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Legal expertise
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3/21
Cooperation between railways from the standpoint of competition law

Do competition law and transport law exist in a state of tension? In this issue, guest writer Prof. Dr. Rainer Freise explores the relationship between competition law and transport law, and concludes that the two bodies of law can happily coexist but that a case-by-case approach must always be taken! 

The fundamental principle is that competition law comes into play if a cooperative undertaking (cartel) is formed between cooperation partners, despite competition between these latter being economically possible. If competition is not economically possible - for example, because operating a cross-border service alone is either impossible or loss-making, whereas a cooperative undertaking reduces costs and ensures a degree of profitability for the participants - then competition law is no impediment to such cooperation. This can be seen if we review the European rules on competition law.

Transport legislation governs, inter alia, which provisions of transport law apply (in particular in terms of liability) when carriers cooperate, especially in the context of successive or substitute carriage. Transport legislation does not govern the permissibility or otherwise of cooperative undertakings from a competition law standpoint (see Art. 2 CIM).

Whether or not a cooperative undertaking in the transport sector is permissible under competition law must be determined by the cooperation partners on a case-by-case basis in the light of the relevant rules and criteria in competition law. Competition law neither provides a blanket exemption from the general prohibition on cartels for specific cooperation models, nor does it ban any outright.

Case-by-case examinations are time-consuming and can be costly, despite which the outcome may still not offer any firm conclusions. It is thus understandable that some railways should choose to forgo all types of cooperative venture: in order to avoid making mistakes and spending limited budget resources on expensive expert analyses, and to ensure they remain on the safe side of competition law. However, in so doing they risk also forgoing a viable – albeit low-margin – line of business.

Nonetheless, reticence to commission case-by-case analyses and the avoidance of specific forms of cooperative venture in practice should not cause us to refrain from even mentioning certain specific types of cooperation (e.g. successive carriage). Anyone suggesting we should has not understood that transport law and competition law are positioned at different levels, deal with different issues, and cannot clash with one another. In interpreting and applying the law, it is to be generally assumed that legal systems are “consistent and free of internal contradiction”, in which context international statutes such as Art. 2 CIM help establish such consistency.

Railways must demonstrate case-by-case that their cooperative undertakings are permissible under competition law, e.g. by presenting facts to show that the undertaking in question is the only economically-viable way of running a (cross-border) rail service cost-effectively, and that the service would not exist at all if not permitted to run in cooperation. This line of argument is based first and foremost on operational, production and business-related facts, not legal considerations. Counsel’s role in this context is to help make the case for such undertakings by identifying and elucidating the range of legal solutions permitted under European competition law.

Since each cooperative undertaking must be assessed for compliance with competition law on a case-by-case basis, the international railway associations should exercise restraint and not seek to provide their members with a set of one-size-fits-all solutions intended to cover all scenarios, since such solutions will necessarily be more restrictive overall than bespoke solutions established case-by-case.   

 

Conclusion:

Competition law is not to be analysed with the aim of establishing which forms of cooperation it prohibits, but rather of determining those forms it permits in instances where a compelling and substantiated case can be made that without cooperation, a rail service will simply not exist.

rhfreise@t-online.de