On October 30, 2020, the Commission sent an SO to České dráhy, the Czech state-owned incumbent rail operator, for allegedly abusing its dominant position through predatory pricing.[1]

The Commission’s charge sheet focuses on the allegation that the Czech rail passenger operator charged prices below cost on the Prague – Ostrava route, which is the backbone of the Czech rail network, between 2011 and 2019. This conduct is alleged to have hindered the rapid growth of two nascent local competitors, RegioJet and Leo Express, which started offering rail passenger transport services on the route in question in 2011 and 2012 respectively.

Predatory pricing is a strategy whereby an allegedly dominant company sets prices below cost to drive competitors out of the market and then recoups the loss by charging “monopoly” prices in the absence of competition.[2] These cases are usually difficult for antitrust regulators to bring because price competition, and the resulting lower prices, is one of the most fundamental ways in which firms compete on the merits; the targets of predation generally do not exit the market easily, and the substantiation of the theory of harm entails complex cost calculations.

Indeed, predatory pricing cases have generally been rare: the recent Qualcomm[3] decision is the first Commission predatory pricing case since the Wanadoo decision in 2003.[4] That said, several Member States had investigated and imposed fines for predatory pricing in bus passenger transport,[5] rail freight transport,[6] pharmaceuticals,[7] and milk supply sectors.[8]

The Czech rail case is the first time the Commission has alleged predatory pricing in the passenger rail transport segment, and its decision could have implications for passenger rail transport in other EU countries. It will also be interesting to see if (and how) the Commission’s competitive assessment takes stock of the Green Deal objectives, which Commissioner Vestager explicitly called out in the statement accompanying the SO.[9] The Green Deal encompasses a comprehensive action plan aimed at making Europe climate neutral by 2050. The Commission is currently in the process of determining how competition rules could support the Green Deal objectives.[10]

[1]      Czech Rail (Case COMP/AT.40156), investigation ongoing. The Commission formally started the investigation in November 2016, following a dawn raid at České dráhy’s premises in April that year. The dawn raid led to a separate proceeding regarding the appropriate scope of the Commission’s dawn raid investigations. Following České dráhy’s appeal, the General Court partly annulled the Commission’s dawn raid decision, which set out the Commission’s intention to investigate predatory pricing practices on certain railway lines (including, but not limited to, the Prague-Ostrava route) in the Czech Republic. The General Court agreed with České dráhy that, on the basis of information available to it, the Commission had sufficient grounds to suspect predatory pricing only with respect to the Prague-Ostrava line, and annulled the dawn raid decision in part where it concerned other routes. České dráhy v. Commission (Case T-325/16).

[2]      In contrast to the U.S. antitrust framework, the Commission does not have to demonstrate a serious probability of recoupment to establish predatory pricing. See France Telecom v. Commission (Case C-202/07 P) EU:C:2009:214, para. 37.

[3]      In 2019, the Commission fined Qualcomm €242 million for abusing dominance by predatory pricing of 3G baseband chipsets. Qualcomm (predation) (Case COMP/AT.39711), Commission decision of July 18, 2019, currently under appeal before the General Court in Qualcomm v. Commission (Case T-671/19). The Qualcomm decision was discussed in our July 2019 European Competition Law newsletter.

[4]      Wanadoo Interactive (Case COMP/AT.38233), Commission decision of July 16, 2003.

[5]      Student Agency (Case No. 62 Af 27/2011-554), Regional Court in Brno, September 25, 2014; and Abuse of a dominant position by Cardiff Bus (Case No. CE/5821/04), UK Office of Fair Trading, November 18, 2008. While the UK Office of Fair Trading did not fine Cardiff Bus (due to its low revenues), the Competition Appeal Tribunal later ordered it to pay nearly £94,000 in damages to its rival 2 Travel. See 2 Travel/Cardiff Bus (Case No. 1178/5/7/11), UK Competition Appeal Tribunal, July 5, 2012.

[6]      English Welsh and Scottish Railways Ltd. (Decision No. CA98/3/03), UK Office of Rail Regulation, November 17, 2006.

[7]      Unfair pricing in respect of the supply of phenytoin sodium capsules in the UK (CE/9742-13), Competition and Markets Authority, December 7, 2016, partially annulled by the UK Competition Appeal Tribunal in Pfizer/Flynn (Case No. 1275-1276/1/12/17), June 7, 2018.

[8]      Valio (Case No. 2553/3/14), Finnish Supreme Administrative Court, December 29, 2016.

[9]      “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 travellers shift to rail in line with the Green Deal objectives.” See Commission’s Press Release, “Antitrust: The Commission sends Statement of Objections to České dráhy for alleged predatory pricing,” October 30, 2020, available at: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2017. The Commissioner referred to green objectives also when the Commission opened the formal investigation in 2016: “Competition drives prices down and service quality up. This is what we need in railway passenger transport, especially when we’re serious about cutting our carbon emissions.” See Commission’s Press Release, “Antitrust: Commission investigates practices of Czech railway incumbent České dráhy in passenger transport,” November 10, 2016, available at: https://ec.europa.eu/commission/presscorner/detail/en/IP_16_3656.

[10]    Competition Policy Supporting the Green Deal – Call for Contributions, October 13, 2020, available at: https://ec.europa.eu/competition/information/ green_deal/call_for_contributions_en.pdf.