On June 9, 2021, the French Cour de cassation (“Cour de cassation”) put an end to a legal saga involving the French legacy train operator SNCF’s anticompetitive practices in the railway freight sector.[1] The Cour de cassation confirmed the Paris Court of Appeals’ December 20, 2018 ruling[2] that had found that the SNCF had breached Articles L. 420-2 of the French Commercial Code and 102 TFEU by applying a predatory pricing strategy to prevent rivals from entering into key contracts in the market for transport of full-train-load.
Background
On December 18, 2012, following a four-year investigation, the French Competition Authority (“FCA”) fined SNCF €60.9 million for abusing its dominant position on the market for railway freight by hindering and delaying the entry of new players.[3] In essence, SNCF (i) was using sensitive information on its rivals that it had obtained as the manager of railway network access (public service), which gave it a competitive advantage, and (ii) prevented rivals from accessing indispensable rail infrastructure (e.g., by artificially overbooking train paths and wagons).
The FCA also ordered the SNCF to take all necessary steps to avoid below-costs pricing in relation to transport services by full-train-load. On November 6, 2014, following the SNCF’s appeal against the FCA Decision, the Paris Court of Appeals partially annulled the FCA Decision, finding that the FCA had not established the existence of predatory pricing and that, as a result, the FCA Decision was moot in that respect.[4]
On November 22, 2016, however, the Cour de cassation annulled the Paris Court of Appeals’ decision, ruling that it should have either examined the lawfulness of the SNCF’s pricing practices itself or referred the case back to the FCA for further investigation.[5] In its second ruling, on December 20, 2018, the Paris Court of Appeals found that the SNCF had indeed engaged in predatory pricing.
The Cour de cassation’s ruling
On June 9, 2021, the Cour de cassation confirmed the Paris Court of Appeals’ findings, concluding that the SNCF had implemented an “eviction plan” against rivals for key contracts that would have enabled them to enter the market for transport of full-train-load. The Cour de cassation thereby confirmed the FCA’s 2012 finding that the SNCF had priced below mid- to long-term marginal costs as part of its predatory strategy.
The SNCF argued both before the Paris Court of Appeals and the Cour de cassation that, in order to assess predation, the FCA should have compared the SNCF’s prices to its most efficient competitors and not to its own costs. The SNCF’s own costs were indeed much higher than those of its competitors because of the special costs it incurred as a legacy incumbent.
However, the Cour de cassation, relying on Deutsche Telekom and TeliaSonera,[6] pointed out that predatory pricing should be assessed by reference to the company’s own costs, and that competitors’ prices are examined only in a limited number of situations.[7] According to the Cour de cassation, the Paris Court of Appeals correctly examined the market for the transport of full-train-load in concreto and rightly found that the SNCF’s position as a legacy incumbent subject to specific legal constraints does not justify taking into account its competitors’ costs as opposed to its own costs. In doing so, the Cour de cassation clarifies that the legal test for predatory pricing does not differ when the dominant undertaking is a national incumbent.
[1] French Cour de cassation, Commercial Chamber, decision of June 9, 2021, no. 496 F-D.
[2] Paris Court of Appeals, decision of December 20, 2018, no. 17/01304.
[3] FCA Decision no. 12-D-25 of December 18, 2012, regarding practices implemented in the railway freight sector (the “FCA Decision”).
[4] Paris Court of Appeals, decision of November 6, 2014, no. 2013/01128.
[5] French Cour de cassation, Commercial Chamber, decision of November 22, 2016, no. 1006 FS-D.
[6] Deutsche Telekom v. Commission (Case C-280/08) EU:C:2010:603:, TeliaSonera (Case 52/09) EU:C:2011:83.
[7] The Paris Court of Appeals and the French Cour de cassation rely on the situations provided in TeliaSonera, at para. 45: “That might in particular be the case where the cost structure of the dominant undertaking is not precisely identifiable for objective reasons, or where the service supplied to competitors consists in the mere use of an infrastructure the production cost of which has already been written off, so that access to such an infrastructure no longer represents a cost for the dominant undertaking which is economically comparable to the cost which its competitors have to incur to have access to it, or again where the particular market conditions of competition dictate it, by reason, for example, of the fact that the level of the dominant undertaking’s costs is specifically attributable to the competitively advantageous situation in which its dominant position places it.”