in the costs incurred for the management of the contracts and the supervision of the use of musical works protected by copyright’. (56)

43. In the judgment of 27 February 2014, (57)OSA (‘OSA’), the Court adopted and simultaneously applied both approaches followed in Tournier and Kanal 5. Thus, the Court considers that where a collective management organisation imposes fees for its services that are appreciably higher than those charged in other Member States and where a comparison of the fee levels has been made on a consistent basis, that difference must be regarded as indicative of an abuse of a dominant position within the meaning of Article 102 TFEU. Furthermore, such an abuse might lie in the imposition of a price which is excessive in relation to the economic value of the service provided. (58)

44. Lastly, in the recent AKKA/LAA judgment, cited several times above, the Court confirmed that the method for identifying the possible excessive nature of the rates of a management organisation used in Tournier and Lucazeau, based on the comparison with the rates charged in other Member States, in particular certain neighbouring Member States selected in accordance with objective, appropriate and verifiable criteria, constitutes a legitimate alternative to the United Brands test, provided that such comparisons are made on a consistent basis and taking into account, where necessary, the purchasing power parity index (PPP index). (59)

45. Reading AKKA/LAA, the question arises whether the Court definitively intended to choose as the sole method of analysis the comparison with the rates charged in the reference Member States, applicable in all cases where the excessive nature of the rates of a collective management organisation for copyright in musical works is assessed. Although the wording of the operative part of that judgment and the fact that the Court has refrained from citing Kanal 5 seem to suggest this, such a conclusion is not supported in view of the grounds of the judgment, from which it emerges that the Court’s focus on that particular method of analysis owes more to the circumstances of the main proceedings in that case and the wording of the questions referred for a preliminary ruling than to a deliberate choice in that regard.

46. However, I do not consider that choice to be appropriate. First, I have already observed that each method of analysis presents its own drawbacks. In particular, as Advocate General Jacobs noted in his Opinion in Tournier, (60) the difficulty in comparing the rates applied in other Member States lies in the fact that an objective method of comparison has to be found, which is not easy given the differences between national laws and the methods used by the various collecting societies to calculate and collect royalties. More generally, as Advocate General Wahl observed in his Opinion in the AKKA/LAA case, ‘so far as concerns geographic comparisons, elements such as — to name but a few — domestic taxes, the particular characteristics of the national labour market and local consumers’ preferences may significantly affect the final prices of the relevant product or service’. Secondly, further clarification is needed on how to proceed where it is not possible to make a comparison on a consistent basis — for example, where a similar method of calculating rates is not available in the reference Member States — or where, as it would appear in the present case from the data provided by the Belgian Government in its written observations, the comparison shows that the rates charged by the collective management organisation are lower than those applied in the reference Member States. Lastly, it cannot be excluded that attributing sole or decisive importance to the comparison of rates applied in several Member States in assessing the possible excessive nature of the rates of collective management organisations could encourage collusive behaviour between the latter with a view to price coordination.

47. For those reasons, it is in my view preferable that the examination of the possible unfairness of the rates charged by collective management organisations for musical works should be carried out by selecting the most relevant method or methods each time, identified on a case-by-case basis.

48. It is in the light of those principles and the points made above that both parts of the question referred for a preliminary ruling must be analysed.

49. By the second part of its question for a preliminary ruling, which should be examined first, the referring court essentially asks the Court whether the fact that a copyright management company which has a de facto monopoly in a Member State applies a remuneration model to organisers of musical events for the right to communicate musical works to the public, based on turnover ‘which makes licence fees dependent on external elements such as, inter alia, the admission price, the price of refreshments, the artistic budget for the performers and the budget for other elements, such as decor’, constitutes an abuse of a dominant position.

51. First, in the question referred for a preliminary ruling, the referring court refers to a tariff structure ‘based on turnover’. However, it is apparent from the order for reference and from the file (and was confirmed at the hearing) that the degressive rate provided for in tariff 211, where no use is made of the basic tariff, applies, in the alternative, to the artistic budget — that is to say, the item of expenditure corresponding to the amount made available to the artists — or to part of the revenue equal not to the entire turnover of the event but only to the amount corresponding to receipts from ticket sales (including those offered free of charge to sponsors). (61)

52. Secondly, although the wording of the second part of the question referred for a preliminary ruling is unclear on this point, it is apparent from the grounds of the order for reference that the element of the SABAM tariff on which clarification is sought is the adoption of a percentage of the revenue of the gross receipts from ticket sales, as a basis for calculation, without taking into account the portion of those receipts that do not depend on the service of the collective management organisation and without allowing the deduction of expenses that are not specifically related to music.

53. Thirdly, the referring court does not ask whether that aspect of the calculation method used by SABAM is unfair in so far as it leads to excessive royalties being charged, but in so far as it fails to establish a sufficient link between the service provided by SABAM and the remuneration requested by it. Therefore, it is not the level of royalties charged per se which is at issue, directly at least, but more generally the method of calculating those royalties, namely the structure of tariff 211 and the relationship between that structure and the service actually provided by SABAM.

