Competition law – (new) tracks as essential facility
On October 2nd 2017, the European Commission has fined Lithuanian Railways 28 million EUR for hindering competition on the rail freight market. The state-owned Lithuanian Railways control the tracks and also operates trains.
In 2008, one of the railway operator‘s major customers was considering to switch suppliers for the transport of its products to ports in Latvia. The customer’s refinery is located close to the Latvian border. In October 2008, the railway company decided to dismantle a 19km long railway track connecting the refinery to tracks in Latvia. As a result the products from the refinery now had to take a significantly longer route through Lithuania to reach Latvia. The track has not been rebuilt to date.
The Commission opened its investigation after the customer complained about the dismantling of the track. The Commission ultimately found that these actions hindered competition on the rail freight market because they excluded the option for the customer to use the services of a different rail operator. The press release notes that Lithuanian Railways did not provide an objective justification for dismantling the track. The Commission thus held that the dismantling of the track amounted to an abuse of a dominant position.
The Commission’s press release also highlights other measures the Commission undertakes with regard to achieving a single market for rail services and stressed that European Competition law wants to ensure that the advances made by deregulating the sector were not counteracted by acts of rail companies.
The decision follows comparable precedents with regard to essential facilities. Essential facilities are understood as (intellectual) property that cannot be reproduced or duplicated for technical, legal or economic reasons and that is also required by competitors to compete. Prior examples include (air)ports, essential patents or newspaper-home-delivery schemes that are not easily replaceable. Companies controlling such facilities are thus obliged to carefully assess if they have to grant access to these facilities to competitors. This might – as the recent decision shows – also include an obligation to keep the essential facility operable. Companies should thus evaluate if their assets are essential for another company’s business and if they can objectively justify denying access.
The decision also shows that public competition law enforcement can be triggered by customer complaints.
Any Questions? Please Contact: Alexander Israel or Jan Moritz Lang
Practice Group: Antitrust & Competition