There has been regular media coverage of the railway sector this past year. The Dutch Railways (“NS”) in particular frequently dominated the headlines; not only because of the parliamentary inquiry into the Fyra, but also because of the irregularities surrounding the tendering procedure for public transport in Limburg. That latter event even led to the dismissal of CEO Timo Huges. A few days before his dismissal the Netherlands Authority for Consumers and Markets (“ACM”) published a decision in which it found that NS had disadvantaged its competitor Veolia in the run-up to the tendering procedure. NS had insufficiently complied with requests of Veolia to use services such as ticket machines, service desks and break rooms for staff at the train stations. The Dutch Railways Act provides that NS must make its competitors a reasonable offer regarding their use. According to ACM, NS also passed on information of Veolia to its subsidiary Abellio. In ACM’s opinion, that information gave Abellio an unfair head start on its competitors in the tendering procedure.
ACM’s decision expressly does not address NS’s possible violation of Article 24 of the Competition Act (see also our earlier blog). ACM’s investigation of that violation is still pending. The recently published draft report of Europe Economics may play an important role in that regard. That report, drawn up at ACM’s instruction, concludes that there is reason to assume that NS holds a dominant economic position on the passenger transport market. According to that report, DB Schenker, the other company investigated, may have a dominant position on submarkets on which freight transport by road or inland navigation is not an alternative. It is also worth mentioning in this regard that ACM also recently visited DB Schenker for a market interview as part of the investigation of container terminal ECT.
ACM’s reason to request Europe Economics to perform an investigation is European Directive 2012/34/EU establishing a single European railway area. That Directive obligates companies with a dominant economic position on a market for railway transport that furthermore provide services (such as stations) to separate those business units, also in the form of separate financial accounts. European Economic’s draft report demonstrates that those obligations will most likely apply to NS.
Passenger transport and freight transport
ACM does not specifically supervise NS’s operating activities under the Railways Act. Under that Act it merely supervises NS as a provider of additional services, such as access to stations or fuel facilities. The decision on the public transport tender in Limburg therefore related to those activities of NS, not to the transport organised by it. Transport by rail can be divided into freight transport and passenger transport. There is no competition with regard to passenger transport on the Dutch main rail network. NS has a monopoly on the transport of passengers across the main rail network. That monopoly has been privately awarded to NS until 2025.
It recently became apparent that such private awarding will remain possible in the future. That agreement was made at a meeting of the EU ministers of transport. This means that the railway policy within the European Union will remain fragmented in the coming years. Whereas Sweden and Great Britain have entirely liberalised the market, rail passenger transport is still in the hands of monopolists in a number of Member States, including France and Belgium.
The Netherlands does not belong to either of those two extremes. The reason for this is that regional competition is indeed possible on the market for passenger transport. If they wish, transporters can bid on a number of regional railway lines to organise passenger transport during a certain period. Syntus, for instance, recently acquired the right to organise transport by train between Zwolle and Enschede and between Zwolle and Kampen as from 2017. Competition on the Dutch railway network is possible also in the field of freight transport. A company may transport freight, provided that it has a permit. Although the Railways Act provides that all operators, of both passengers and freight, must have the same rail access, some freight operators find that that is not the case. ACM’s Sixth Railway Monitor demonstrated that freight operators believe that they are disadvantaged. The operators believe that ProRail, the Dutch railway infrastructure manager, favours passenger operators in allocating the capacity.
ProRail, as the rail infrastructure manager, is supervised by ACM. Under the Railways Act, ACM supervises the relationship between ProRail and the users of the railways. The Railways Act stipulates conditions regarding the allocation of capacity, the Network Statement, access agreements, usage fees and related services and provisions that transporters desire in order to operate their trains. In addition to the aforesaid complaint, the freight operators have also complained about the times at which ProRail performs maintenance. Their complaint is that most of the maintenance is allegedly performed at night, precisely when the freight operators make use of the rail network. As a result, the freight operators allegedly often have to make detours, which causes delays and gives rise to additional costs.
ACM targeted ProRail also in a number of other cases this past year. After a request from a number of operators (Arriva, Veolia, Syntus and Connexxion, affiliated in the Federatie Mobiliteitsbedrijven (“FMN”)) ACM ruled that the usage fees for light trains had to be lower than ProRail had initially determined. Under the Railways Act, ProRail had to base its rates on the costs resulting from use of the trains, such as wear of the rails and points. The complaint was directed at ProRail’s pricing per weight category, whereby the lowest weight category consisted of trains up to 160 tons. FMN believed that that weight category was too broad, since almost all of FMN’s trains weigh a maximum of 120 tons. FMN therefore successfully pleaded in favour of the introduction of an extra, lower weight class. At the same time that reduction for lighter trains led to an increase of the rates for heavier trains. DB Schenker, KNV Spoorgoederenvervoer and NS filed an appeal. However, the appeal was filed too late and those parties’ claims were therefore dismissed by the Trade Industry Appeals Tribunal.
Arriva and Connexxion recently also filed a complaint against ProRail with ACM. According to Arriva and Connexxion, ProRail had disadvantaged them by scheduled work on the Arnhem-Didam route, which made it impossible for them to transport passengers. ACM found that, after intervention by ACM, passengers were able to use buses and the essence of the problem had therefore been solved. ACM therefore dismissed the complaint.
Fourth Railway Package
For both NS and ProRail it is important with a view to the future what the Fourth Railway Package will bring. Like the earlier Railway Packages, the Fourth Railway Package is intended to further liberalise transport by rail. After the liberalisation of freight transport and international passenger transport, the Fourth Railway Package is directed specifically at domestic passenger transport.
In that light the European Commission is attempting by means of a number of legislative proposals to further remove existing barriers in order to create a single European railway area and to put a stop to the fragmentation referred to above. In particular, the European Commission intends to increase the competition on the markets for domestic passenger transport. That is difficult at the moment because the Member States apply different safety standards and use different technical systems, for instance. The Fourth Railway Package must also give rise to a set of workable standards and approvals.
For NS this could mean that in due time Dutch and foreign competitors might more easily gain access to the Dutch railway system and, vice versa, that it will be easier for NS to offer its transport services abroad. At the same time the private awarding of the main network until 2025 and the position taken by Minister Mansveld against further liberalisation demonstrate that NS’s position on the main network will not be at risk in the near future. According to the Minister the possibility of awarding the concession without tendering does not conflict with the objectives of the Fourth Railway Package to improve the quality and efficiency of the railways. However, the Ministry of Infrastructure and the Environment wishes to offer local authorities the possibility of withdrawing the concessions if a transporter performs inadequately on three occasions. This power of withdrawal also applies to the central government with regard to the concession granted to NS.
The Fourth Railway Package furthermore serves the purpose of making rail managers, such as ProRail, more independent from passenger transporters, from both a financial and an operational perspective. Negotiations on the Fourth Railway Package with the European Parliament have yet to commence. That will most likely take place during the Dutch presidency of the EU in the first six months of 2016.