54. In that connection, it should be made clear from the outset that an undertaking, even if in a dominant position, must be able to pursue its own interests and that to that end it is, in principle, free to choose the method of calculation it considers most appropriate in order to determine the remuneration required in return for the goods or services that it offers. Accordingly, it is neither for the Court nor the national courts or competition authorities to determine which method of calculation should be used, but only to ascertain that the method applied in practice does not infringe the prohibitions imposed by Article 102 TFEU, and specifically does not lead to the imposition of unfair prices.

55. W.W submits that tariff 211 was created for traditional music festivals featuring the attraction of live music. It contends that events such as Tomorrowland conversely offer audiences a ‘unique and global’ experience, particularly because of the decor, which transforms not only the stage but the entire venue into an ‘imaginary world’, the costumes worn by staff, the visual elements such as light shows, optical effects and fireworks, the catering and a whole range of services offered during, before and after the event. WCD also emphasises the unique nature of the event it organises and, like W.W, argues that the gross receipts from ticket sales are generated mainly by factors that are unrelated to the music repertoire used. According to W.W, it follows that, for events of this type, the use of revenue as a basis for calculating the remuneration of the collective management organisation is in itself an abuse of a dominant position. By contrast, WCD considers it an abuse not to allow deduction from gross receipts of non-music-related expenses, some of which — such as those relating to compliance with environmental or safety regulations — are continually increasing. According to W.W and WCD, nor is the artistic budget a sufficient basis for the calculation.

56. According to the case-law referred to above, (62) a price cannot be regarded as unfair within the meaning of point (a) of the second paragraph of Article 102 TFEU if it is reasonably related to the economic value of the service provided by the undertaking in a dominant position. In the present case, that service consists in making musical works protected by copyright available to users for communication to the public at festivals.

57. As we saw earlier, the United Brands test suggests, at least implicitly, determining the value of the product or service provided by the dominant undertaking on the basis of its costs of production. Now, while it is possible to quantify the costs of collective management, it is extremely difficult, if not impossible, to determine the costs of creating an intellectual work, such as a musical work. The criterion contained in the United Brands test is, therefore, inadequate for determining the economic value of the service provided to users by a collective management organisation as a whole.

58. Consequently, the economic value of that service and, in the present case, of the service provided by SABAM to festival organisers must be assessed taking into account the nature of collective management, on the one hand, and copyright, on the other. (63)

59. As regards collective management, a significant part of its value lies in the fact that festival organisers are not obliged to contact each copyright holder individually about the works they intend to perform in order to negotiate separate licences with each one for the communication of works to the public, but have a single point of contact in the collective management organisation. The reciprocal agreements that SABAM has with other collective management organisations also allow access to the repertoire of foreign organisations by means of a single licence. That system of collective rights management not only represents a clear saving of time and resources, but is a prerequisite for the very feasibility of events of the type organised by companies such as W.W and WCD.

60. As regards copyright, the economic value of the musical works made available to festival organisers depends on the revenue they help (or are expected to help) generate. As Advocate General Trstenjak observed in her Opinion in Kanal 5, (64) for copyright licences, it is entirely normal practice to charge a royalty amounting to a proportion of the revenue earned by the product for which the copyright-protected material is used. The underlying notion is that an author should have a reasonable proportion of the turnover that is procured through the use of his or her work.

61. That notion is reflected in the settled case-law of the Court referred to above, according to which the fact that a copyright management organisation receives remuneration for the performance of protected musical works, the amount of which is calculated on the basis of the user’s turnover, must be regarded as a normal exploitation of copyright. (65) Consequently, royalties calculated on the basis of the user’s turnover are, in principle, reasonable in relation to the economic value of the service provided. (66)

62. Admittedly, the turnover of an event such as a music festival (67) depends to a greater or lesser extent on factors other than the communication to the public of copyrighted works, such as the quality and reputation of the performers, the venue, the decor, the lighting, the services offered during the event or its popularity. These are all factors that depend largely (but not exclusively) on the efforts of the organisers. They give rise to costs other than those linked to the royalties due to the collective management organisation and to differing degrees clearly bear no direct relation to the service it provides.

63. First, however, without detracting from the importance of those factors, and although it is ultimately for the referring court to rule definitively on the matter, it seems undeniable that music constitutes the main element of the ‘product’ offered by the defendants in the main proceedings and the main reason for the gathering of the public attracted to the event. Secondly, I note that a remuneration model based on turnover is customary in the field of copyright and, more generally, in the field of intellectual property rights, even if the right covered by the licence is not the main object of the end product. (68) Thirdly, as we have seen, in Kanal 5 the Court approved such a remuneration model for users such as television broadcasters whose turnover may depend largely on elements that are unrelated to the use of protected musical works. (69) Fourthly, it seems to me that the arguments put forward by the defendants in the main proceedings could apply in general to different types of users — including large-scale users — of music, such as discotheques, whose success also depends to a large extent on factors that could be considered unrelated to music, such as decor, lighting, location, quality of refreshments, type of clientele, the reputation of the DJs, and so forth. Last but not least, as correctly observed by SABAM, the mere fact that other factors besides music influence the decision to buy a ticket for events such as those organised by W.W and WCD does not in itself mean that a tariff structure that uses the receipts from ticket sales as a basis for the calculation of royalties is excessive in relation to the economic value of the copyright-protected musical works that are made available.

