European Commission investigates possible predatory pricing by České Dráhy, the Czech railway operator

On October 30, 2020, the European Commission sent a Statement of Objections to České Dráhy, the Czech rail operator, regarding possible predatory pricing. At this stage of the investigation, the Commission is indeed of the opinion that České Dráhy engaged in predatory pricing between 2011 and 2019 with the aim of hindering competition on the national market for rail passenger services in breach of European competition law rules.

The Czech public rail operator, České Dráhy, enjoyed until 2011 a legal monopoly on passenger rail transport on the line between Prague and Ostrava. Since 2011, two railway companies, RegioJet and LEO Express, have been operating this route in competition with České Dráhy. As a result, České Dráhy is reported to have decided in 2011 to significantly lower the prices of its train tickets on this railway line in order to foreclose the market.

Following a complaint, the European Commission carried out an inspection of the premises of the disputed company in April 2016. In November 2016, a formal investigation was opened to assess the existence of the alleged predatory practices of České Dráhy.

As a result of this investigation, the Commission came to the preliminary conclusion that České Dráhy engaged in predatory pricing with the aim of impeding competition in the market during the period 2011-2019.

Under European competition law, dominant companies are prohibited from abusing their dominant position in the market by restricting competition. Below-cost pricing may be considered as such an abuse if the objective is to foreclose competitors and when this objective is achieved, if the undertaking concerned increases prices or intends to do so. If the conditions for such an abuse are met, České Dráhy's pricing practice could constitute an infringement of Article 102 of the Treaty on the Functioning of the European Union.

However, it should be noted that a statement of objections is the first formal step in a European Commission investigation into a possible violation of competition law. Indeed, the purpose of the Statement of Objections is to inform the companies concerned of the Commission's preliminary position so that they can inform the Commission of their position regarding its objections. They can thus exercise their right of defence by having access to the investigation file, by submitting observations and by requesting a hearing.

If the Commission concludes that there is sufficient evidence of an infringement of the competition rules, it may impose a fine on the undertaking in question of up to 10% of the undertaking's total annual turnover.

In parallel with the gradual liberalization of the European rail sector, the Commission has in recent years adopted a tougher approach towards the incumbent railway companies in terms of competition law. In a previous case, the Commission had also investigated potential anti-competitive practices of the Slovak state railway company ZSSK and possible obstruction of a search conducted by the Commission to determine the existence of these same disputed practices. However, after a thorough examination of all the evidence, including ZSSK's response to the Statement of Objections and its oral hearing, the Commission decided not to pursue the proceedings.