Council chiefs in Magaluf have ordered the closure of the bar where a Northern Ireland holidaymaker was filmed performing sex acts on 24 men for a cheap cocktail.
Local police say they have identified Playhouse as the bar where the seedy video was taken.
The owners of the bar have been hit with a £43,500 fine, which they have been told to pay with controversial firm Carnage.
Both Playhouse and Carnage have also been told they must shut for a year unless they can successfully appeal against the hard-hitting council decision.
The pair, formally notified on Thursday of the fine and closure orders, have been given 15 working days to appeal.
A council spokesman said: "The town hall has shown it is acting in a scrupulous legal fashion.
"We've acted only when a full and conclusive police report was in place.
"We haven't acted on the spur of the moment based on the sole evidence of a video posted on the internet.
"I think the message is clear. The town hall won't tolerate activities of the kind featured in the video under any circumstances.
"We will use all the laws we have available to us to ensure there is no repetition.
"Playhouse and Carnage now have 15 days to defend themselves and I am sure they will do so because a 12-month closure could make anything think about closing up permanently."
The spokesman added: "There's nothing to stop Carnage opening up again under a different name if the council decision prospers.
"But if they chose to do so they'll have to be aware of what they're up against.
"A lot of bars and hotels they have been working with might not be so keen to work with them in the future.
"The fine of £43,500 is a joint fine they can pay between them but the closure orders affects them both for the full 12 months."
Manuel Onieva, mayor of the municipality of Calvia which covers Magaluf, ordered a police investigation earlier this month after the video of an 18-year-old Co Armagh tourist performing multiple sex acts on men inside a bar went viral.
He spoke of his disgust at the video and warned the bars face closure if they were found to have broken the law.
The council said it was fining Playhouse and Carnage and closing them down for 12 months because they had failed to comply with laws which made them responsible for ensuring under-age children had not witnessed the sordid events.
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A spokesman for Calvia town hall said: "We hold Carnage Magaluf responsible, because it was the organiser of the activity when the illegal act was committed." Carnage director Paul Smith said last night he would release a statement early next week. Asked if he would appeal, he said: "What do you think? Yes, of course."
The owner of Playhouse, which is run under a company name, could not be contacted.