Lithuanian National Railway Abused Its Dominant Position In The Freight Market

• Jurisdiction: European Union
• Law Firm: Ganado Advocates
• Subject Matter: Transport, Rail, Road & Cycling
• Author: Simay Cilingir
• Published date: 24 July 2023

On 12 January 2023, the Court of Justice of the European Union (CJEU) upheld the General Court's decision on imposing a fine of around '20 million on the Lithuanian national railway company in the judgement of Lietuvos gelezinkeliai v Commission (Case C-42/21 P).

The relevant article in discussion was Article 102 of Treaty of Functioning of the European Union (TFEU). This article prohibits actions by companies which may cause harm to consumers and create an impact on competition, thereby having an exclusionary effect on other potential or actual competitors. It specifically states that "any abuse by...an undertaking's dominant position within the internal market.... shall be prohibited". In this case, the CJEU confirmed that the Lithuanian national railway had abused its dominant position in the freight market which consequently resulted in anticompetitive effects.

Background

Lietuvos gelezinkeliai AB, the Lithuanian national railway company (LG) deals with both railway infrastructure as well as the provision of rail transport services. Orlen Lietuva AB (Orlen), is a Lithuanian oil company and a subsidiary of the Polish undertaking PKN Orlen SA.

In 1999, an agreement was entered into between LG and Orlen, for LG to provide its rail transport services to Orlen. One of the routes to transport Orlen's products involved crossing to the Latvian border and LG concluded a subcontract with the Latvian national railway (Latvian Railway) which consequently operated under LG since it did not have the necessary regulatory authorisation to carry out its activities independently in the territory of Lithuania. Therefore, Orlen relied heavily on LG for most of its refined oil products to be transported.

In 2008, a commercial dispute arose between LG and Orlen, and subsequently, Orlen explored the possibility of contracting directly with the Latvian Railway and discussed its plans to switch their transport services. Later that year, LG identified a defect in several rail tracks including the important route leading to the Latvian border, which was an important shortcut for Orlen's business. LG removed this 19km stretch of track completely, and all traffic was suspended until all restoration and repair works were completed. It transpired that LG did not intend to repair the 19km track on the shortcut to Latvia and during this time, discussions between Orlen and the Latvian Railway were interrupted.

Orlen lodged a formal complaint with the European Commission and the...