64. I note, moreover, that various elements of tariff 211 — which, as SABAM correctly observes, must be assessed as a whole — mitigate the effects of using turnover as the basis for calculating royalties and to some degree take into account the fact that the amount of revenue does not depend exclusively, or at least not necessarily in a directly proportional manner, on the value of the music.

65. First of all, as mentioned earlier, receipts from ticket sales make up only a portion of the turnover generated by the events organised by the defendants in the main proceedings. In that connection, I note that SABAM explained at the hearing — without being disproved by the defendants — that the percentage of turnover used to calculate royalties was around 35% and 50%, respectively, of the total turnover generated by Tomorrowland and Wecandance. Secondly, the base amounts — corresponding to receipts from ticket sales or the artistic budget — are divided into 8 (or 9) tranches to which a degressive rate of between 6% and 2.5% is applied. Accordingly, the percentage of the base amount corresponding to the royalties due to SABAM decreases as that amount increases. Thirdly, a series of discounts is applied to the royalties thus calculated. This takes into account, even if only on a flat-rate basis, the percentage of the SABAM repertoire actually performed during the event. Lastly, SABAM stated at the hearing — also without being disproved by the defendants in the main proceedings — that to take into account the specific nature of festivals, the degressive rate applied for such events starts from a lower maximum (6%) than for similar events such as concerts (8%). (70)

66. Like the royalties calculated on the basis of the turnover of the event, I consider that the royalties calculated using the artistic budget are — contrary to the claims made by the defendants in the main proceedings — in principle reasonable in relation to the economic value of the service provided by SABAM, in so far as such an item of expenditure gives a direct indication of the importance, in the organisation of the event, of the component linked to the communication of protected musical works.

67. In the light of the foregoing, the mere fact that the remuneration model adopted by SABAM uses, as the basis for calculating the royalties due for communicating musical works in its repertoire to the public, a percentage of turnover or portion of the turnover generated by the event at which such communication took place, or, alternatively, the artistic budget, does not in itself indicate the existence of unfair prices, nor a fortiori, contrary to the submissions of the defendants in the main proceedings, does it confirm that such an abuse exists.

68. In my view, the same applies, in principle, to the impossibility of deducting expenses ‘not directly related to the music’ from the base amounts calculated from the portion of the turnover derived from ticket sales or from the artistic budget. Besides the fact that it is extremely difficult to assess which expenses can be considered as not being directly related to the music, given the nature of the events in question (are, for example, expenses that ensure sound quality, but not those related to lighting, directly related to the music?), the impact of those expenses on the amount of turnover used as the basis for the calculation (in this case, revenue from ticket sales) depends on how the event organisers decide to allocate them and thus on elements that are entirely beyond SABAM’s control. I would also point out that in Basset and Tournier, the Court found that remuneration models based on gross turnover were legitimate. Similarly, in the case giving rise to the judgment in Kanal 5, STIM calculated the royalties on the basis of revenue from broadcasting to the public or, in the alternative, from advertising and/or viewer subscriptions, deducting only certain expenses. (71)

69. In any event, it is for the referring court to assess, in the light of all the relevant circumstances, whether the application of tariff 211, in so far as it uses the receipts from ticket sales or, alternatively, the artistic budget as the basis for calculating royalties, allowing only certain costs to be deducted from those amounts, is liable to give rise to unfair prices being imposed.

70. However, in order for the referring court to be able to determine the existence of excessive prices, it must, as set out in points 29 to 38 above, compare the level of royalties collected by SABAM by applying tariff 211 with a benchmark price, to be established using the most relevant methods of analysis at its disposal given all the circumstances of the case before it. The royalties would be found to be excessive if the comparison were to reveal a significant and persistent difference between those royalties and the benchmark price in question, without that difference being objectively justified.

71. In essence, to omit that stage of the analysis would be to recognise that a particular method of calculating the remuneration required by a dominant undertaking for its products or services automatically results in excessive prices being imposed, irrespective of the actual level of those prices. However, except in certain special cases, I consider that approach to be methodologically flawed. In practice, it could lead to the paradoxical result of depriving an undertaking of the freedom to adopt a particular calculation method, even where its application results in prices that are not above the competitive level.

72. One of the main methods of analysis that the referring court could consider — excluding for the reasons set out above the analysis of price/costs of production provided for in the United Brands test and the comparison with the prices charged by the competition in view of SABAM’s de facto monopoly position — is a geographical comparison, to be carried out in accordance with the criteria laid down by the Court in AKKA/LAA. Furthermore, although it emerged at the hearing that SABAM did not substantially alter the level of royalties required to make the musical works in its repertoire available to the festival organisers, (72) it might be appropriate to perform a historical analysis allowing a dynamic view to be taken of changes in the level of royalties actually paid by the defendants in the main proceedings. In that respect, I do not exclude that completely disregarding any increase in expenses that has been ascertained — particularly of expenses due to compliance with legal requirements, such as the costs of implementing health and safety or environmental protection measures — and completely disregarding any impact of those expenses on the amounts used as the basis for calculating the royalties of the collective management organisation that has been ascertained, could be indicative of unfair prices, in so far as it leads to a significant increase in the level of royalties without any quid pro quo for users and without being justified by an increase in SABAM’s expenses. Lastly, a comparison with the royalties collected by SABAM for similar services — identified, if possible, on the basis of objective criteria as part of an assessment by the referring court — may also be appropriate.

