William Malcolm

Commission Says Ceske Drahy Broke Competition Rules

The European Commission (EC) has come to the preliminary conclusion that Czech Railways (ČD) violates antitrust rules by charging prices below costs. The commission has sent a formal Statement of Objections to the carrier. ČD faces fines of up to ten percent of its annual turnover. Which according to the company’s annual report was four billion crowns last year. In response, the carrier said the Statement is not a final ruling, but rather notification of the commissions preliminary findings.

The Commission opened an investigation in 2016 when RegioJet and Leo Express complained about prices allegedly intended to eliminate competition. In 2011 and 2012, they started offering their services on the backbone line between Prague and Ostrava, where Czech Railways sold tickets below cost.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “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 travelers shift to rail in line with the Green Deal objectives. In the present case, we have concerns that České dráhy was involved in predatory pricing which is against the EU competition rules.

The Commission has now given the company time to comment, and its representatives can examine the documents in the proceedings or request a hearing in Brussels. However, if Czech Railways fails to persuade the commission to change its opinion, the EU executive may impose a fine on the company in the said amount. The standards do not specify any precise time limits for the further course of the proceedings.

The antitrust rules set out in the EU treaties prohibit dominant companies from abusing their strong market position. In some cases, pricing below cost may constitute such an abuse.

“The Commission investigation shows ČD potentially felt that RegioJet and Leo Express expanded too quickly on the Prague – Ostrava route and beyond. ČD reacted by starting to offer its services at prices that did not cover its costs, with the aim of hindering competition in the market. The Commission therefore has reached the preliminary view that between 2011 and 2019 ČD engaged in predatory pricing on the Prague – Ostrava route,” the European Commission said today.