The CJEU confirms the fine imposed on Lithuanian Railways for removing a section of track

On January 12, 2023, the Court of Justice of the European Union (“CJEU”) definitively confirmed the European Commission’s (“EC”) decision sanctioning the Lithuanian state-owned railway operator (Lietuvos geležinkeliai AB or “LG”) for an abuse of a dominant position. According to the EC, LG’s removal of a section of railway track prevented its main competitor from providing transport services between Lithuania and Latvia.

The case is highly significant. It confirms that article 102 TFEU does not contain an exhaustive list of abusive conduct and clarifies the scope of the Bronner case law on access to infrastructure.

Background

LG is the Lithuanian state-owned railway operator. As a vertically integrated undertaking, LG manages, maintains and operates the country’s railway tracks and infrastructure under a statutory monopoly, while also providing passenger and freight transport services in the Lithuanian market.

The case stems from a financial dispute between LG and one of its main customers, Orlen Lietuva AB, specializing in oil refining and distribution.  Orlen owns a refinery facility located in Lithuania, close to the Latvian border and directly connected to this country by rail[JMR1] 

Initially, Orlen used LG’s services to transport refined oil from Lithuania to Latvia through a short rail route and from its factory to Klaipeda seaport (Lithuania) for exporting purposes. LG provided the transportation services to Latvia together with the Latvian national railway company (LDZ) subcontracted by LG.

Due to a financial dispute over LG’s tariffs for this service, Orlen decided to move its maritime export business to Riga and Ventspils (Latvia) and contracted directly with LDZ to transport the product from its refinery in Lithuania to the Latvian ports. For this purpose, it made use of the connection directly linking its refinery (in Lithuania) to the Latvian railway network.

Shortly after Orlen began implementing these plans, LG decided to suspend all rail traffic on the track linking Orlen’s refinery to the Latvian rail network, citing safety reasons. Subsequently, LG removed that section of the track, forcing Orlen to use a significantly longer route to get its product to Latvian ports for export.

According to the European Commission, LG’s removal of the short track constituted an abuse of a dominant position. By removing the track, LG prevented LDZ—a potential competitor—from accessing the Lithuanian rail network (and thus the market for rail transport services between Lithuania and Latvia). The Commission considered that LG was hindering competition and imposed a fine of EUR 28 million.

The appeal before the General Court

In its appeal before the General Court (“GC”), LG claimed that the Commission had misapplied the Bronner criteria when assessing the conduct at issue, which involved a refusal of access to the Lithuanian railway network.

The Bronner case law sets a standard for assessing a refusal of access to infrastructure by an operator in a dominant position. According to these criteria, it is necessary to prove not only that the refusal is likely to eliminate all competition in the relevant market and that it is not objectively justified, but also that the infrastructure itself is indispensable for the exercise of the activity in that market—i.e., that there is no actual or potential alternative.

The General Court rejected LG’s arguments. According to the GC, since under both national and EU law it is mandatory to grant unrestricted access to national railway networks, the Bronner case law is not the relevant framework for establishing an abuse of a dominant position.

In its appeal to the CJEU, LG sought the annulment of the GC’s judgment and the Commission’s decision, insisting on the erroneous application of the Bronner case law.  It also argued that the Commission had misapplied the concept of abuse under article 102 TFEU, as the removal of the railway track section did not amount to an abuse.

The judgment of the CJEU

In its judgment of January 12 (Case C-42/21 P), the CJEU definitively confirmed the GC’s judgment and the European Commission’s decision.

With regard to the application of the Bronner criteria, the CJEU considers that the destruction of infrastructure (e.g., track removal) does not amount to a refusal of access within the meaning of that case law. According to the CJEU, the Bronner case law concerns a refusal of access to infrastructure whereby the dominant undertaking reserves it for its own use. In turn, the destruction of an infrastructure (or part of it) entails additional costs for the operator while at the same time hindering access both for competitors (actual and potential) and for the dominant undertaking itself.

Moreover, refusal of access to the infrastructure in this case does not affect the entire rail network as such, but only a specific section. Other routes on the network connecting similar destinations and points of departure remained open to potential competitors, even if they were longer.

Finally, the CJEU seems to confirm that the Bronner criteria are no longer applicable when the regulatory framework already requires access to an infrastructure. In this regard, the CJEU takes a slightly different approach to that of the GC. According to the CJEU, the Bronner case law is not relevant in these cases because the dominant undertaking cannot as such refuse access (as there is a legal obligation), but merely influence its conditions. Therefore, the issue was not whether or not to give access, but the scope of that obligation.

On this basis, the CJEU relies once again on the non-exhaustive nature of article 102 TFEU to define LG’s conduct as an independent form of abuse. At the same time, the CJEU recalls that the breach of a legal obligation by a dominant undertaking is not sufficient on its own to declare the existence of an abuse of a dominant position—which must be established by the competition authority.

Conclusions

Although not groundbreaking, this judgment gives rise to several practical considerations for future cases of abuse of a dominant position:

• It reinforces the exceptional nature and limits the scope of the Bronner criteria in cases of access to infrastructure.

• It recalls the special responsibility of dominant companies that manage state-owned infrastructure. This implies maintaining the infrastructure so that it can return to service in the short term, particularly when a delay may affect competition.

• The ruling will be relevant in future cases concerning digital markets, especially upon the implementation of the obligations related to access, interoperability, compatibility and data exchange under the Digital Markets Act.

• Finally, the conclusion that the removal of the railway gave rise to an “autonomous” abuse of dominance is a reminder that the scope of art. 102 TFEU is not exhaustive and is constantly evolving. Indeed, it could apply to other conduct not expressly provided for in the rule. From this perspective, the CJEU seems to endorse the position of the General Court in the Google Shopping case, where the GC considered self-favoring as an independent form of abuse—and thus excluded the application of the Bronner case law. The Google Shopping judgment is currently under appeal and awaiting a final decision from the CJEU.