73. In the first part of its question for a preliminary ruling, the referring court asks the Court, in essence, whether the fact that a copyright management organisation which has a de facto monopoly in a Member State applies a remuneration model to organisers of musical events for the right to communicate musical works to the public, which uses a flat-rate tariff in tranches, instead of a tariff that takes into account the precise share of the repertoire protected by the organisation played during the event, constitutes an abuse of a dominant position.

74. Again, the point raised in the main proceedings is not the level of royalties as such, but the application of a particular calculation method which, it is argued, in itself amounts to an abuse, since it is excessive in relation to the economic value of the service provided by the collective management organisation.

75. According to W.W and WCD, it follows from Kanal 5 and OSA that the calculation of the royalties of collective management organisations must take into account the actual use made of the works in those organisation’s repertoire. The companies submit, in particular, that there are several techniques that allow the precise and error-free identification of the musical works actually performed and thus the share of the repertoire of the collective management organisation actually used. They refer in particular to the program developed by the Dutch company DJ Monitor. The use of such techniques would not entail additional costs for SABAM, or at least not unduly, since SABAM would still be required to analyse the list of works performed in order to distribute the royalties among the rightholders. SABAM disagrees with the general scope that W.W and WCD attribute to Kanal 5. It argues that the judgment applies only to television broadcasters, that is operators in a sector where the extent of the use of musical works varies, and not to operators such as W.W and WCD whose events revolve around music. According to SABAM, while it is appropriate to calculate the royalties payable by broadcasters by applying a variable share according to the musical works performed, in the case of music events such as those at issue in the main proceedings the remuneration can be expressed as a fixed percentage of turnover or on a variable flat-rate basis.

76. In the light of the observations of the parties to the main proceedings, it is first necessary to clarify the scope of Kanal 5, which the parties interpret differently. In that judgment, the Court explained that rates calculated on the basis of the revenue of television broadcasting companies and the amount of music broadcast may amount to an abuse when ‘another method exists which enables the use of those works and the audience to be identified and quantified more precisely and that method is capable of achieving the same legitimate aim, which is the protection of the interests of composers and music editors, without however leading to a disproportionate increase in the costs incurred for the management of the contracts and the supervision of the use of musical works protected by copyright’. (73)

77. As I observed earlier, the Court has repeatedly affirmed the legitimacy of a remuneration model for making available protected musical works, the amount of which is calculated on the basis of the user’s turnover, both in respect of users whose business depends on the exploitation of musical works, such as discotheques in Basset and Tournier, and users for whom the extent of such exploitation varies according to other factors, such as television broadcasters in Kanal 5.

78. That being the case, I note that in Tournier, specifically with regard to large-scale music users such as discotheques, and in a context in which the legitimacy of ‘blanket licensing’ — involving a fixed fee for access to the entire repertoire of the collective management organisation, irrespective of the actual use of the protected musical works — was at issue, the Court found that, although the blanket or flat-rate nature of the royalty in itself did not infringe the prohibition of unfair prices, an abuse could still take place if alternative methods existed that offered the same protection of the interests of copyright owners without additional costs. (74) Moreover, the Court has held on several occasions that, in the case of protected works made available to the public, copyright owners and the persons claiming through them have a legitimate interest in calculating the royalties due on the basis of the actual or probable number of performances. (75) Lastly, I note that, in Kanal 5, despite Advocate General Trstenjak making a clear distinction between the situation of television broadcasters and large-scale music users, by finding that a method of calculating royalties based on a fixed proportion of revenue was unlawful only in the former case, the Court justified the need to calculate royalties on the basis of the amount of music actually used, not in terms of the nature of the television broadcasters but more generally owing to the need to ensure that the remuneration was commensurate with the value of the service and to protect the interests of rightholders. (76)

79. On the basis of the foregoing, and like the Commission, I thus consider it to be a settled principle of the case-law of the Court of Justice that although a collective management organisation which has a dominant position in a Member State is free to calculate the amount of royalties due to it for the performance of musical works on the basis of the turnover generated by the user and to require that they correspond to a percentage of turnover that varies according to the amount of music used, albeit calculated on a flat-rate basis, such a calculation method may still amount to an abuse of a dominant position where alternative methods exist that allow both the musical works used and the audience to be precisely calculated. Such methods must ensure the same level of protection of the interests of authors, composers and publishers of music and must not lead to an excessive increase in the collective management organisation’s expenditure. The principle set out above applies both to users whose business depends wholly or largely on the exploitation of music, and to users for whom the extent of such exploitation is variable and less significant.

80. It is common ground that tariff 211 — both in the version applicable to the facts of the main proceedings, based on the 1/3-2/3 rule, and in the amended version of 2018, based on 10% tranches — involves, with a greater or lesser degree of approximation, a flat-rate calculation of the share of the SABAM repertoire actually performed during the events to which it applies. According to the earlier of the two versions, a discount on the full tariff was applied provided that at least one third of the works listed by the event organisers did not belong to the SABAM repertoire. Conversely, no discount was provided for below that threshold. Since no royalties were due only where no works in the SABAM repertoire featured on that list, in principle the performance of just one of the works protected by SABAM could have resulted in the application of one third of the full tariff. Furthermore, if the musical works in the SABAM repertoire corresponded precisely to one third or two thirds of those that the event organisers planned to perform, SABAM invoiced two thirds of the tariff or the full tariff, respectively. In the later version of the tariff, the 3 tranches of 33% were replaced by 10 tranches of 10%, thereby reducing the discrepancies regarding the share of musical works in the SABAM repertoire actually performed, although that share continues to be determined on a flat-rate basis.

