On 18 November 2004, the Competition Council received a complaint from British Airways concerning an alleged abuse of dominant position by Eurostar, the SNCF subsidiary in charge of the passenger transport between London and Paris.
In its complaint, British Airways argued that not only did Eurostar practice predatory prices by offering particularly cheap tickets that did not cover its costs but also, it implemented a policy to saturate capacity in order to foreclose British Airways from the market.
According to British Airways, such a business policy could be adopted by the unprofitable Eurostar subsidiary as it was financed by the SNCF which has the monopoly on the French Railway network, resulting in cross subsidies. Although the Competition Council stressed that Eurostar holds a dominant position on the market for passenger transport on the Paris-London line, the Council considered that the policy implemented was not predatory.
According to the Council, such a strategy would first imply that Eurostar rationally accepted to sustain losses in putting more trains than necessary on the network and in selling tickets at abnormally low prices so as to eliminate competition from air transport and, then, increase its prices and regain the losses suffered.
The Council observed that:
- Eurostar had not increased capacity during the relevant time period (2004) but rather reduced it;
- its pricing policy did not have an anticompetitive object or effect on the market, each train covering variable costs but not fixed ones as Eurostar committed itself to pay for the use of the Channel and the British railway lines over a very long period; and that
- the alleged market disruption resulting from cross subsidies within the SNCF is not established as, if air companies have lost market shares, the market itself increased considerably as a result of the new services offered by Eurostar. In the light of all these elements, the Competition Council decided that Eurostar did not infringe the competition rules.
Source: Decision of the Competition Council No 07-D-39 of November 23, 07