On November 18, 2020, the General Court dismissed an appeal by AB Lietuvos geležinkeliai (“Lithuanian Railways”) against a 2017 Commission decision which found that the company had abused its dominant position on the Lithuanian rail freight market by removing a stretch of track connecting Latvia and Lithuania (the “short route”). The Commission found that the conduct prevented one of Lithuanian Railways’ major customers, the Polish stated-owned oil company AB Orlen Lietuva (“Orlen”), from switching transportation services to rival Latvian Railways.[1] The Commission and Lithuanian Railways discussed potential remedies, but failed to reach an agreement. The Commission therefore imposed a fine of €28 million. The General Court partially upheld the Commission decision, reducing the fine from €28 million to €20 million due to the limited territorial scope of the infringement.[2]
On appeal, Lithuanian Railways argued that the Commission should have assessed the case through the framework of the essential facilities doctrine.[3] The doctrine, developed in European Court jurisprudence[4] and incorporated into formal Commission Guidelines,[5] applies a three-part test for a finding of abuse: (i) access to the facility must be indispensable;[6] (ii) access must be denied without objective justification; and (iii) the refusal to allow access must exclude all competition on a secondary market. A facility is considered “indispensable” if there is no actual or potential substitute on which downstream competitors can rely.[7]
Lithuanian Railways argued that the section of removed track was not “indispensable” for rival Latvian Railways to compete on the downstream market,[8] as they could use an alternative route (the “long route”). Moreover, the track had been suspended for safety reasons prior to its removal due to its poor condition. Finding an abuse in these circumstances would violate Lithuanian Railways’ freedom to conduct business by requiring it to make substantial investments in the rail network for the sole benefit of allowing a single competitor to enter the market and compete.[9]
The General Court upheld the Commission’s decision. Notably, the Court held that it was correct not to entertain the essential facilities doctrine but, rather, to assess the conduct solely as an exclusionary abuse under Article 102 TFEU (i.e., as conduct capable of hindering access to the market and foreclosing competitors). The General Court referred to its recent judgment in Slovak Telekom,[10] currently under appeal before the Court of Justice, in which it held that the requirements of the essential facilities doctrine are only applicable in the absence of a regulatory obligation to provide access to other undertakings. The obligation on Lithuanian Railways to provide access to the short route derived from the applicable regulatory framework already required it to grant competitors access to the network, to ensure safe and uninterrupted rail traffic, and to restore the normal situation in the event of a disturbance.[11] The General Court therefore held that there was no tension with Lithuanian Railways’ freedom to conduct business.
A potential remedy to a finding of abusive refusal to supply is typically an obligation on the undertaking to grant access to the facility on “reasonable and non-discriminatory” terms.[12] The Commission offered Lithuanian Railways two alternative remedies: (i) reconstruct the section of removed track; or (ii) eliminate the disadvantages faced by competitors on the long route, for example by streamlining licensing and safety procedures, ensuring fair capacity allocation, and increasing transparency on access costs.[13]
On appeal, Lithuanian Railways submitted that the first alternative remedy was disproportionate because the investment required would go beyond restoration of the competitive status quo at the time the track was removed.[14] The effect of such an investment would not be to maintain an existing facility, but to create an entirely new one.[15]
The second alternative remedy was unnecessary because there were no high barriers to entry on the long route. Nevertheless, the General Court upheld the Commission’s decision, finding that Latvian Railways faced competitive disadvantages and that the proposed remedies were not disproportionate.[16]
[1] Baltic rail (Case COMP/AT.39813), Commission decision of October 2, 2017.
[2] Lietuvos geležinkeliai v. Commission (Case T-814/17) EU:T:2020:545 (“Lithuanian Railways”), paras. 402–404: “Finally, as regards the geographic extent of the infringement, it should be noted that, although the infringement had an impact on part of the territory of two Member States, it does, however, continue to be relatively limited. The removal of the Track concerned solely a section of a track which provided one of the various possible rail links between Latvia and Lithuania.”
[3] Lithuanian Railways, para. 71.
[4] Notably, Oscar Bronner GmbH & Co. KG v. Mediaprint Zeitungs- und Zeitschriftenverlag GmbH & Co. KG (Case C-7/97) EU:C:1998:569; and IMS Health (Case C-418/01) EU:C:2004:257.
[5] Guidelines on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, 2009/C 45/02.
[6] The assessment is normally made by looking at whether the input through which access is sought is incapable of being duplicated, or could only be duplicated with great difficulty, meaning its duplication is physically and legally impossible, and not economically viable. See Bellamy and Child (ed. Bailey D. and John, L., European Union Law of Competition (8th Edition), “Chapter 10: Article 102,” 2018, Oxford Competition Law, p. 719. Facilities that have been held to be indispensable include ports, airports, rail networks, gas pipelines, telecommunications wires and cables and cross-border payment systems, among others. (See, for example, Port of Rødby (Case COMP 94/119/EC), Commission decision of December 21, 1993; Frankfurt Airport (Case COMP/IV/34.801), Commission decision of January 14, 1998; GVG/FS (Case COMP/37.685), Commission decision of August 27, 2003; Gaz de France (Case COMP/39.316), Commission decision of December 3, 2009; and Slovak Telekom v. Commission (Case T-851/14) EU:T:2018:929).
[7] Guidelines on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, 2009/C 45/02, para. 83.
[8] Ibid., para. 72.
[9] Ibid., para. 73.
[10] Slovak Telekom v. Commission (Case T-851/14) EU:T:2018:929, paras. 117–121.
[11] Lithuanian Railways, para. 91.
[12] Whish, R. and Bailey, D., Competition Law (9th Edition), “Chapter 17: Abuse of dominance (1): non-pricing practices,” 2018, Oxford Competition Law, p. 724.
[13] Baltic rail (Case COMP/AT.39813), Commission decision of October 2, 2017, paras. 395–396.
[14] Lithuanian Railways, paras. 301–302.
[15] Ibid., para. 306.
[16] Lithuanian Railways, paras. 247–263, 301–330.