81. In the light of the Tournier and Kanal 5 case-law, referred to above, it is for the referring court to assess, considering all the circumstances of the present case: (i) whether there are methods of identifying more precisely the musical works protected by SABAM performed during the event (since SABAM’s royalties are collected on the basis of the receipts derived from ticket sales, the question of audience identification does not arise); (ii) whether those methods ensure the same protection of the interests of the holders of copyright in those works; (iii) whether the application of those methods unduly increases SABAM’s costs, particularly as regards contract management and monitoring of the use of the protected musical works.

82. In my view, the relevant circumstances that the referring court will have to consider when assessing the first of those points include: (i) the availability of data on the musical works actually performed and the technologies used;(77) (ii) the reliability of such data and technologies; (78) and (iii) the time it takes to obtain the data. (79) Regarding the reliability of the digital technologies referred to by W.W and WCD, I note, subject to verification by the referring court, that SABAM stated in its written observations that the program used during the 2015 and 2016 events at issue in the main proceedings failed to recognise around 8% of the tracks performed, that such technologies struggle to recognise mixed tracks and, in any case, that they are not suitable for live music.

83. In examining the second of the points set out in point 81 above, the referring court must assess the advantages and disadvantages of the method of calculating royalties used by SABAM, taking into account the context in which such royalties are invoiced. In that respect, the following three factors seem to me to be particularly relevant. First, it will be necessary to consider what proportion of musical works in the SABAM repertoire is normally performed during the events at issue in the main proceedings, relative to all the music used. It is not inconceivable that the use of a flat-rate method is still preferable, taking into account the conflicting interests at stake, if almost all the works performed during this type of event are in the repertoire of the collective management organisation. In that connection, I note, subject again to verification by the referring court, that, in its written observations, SABAM, without being disproved by W.W and WCD, states that around 80-90% of the music performed during the festivals organised by those companies came from its repertoire. Secondly, the impact of using alternative methods on the speed of payment of royalties will have to be assessed. It is possible, as SABAM points out, that, due to errors in the recognition of the works performed, disputes could arise between the collective management organisation and the event organiser, which could increase the time it takes to collect royalties, to the detriment of rightholders. (80) Thirdly, the possible impact on the interests of rightholders of the phasing-out of the flat-rate method in tranches (in both versions) adopted by SABAM will have to be assessed in the light of the system for distributing royalties used by SABAM and its cost structure.

84. As regards the last of the points made in point 81 of this Opinion, relating to costs, I note that, unlike the wording used in Tournier, which seemed to rule out any increase in the organisation’s management and monitoring costs, the judgment in Kanal 5 stated that the use of a calculation method allowing the precise identification of the musical works performed must not lead to a ‘disproportionate’ increase in those costs. (81) If, therefore, the transition to such a system could lead to an increase in SABAM’s costs, that increase must be limited and must be weighed against the advantages it offers to organisers of musical events. An excessive increase is liable to reduce the level of royalties received by authors and their rightholders. In the main proceedings, W.W and WCD submit that the costs relating to the use of digital technology for the recognition of musical works, which, according to SABAM, are significant, would be borne by them and thus not entail additional costs for SABAM. Should that be confirmed, (82) the extent of the costs resulting from any errors or disputes relating to the identification of the SABAM repertoire, as mentioned in its written observations, would still have to be verified. The argument made by SABAM that only certain organisers of musical events would be able to afford the costs of using new digital technology and that, for others, those costs would be borne by SABAM, does not seem to me to be decisive, since there is nothing to prevent SABAM from adopting different calculation methods for different categories of customers, where such differentiation is justified and non-discriminatory.

85. If the verification referred to in point 81 above has a positive outcome, SABAM’s tariff structure is liable to infringe the prohibition on imposing unfair prices and conditions laid down in point (a) of the second paragraph of Article 102 TFEU. Indeed, a tariff structure based on flat-rate tranches that do not take into account the actual use of the protected musical works implies, where it is possible to determine precisely (or with more precision) the amount of such use (and audience), that a certain proportion of the royalties received by that company do not correspond to a service actually provided. (83)

86. However, I do not believe that in Tournier and Kanal 5, the Court intended to establish an automatic mechanism whereby the adoption of such a tariff structure — in the circumstances specified in those judgments and in the absence of justification from the collective management organisation — would necessarily lead to a finding of unfair prices.

87. As I noted earlier in points 70 and 71 above, the adoption of a particular method of calculating remuneration for products or services offered by a dominant undertaking cannot in itself give rise to the presumption that excessive prices exist, but must be substantiated by a comparative analysis of the level of those prices with a benchmark price.

88. It is only where it emerges that the application of such a calculation method in practice precludes any reasonable relation of the price to the economic value of the service provided that such a comparative analysis is unnecessary.

