On 7 September 2022, the Brussels Court of Appeal confirmed that SABAM, the Belgian Association of Authors, Composers and Publishers, abused its dominant position in violation of Article IV.2 of the Belgian Code of Economic Law (“CEL”), Article 102 of the Treaty on the Functioning of the European Union (“TFEU”) and Article VI.104 CEL by having excessively raised its applicable tariffs in 2017 without any objective justification. The Court of Appeal’s ruling puts an end to lengthy proceedings initiated against SABAM over 6 years ago, in which both the European Commission (“EC”) and the Court of Justice of the European Union (“ECJ”) provided guidance.
Background of the case
In 2016, numerous festival and concert organisers and the music festivals’ federation in Flanders sought a cease-and-desist order as in summary proceedings against SABAM following SABAM’s announced change of its tariffs for live concerts, on the one hand, and festivals, on the other hand, which would take effect from 1 January 2017. SABAM is the copyright management society that collects and distributes royalties in Belgium, including collecting royalties from music festivals for the use of works from rightholders who entrust their works and the rights in those works to SABAM (which is so-called ‘collective management’, as opposed to direct licensing). SABAM’s new tariff scale induced a fee increase of up to 32% for concerts and even 37% for certain festivals.
At first instance, the President of the Brussels Commercial Court found that SABAM had engaged in unfair commercial practices and abused its dominant position in breach of Article VI.104 CEL, IV.2 CEL and 102 TFEU by, among other things, (1) increasing the fees for festivals to a significant level (up to 37%), (ii) refusing to deduct costs other than booking fees, VAT, municipal taxes or public transport costs from the fees’ calculation basis, (iii) insufficiently taking into account the number of works from SABAM’s repertoire that are being performed and (iv) applying very high minimum fees that are disproportionate to the works being performed. SABAM was ordered to immediately cease applying these rates subject to a penalty payment.
An important point that was disputed was that when calculating the licence fees to be paid, SABAM has been applying a certain percentage of its basic tariff, depending on how many works from SABAM’s repertoire are being played at a given concert or festival, but neither takes into account the exact number of works being played nor therefore the actual proportional economic value of the rights linked to those works. In practice, as soon as an artist would play one single work from SABAM’s repertoire at a concert or festival, the organiser of this concert or festival would then have to pay 1/3rd of SABAM’s basic rate on its gross receipts as remuneration for the use of the copyrights in that one work. In the same vein, as soon as 67% of the works played belonged to SABAM’s repertoire, then SABAM would charge 100% of its tariff. In other words, no account was being taken of the actual number of works effectively played at an event relating to SABAM’s repertoire to determine the licence fees due.
SABAM then filed an appeal against the judgment. The Brussels Court of Appeal delivered its judgment on 7 September 2022, after having put the case on hold to wait for a requested amicus curiae from the EC about the case and also the ECJ’s preliminary ruling in a very similar case against SABAM regarding the latter’s tariff structure that was requested by the Antwerp Commercial Court (C-372/19). In the preliminary ruling reference, the ECJ was asked, on the one hand, if the tariff rate applied by SABAM could be based on a festival’s gross receipts (based on ticketing income) without taking into account the festival’s operating costs, and, on the other hand, if a flat-rate system operating in tranches (approximating the proportion of musical works from SABAM’s repertoire with thresholds like 1/3rd 2/3rd or 10% tranches) was legitimate.
Input from the EC and the ECJ
In its advice of 13 August 2019, the EC stated that to assess whether SABAM was abusing its dominant position, the national court must verify 1) whether the tariffs applied by SABAM were reasonable in relation to the economic value of the services provided (taking into account the availability of alternative methods for determining the tariffs so that those tariffs more accurately reflect the proportion of the music performed belonging to SABAM’s repertoire, without disproportionately raising SABAM’s costs in that regard, and to compare SABAM’s tariffs with those of other collecting societies in the EU), and 2) whether the tariffs applied by SABAM would lead to discrimination between festival organisers.
On 25 November 2020, the ECJ in its turn issued its preliminary ruling regarding the two questions that the Antwerp Commercial Court had submitted to it. While the ECJ ruled that a tariff rate based on gross ticketing income is not in itself abusive, it considered that a flat-rate system in tranches for determining the proportion of the musical works performed that come from the management organisation’s repertoire does not constitute an abuse of dominance, provided that there is no other method by which the use of those works can be more precisely identified and quantified without disproportionately increasing the cost of administering the contracts and of monitoring the use of copyright-protected musical works. The national court must assess that taking into account all the relevant circumstances, including the availability and reliability of the data provided and the technological tools in place.
The Brussels Court of Appeal’s decision
Following the EC’s advice and the ECJ’s ruling, the Brussels Court of Appeal in its decision of 7 September 2022 confirmed that SABAM has a dominant position on the relevant market, and that SABAM’s 2017 tariff increase constitutes an abuse of dominance in that SABAM failed to properly substantiate the proportionality of this tariff increase. Therefore, the Court found an excessive difference between SABAM’s new 2017 tariffs and the tariffs it applied in the past. Although SABAM tried to justify the tariff increase, the Court held that SABAM did not provide any conclusive numerical evidence of SABAM passing-on these increased fees to the right holders.
In line with the ECJ’s preliminary ruling, the Court of Appeal further found that the calculation of licence fees should more accurately take into account the proportion of the protected repertoire if there is “another method by which the use of these works can be more accurately identified and quantified”. Now that four years have passed since the first judgment and given the advances in technology (with so-called ‘fingerprinting’), SABAM should be able to more accurately quantify the amount of works actually used, and therefore adapt its fees accordingly.
In light of the above, the Court ordered SABAM to immediately cease this abuse under a penalty payment of 50,000 EUR per individual infringement (with a maximum of 1 million EUR in penalty payments).
In practice, this appeal judgment means that SABAM must revise its excessive 2017 tariffs and elaborate on an alternative method to calculate its fees. The Brussels Court of Appeal stated that such an assessment should be made in a properly reasoned manner in the context of negotiations.
Therefore, it remains to be seen which alternatives SABAM – possibly together with concert and festival organisers – will put forward to ensure a more accurate identification of the works and rights actually relating to SABAM’s repertoire and the according licence fees.
This case is certainly interesting as it provides more insight about abusive excessive pricing outside the pharmaceutical sector, which is the sector where most of such cases that have arisen until now have been handled.
Moreover, it could have an impact on the assessment of other national collecting societies’ tariff structures, which have also been challenged in the past by concert and festival organisers in other European countries.
 A right holder may decide not to join a collective society such as SABAM (or only to do so regarding certain of his/her rights). In such a case, the right holder will license those rights him/herself, determine the licence fees and will receive those licence fees paid directly to him/her.
 It should be noted that after the first ruling, SABAM changed its 1/3rd 2/3rd rule and started applying tranches of 10%.