European Commission: state-owned Czech rail operator breached antitrust rules
The European Commission has informed the state-owned Czech rail operator České dráhy (ČD) that it has breached EU antitrust rules by charging prices below costs. ČD will have the opportunity to excercise its right of the defence. If the Commission after the defence concludes that there is sufficient evidence of an infringement, it can impose a fine of up to 10 per cent of a company’s annual worldwide turnover.
Following a complaint, the Commission carried out inspections at the premises of ČD in April 2016. In November 2016, the Commission opened a formal antitrust investigation to assess the alleged predatory conduct of ČD relating to the provision of rail passenger transport services in Czechia, and in particular on the Prague – Ostrava route, the backbone of the Czech rail network.
On certain routes in Czechia, rail undertakings compete on a commercial basis, outside of public service contracts. In 2011 and 2012, two new rail undertakings, RegioJet and Leo Express, started operating commercial trains on the Prague-Ostrava route. As competition increased in the rail sector in this area, the number of passengers using this route by rail doubled in a few years.
The Commission investigation shows ČD potentially felt that RegioJet and Leo Express expanded too quickly on the Prague – Ostrava route and beyond. ČD reacted by starting to offer its services at prices that did not cover its costs, with the aim of hindering competition in the market. The Commission therefore has reached the preliminary view that between 2011 and 2019 ČD engaged in predatory pricing on the Prague – Ostrava route.
EU antitrust rules
Under EU antitrust rules, dominant companies have a responsibility not to abuse their powerful market position by restricting competition. Under specific conditions, pricing below cost may constitute such an abuse. Predatory pricing constitutes a serious infringement of the EU antitrust rules.
If confirmed, according tot the European Commission ČD’s conduct would amount to an infringement of Article 102 of the Treaty on the Functioning of the European Union (TFEU) through predatory pricing. The sending of a Statement of Objections does not prejudge the outcome of the investigation.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Competition in the rail passenger transport sector can drive prices down and service quality up to the benefit of consumers. It benefits the environment too as travelers shift to rail in line with the Green Deal objectives. In the present case, we have concerns that České dráhy was involved in predatory pricing which is against the EU competition rules.”
Statement of Objections
A Statement of Objections is a formal step in the Commission’s investigations into suspected violations of EU antitrust rules. The Commission informs the parties concerned in writing of the objections raised against them. The parties can then examine the documents in the Commission’s investigation file, reply in writing and request an oral hearing to present their comments on the case before representatives of the Commission and national competition authorities.
If, after the parties have exercised their rights of defence, the Commission concludes that there is sufficient evidence of an infringement, it can adopt a decision prohibiting the conduct and imposing a fine of up to 10 per cent of a company’s annual worldwide turnover. There is no legal deadline for the Commission to complete antitrust inquiries into anticompetitive conduct.