The Italian Competition Authority fines Photoclaim for unfair practices
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On 3 October 2022 the Italian Competition Authority (AGCM) imposed a fine on the Polish company Photoclaim sp.zo.o ("Photoclaim"), which specialises in assisting rightholders to enforce copyright claims on photographs against online infringements, and a fine on its German counsel Mr Robert Fechner, on the grounds of unfair commercial practices.
The penalty is the outcome of an inquiry launched following the complaint of a small Italian business, that had received a request for a very large payment by way of expenses and damages from Mr Fechner, on behalf of Photoclaim, claiming that the addressee had illegally used a third party’s photograph on its website. The letter contained a settlement proposal including particularly onerous penalty clauses and threatened legal action before the German courts, hinting to the risk of even greater disbursements by way of damages and court costs.
The AGCM's inquiry showed that Photoclaim and Mr Fechner had sent a considerable number of standardised cease-and-desist letters to Italian small businesses on the grounds of infringement of moral rights and copyrights on photographs published online. The letters, however, did not provide any evidence of the rightsholder’s mandate, or of the ownership of the claimed rights or the true nature of the photograph[1].
Moreover, in the Authority's opinion, not only the contents but, above all, the manner of Photoclaim's and Mr Fechner's communications were so peremptory as to induce the addressees to adhere to the settlement proposal, regardless of the actual extent and infringement of a copyright, effectively depriving them of freedom of choice. Specifically, reference was made to a conduct defined by the Authority as contrary to professional diligence, including requests to sign settlement agreements containing, inter alia, admissions of liability, procedures to force adherence to vexatious clauses, imprecise references to the application of German law and jurisdiction, and so on.
The AGCM also found that the claims put forward appeared to be entirely disproportionate, as the complainant showed that the value of a licence for the use of a photograph similar to the disputed one would be far lower than the sum put forward by way of compensation by Photoclaim.
The Authority concluded that such conducts amounted to misleading and aggressive commercial practices, i.e. those capable of misleading the consumer and, in any event, capable of inducing him/her to take a commercial decision that he/she would not have taken otherwise. In particular, the AGCM considered that the aggressive behaviour of Photoclaim and Mr Fechner described above was capable of intimidating small businesses into adhering to their settlement proposal, out of fear for the burdensome economic and legal consequences threatened.
On these grounds, the AGCM imposed a double administrative fine, one against Photoclaim amounting to €35,000.00, the other against Mr Fechner amounting to €10,000.
This is a precedent of great importance in that the Authority for the first time addressed the practice of serial cease-and-desist letters in the matter of online IP infringements, drawing an ideal line.
[1] Italian Copyright Law provides for three types of photographs: a) photographic works, characterised by their creative character and therefore enjoying full copyright protection; b) "simple" photographs, which enjoy the more limited protection of so called neighbouring rights; c) merely documentary photographs, which do not enjoy any kind of copyright protection.