Competition law and the rail sector: is there any competition?

The rail sector is one of the network industries the European Commission actively pursues liberalization to open the rail markets for competition. However, Member States are reluctant to open up the rail sector for competition and aims at keeping the public ownership of rail. Siemens-Alstom merge block brought back the debates on competition in network industries as all the issues relevant of rail incumbents owning integrated infrastructure and operations are still present despite liberalization actions. Furthermore, the dispute between Lithuanian Railways and the European Commission on competition law infringement clearly illustrates the challenges of applying competition rules to the rail sector.

Latest competition law enforcement and litigation in the rail sector

  • Currently, the European Commission runs one investigation in the rail sector regarding the Art 101 TFEU infringement by Slovak incumbent rail company. Also, two more cases, including the Commission’s decisions in the investigation against Czech railway incumbent České dráhy, a.s., and Lithuanian Railways are challenged at the EU courts.
  • Rail companies also were in a spotlight of Dutch and Spanish competition authorities in 2017. It was concluded that Dutch Railway NS abused their dominant position in public tender, whereas in two separate cases Nokia Solution and Network Spain, and REFN, Deutsche Bahn et al fined for anticompetitive agreements and abuse of dominant position.
  • Furthermore, despite the political pressure to create a regional champion, the European Commission blocked the Siemens-Alstom merger showing that EU competition law will not be used as a tool for protectionism.

Lithuanian Railways antitrust investigation

  • In 2016 the Commission found abuse of dominant position in the rail freight market and fined Lithuanian rail incumbent Lietuvos gelezinkeliai (‘Lithuanian Railways’) for EUR 28 million.
  • It concluded that dismantling the existing rail track which connected Lithuanian and Latvia infringed Art 102 TFEU. The assessment was based on a principle of third-party access which is an obligation deriving from the EU rail laws.
  • The case of Lithuanian Railways differs from similar cases as third party access was not just denied, restricted or discriminatory. The infrastructure was physically removed. Therefore, it suggests a straightforward exclusionary behavior and efficiency gains are unlikely to be possible to prove.
  • Consequently, Lithuanian Railways challenged the decision arguing that the dismantled infrastructure was not essential instead of trying to justify dismantling. The case is pending in the General Court.

Essential facilities doctrine and the rail sector

EU case law on the application of essential facility doctrine in the rail sector is scarce. Only a few cases such as European Night Service and GVG/FS could be mentioned.

  • As the rail sector is a sector where liberalization is still in progress, competition law, including the essential facilities doctrine, becomes a tool for facilitating access to the infrastructure where sector-specific laws fail to establish that.
  • In Lithuanian Railways, the EU courts will have an opportunity to revisit the application of essential facilities doctrine and third-party access in the rail sector.

The full article published as a blog post in the official blog of European Competition and Regulatory Law Review (CoRe) is here.