89. It is for the referring court to verify this. As for the comparative methods that the referring court may use in the circumstances of the main proceedings, I refer to point 72 of this Opinion.

90. In the light of all the foregoing considerations, I suggest that the Court reply as follows to the question referred for a preliminary ruling by Ondernemingsrechtbank Antwerp (Companies Court, Antwerp, Belgium):

Point (a) of the second paragraph of Article 102 TFEU must be interpreted as meaning that a collective copyright management organisation which has a de facto monopoly in a Member State does not abuse its dominant position by imposing unfair prices solely because it adopts a tariff structure on the basis of which the royalties received for making protected musical works from its repertoire available for communication to the public at festivals are calculated by applying a degressive rate to the revenue from ticket sales or to the artistic budget, without the possibility of deducting costs not directly linked to the service provided by that organisation, and by providing for a system of discounts based on the use of flat-rate tranches to take into account the proportion of musical works actually performed at the festival. However, it is not excluded that the application of such a tariff structure may lead to unfair prices being imposed, especially when another method exists that enables the musical works actually performed to be identified and quantified more precisely and that method is capable of achieving the same legitimate aim, which is the protection of the interests of authors, composers and publishers of music, without leading to a disproportionate increase in the costs incurred for the management of the contracts and the supervision of the use of musical works protected by copyright. It is for the referring court to assess, in the light of all the circumstances of the case before it, whether those conditions are met and, if so, whether imposing unfair prices is supported by further evidence derived, in particular, from a comparison with the rates applicable in other Member States adjusted using the purchasing power parity index, from a comparison with the fees applied in the past by the same management organisation, or from a comparison with the royalties set by that organisation for similar services.

2 Directive of the European Parliament and of the Council of 26 February 2014 on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online use in the internal market (OJ 2014 L 84, p. 72).

6 According to the file, although the definition of ‘festival’ has changed with each version of tariff 211, that concept has always referred to the organisation of a series of concerts by at least five groups or artists each day, each performing its own set. In some cases, a central theme and annual frequency were required.

7 According to the file, in the 2014 and 2016 versions of tariff 211, the concept of artistic budget was defined as the amount made available to artists to perform their set. Technical sound and lighting expenses reimbursed to artists were added in the 2017 version.

8 In the 2017 version, travel expenses were added where public transport had been used.

9 The referring court states that the cases brought by SABAM against W.W and WCD have not been joined, but will be disposed of by a single decision.

10 The referring court notes that, since the first annual Tomorrowland festival, SABAM and W.W have disagreed on the amount of remuneration due to SABAM. After reaching a settlement in 2008, and following a further dispute relating to the 2011 and 2014 events, in 2015, the Antwerp court upheld SABAM’s payment claim for the Tomorrowland events that took place in 2011 and 2013. Following that decision, on 30 July 2015, SABAM and W.W reached a new settlement concerning the royalties due to SABAM, not only for the events in 2011 and 2013, but also for the event that took place in 2014. They agreed, in particular, that two thirds of the amount for 2014 should be paid directly to SABAM and that one third should be held in a bank account pending the settlement of the dispute that had arisen in the meantime over the percentage of the SABAM repertoire used during the festival. For 2015 and 2016, although W.W initially accepted the tariff applied by SABAM, it subsequently contested the invoices issued by SABAM. SABAM is seeking payment of EUR 194 925.29 for the 2014 Tomorrowland festival, EUR 259 072.42 for the 2015 festival and EUR 283 726.99 for the 2016 festival, plus interest. SABAM is also requesting that W.W inform it of the number of VIP tickets sold for the 2016 event and their price. W.W is making a counterclaim seeking a declaration, principally, that no amount is due to SABAM for the Tomorrowland festivals held from 2014 to 2016 and the release of the funds set aside for the 2014 event, in addition to the reimbursement of EUR 16 236.00 for the 2016 event. In the alternative, W.W is requesting that an expert be appointed to determine the proportion of the works in the SABAM repertoire that were performed during the 2014, 2015 and 2016 events.

11 The referring court explains that for the event held in 2013, SABAM applied tariff 105, but began applying tariff 211 from the second event. WCD paid the amounts requested, but subsequently contested them. For the 2015 and 2016 events, WCD used the SABAM repertoire without permission. The amounts for those events, which were also contested by WCD, were therefore set by SABAM on the basis of its own calculations. SABAM seeks an order requiring WCD to pay EUR 27 359.04 and EUR 38 550.45, plus interest. WCD has filed a counterclaim seeking an order requiring SABAM to reimburse EUR 7 897.00 and EUR 13 349.78, plus interest.

13 The decision of the President of the Brussels Commercial Court also criticised SABAM for raising the tariff applied to festivals by around 37% and for applying an unduly high minimum tariff. SABAM was also ordered to pay a periodic penalty payment of EUR 5 000 per day, up to a maximum of EUR 1 000 000, in the event of non-compliance with that decision (see https://www.rtbf.be/pure/article/detail_dans-leur-conflit-avec-la-sabam-les-festivals-obtiennent-gain-de-cause?id= 9894749).

14 In the pharmaceutical sector, several national antitrust authorities have found unfair and abusive pricing practices, notably in Italy (Aspen case, decision of the Autorità Garante della Concorrenza e del Mercato (Italian Competition and Markets Authority) of 29 September 2016), the United Kingdom (Pfizer/Flynn case, decision of the Competition and Markets Authority of 7 December 2016) and Denmark (CD Pharma case, decision of the Konkurrence- og Forbrugerstyrelsen (Danish Competition and Consumer Authority) of 31 January 2018); at European level, the Commission launched a formal investigation in May 2017 into whether Aspen Pharma was charging unfair prices for cancer medicines in the European Economic Area (EEA) (excluding Italy); see also the Report from the Commission to the Council and the European Parliament ‘Competition Enforcement in the Pharmaceutical Sector’ (2009-2017) of 28 January 2019, COM(2019) 17 final, paragraph 4.2. In the copyright management sector, for a discussion of the decisions of national antitrust authorities, see the file available at https://www.concurrences.com/en/bulletin/special-issues/collecting-societies/collecting-societies-and-competition-law-an-overview-of-eu-and-national-case; at European level, see the case-law cited in points39 to 44 of this Opinion.

15 C‑177/16, EU:C:2017:286 (‘the Opinion of Advocate General Wahl in the AKKA/LAA case’).

17 The case that gave rise to that judgment involved an action by the largest banana supplier in the world at the time, the United Brands Company (‘UBC’), against the decision by which the Commission concluded, inter alia, that the prices charged by the group’s European subsidiary to some of its customers were excessive. The Commission had reached the conclusion that there was an abuse after comparing the prices charged by UBC in the German, Netherlands, Danish, Belgian and Luxembourg markets with those charged in the Irish market, which showed that the former were significantly higher than the latter.

19 See paragraph 250 of United Brands. That definition has since been used in numerous judgments: see, for example, judgments of 11 November 1986, British Leyland v Commission (226/84, EU:C:1986:421, paragraphs 27 and 28); of 17 July 1997, GT-Link (C‑242/95, EU:C:1997:376, paragraph 39); of 17 May 2001, TNT Traco (C‑340/99, EU:C:2001:281, paragraph 46); of 27 February 2014, OSA (C‑351/12, EU:C:2014:110, paragraph 88); of 11 December 2008, Kanal 5 and TV 4 (C‑52/07, EU:C:2008:703, paragraph 28); and lastly, of 14 September 2017, Autortiesību un komunicēšanās konsultāciju aģentūra — Latvijas Autoru apvienība (C‑177/16, EU:C:2017:689, paragraph 35; ‘AKKA/LAA’).

21 Such assessments need not be cumulative: see order of 25 March 2009, Scippacercola and Terezakis v Commission (C‑159/08 P, not published, EU:C:2009:188, paragraph 47).

22 In United Brands, the Court, while criticising the Commission, in essence, for not examining UBC’s costs structure, expressly admitted, however, that ‘other ways may be devised … for determining whether the price of a product is unfair’; see paragraph 253 of United Brands.

23 See judgment of 11 November 1986, British Leyland v Commission (226/84, EU:C:1986:421, paragraphs 28 and 29), in which a 600% increase in prices without an apparent increase in costs rendered an analysis of the latter unnecessary and focused attention on the difference between present and past prices.

24 See judgment of 11 November 1986, British Leyland v Commission (226/84, EU:C:1986:421, paragraphs 28 and 29).

25 See Commission Decision of 25 July 2001 relating to a proceeding under Article 82 of the EC Treaty (COMP/C‑1/36.915 — Deutsche Post AG — Interception of cross-border mail, recital 160).

26 See, implicitly, judgment of 13 July 1989, Tournier (395/87, EU:C:1989:319, paragraph 44).

27 See judgment of 11 November 1986, British Leyland v Commission (226/84, EU:C:1986:421, paragraphs 28 and 29).

28 See, implicitly, United Brands, in which the Commission’s comparison of UBC’s prices in different Member State markets was criticised solely because the national reference market had been chosen on the basis of incorrect assessments.

29 See judgment of 8 June 1971, Deutsche Grammophon Gesellschaft (78/70, EU:C:1971:59, paragraph 19).

30 See also judgments of 29 February 1968, Parke, Davis and Co. (24/67, EU:C:1968:11, p. 81) and of 5 October 1988, CICRA and Maxicar (53/87, EU:C:1988:472). In both cases, however, the Court ruled that the fact that the price charged by the dominant undertaking was higher than that of its competitors was not sufficient to determine an abuse, since the products of the dominant undertaking were patent-protected.

31 See judgment of 4 May 1988, Bodson (30/87, EU:C:1988:225, paragraph 31) and, more recently, AKKA/LAA, paragraph 38.

33 See judgment of 13 November 1975, General Motors Continental v Commission (26/75, EU:C:1975:150, paragraph 15).

34 Similarly, once the method of analysis has been identified, the choice of the relevant benchmark should also be made taking into account all the circumstances of the case. See, for example, paragraphs 41 and 42 of AKKA/LAA, according to which the choice of reference markets for comparison purposes depends on the specific circumstances of each case; see also judgment of 28 March 1985, CICCE v Commission (298/83, EU:C:1985:150, paragraphs 24 and 25).

36 See AKKA/LAA, paragraph 49. See also the Opinion of Advocate General Wahl in the AKKA/LAA case, point 36.

37 In the recent AKKA/LAA judgment, in paragraphs 38 and 43, the Court ruled on the comparison of the unfair rates applied by the copyright management organisation in one Member State with those charged by similar organisations in neighbouring Member States only or in a broader sample of other Member States. See also judgment of 27 February 2014, OSA (C‑351/12, EU:C:2014:110, paragraphs 87 to 92).

38 I refer here to the analysis made in the Opinion of Advocate General Wahl in the AKKA/LAA case, in points 43 to 45.

39 See AKKA/LAA, paragraphs 55 and 56; see, to the same effect, the Opinion of Advocate General Wahl in the AKKA/LAA case, point 107.

41 See Commission Decision of 23 July 2004, Case COMP/A.36.568/D3 — Scandlines Sverige AB v Port of Helsingborg.

42 See judgment of 29 February 1968, Parke, Davis and Co. (24/67, EU:C:1968:11, p. 100) in which the Court held that a higher price for a patented product as compared with an unpatented product does not necessarily constitute an abuse; see also judgment of 5 October 1988, CICRA and Maxicar (53/87, EU:C:1988:472, paragraph 17).

45 The monopoly of collective management organisations, which is often legal, is essentially due to the difficulty encountered by users and rightholders in negotiating individual licences for the use of musical works. However, the emergence of new digital technology seems to call into question, at least in part, the inevitability of such monopolies. See Lenard, T.M., and White, L.J., Moving Music Licensing Into the Digital Era: More Competition and Less Regulation, at https://techpolicyinstitute.org/wp-content/uploads/2015/12/moving-music-licensing-digital-era.pdf. Directive 2014/26 itself provides a more favourable legal framework for further opening up of the copyright management market to competition.

51 SACEM charged a fixed rate of 8.25% of turnover, including VAT, of the discotheque.

52 See paragraphs 38 and 42 of Tournier and paragraphs 25 and 29 of Lucazeau.

53 Paragraph 45 of Tournier. In this case, SACEM refused to make available to discotheques only the part of its repertoire they actually used.

55 The Court found that this was the case with the tariff applied by STIM to Kanal 5 and TV 4. That tariff consisted of a variable percentage of the revenue earned by those television broadcasters from the sale of advertising space and, in the alternative, from the sale of advertising space and viewer subscriptions. The percentage increased with the increase in the annual proportion of music of the television broadcaster (that is to say, the duration of the use, in individual broadcasts, of a protected musical work calculated over one year), albeit in a manner that was not directly proportional. STIM allowed the deduction of marketing expenses and licence fees payable to the Swedish State for the right to broadcast via the cable network; see Opinion of Advocate General Trstenjak in Kanal 5 and TV 4 (C‑52/07, EU:C:2008:491, paragraph 9).

61 According to the file, tickets for sponsors are calculated at face value or, if that value cannot be determined, on the basis of the average admission price.

67 W.W in particular disputes that Tomorrowland can be defined as a ‘festival’.

70 Clearly, the impact of this factor should be assessed by comparing the structure of the two tariffs as a whole, although it is for the referring court to conduct that assessment.

71 See Opinion of Advocate General Trstenjak in the Kanal 5 case, point 9 and footnote 4.

72 However, as noted earlier (see footnote 13 above), it emerges that the proceedings pending before the Court of Appeal in Brussels concern, inter alia, a recent increase in the rates charged by SABAM to festivals.

75 See judgment of 18 March 1980, Coditel and Others (62/79, EU:C:1980:84); Tournier, paragraph 12; and Kanal 5, paragraph 38.

77 W.W and WCD state that a list of the works to be performed is normally given to SABAM. Since the submission of that list is a prerequisite for the discounted rate, the data it contains are obtained by SABAM without it having to take any specific action. However, the use of digital technology could prove more complex.

78 The submission by the organisers of the list of works to be performed requires monitoring during the festival. In theory, the use of digital technology obviates the need for this. Nevertheless, the risk of technical problems occurring during the event must still be assessed.

79 The list of works to be performed during the festival is made available to SABAM in advance of the event. However, the use of digital technology means that the data are not available until after the event has taken place.

80 SABAM states that it has a statutory period of nine months from the end of the financial year in which the copyright revenue is received to proceed with the distribution to the rightholders.

82 In its written observations, SABAM states that, in the main proceedings, WCD argued that those costs should be deducted from the revenue used as the basis for determining SABAM’s royalties.

83 See, to that effect, judgments of 10 December 1991, Merci convenzionali Porto di Genova, C‑179/90, EU:C:1991:464, paragraph 19, and of 16 July 2009, Der Grüne Punkt — Duales System Deutschland v Commission, C‑385/07 P, EU:C:2009:456, paragraphs 141 to 147.

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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> SABAM (Competition - Abuse of a dominant position - Concept of 'unfair price' - Opinion) [2020] EUECJ C-372/19_O (16 July 2020) URL: http://www.bailii.org/eu/cases/EUECJ/2020/C37219_O.html Cite as: [2020] EUECJ C-372/19_O, [2020] ECDR 17, EU:C:2020:598, ECLI:EU:C:2020:598

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