Highest Dutch Court upholds annulment of € 41 million abuse of dominance fine imposed on railway incumbent

Although NS is until 2025 the sole concession holder for the exploitation of the main rail network (“MRN”) in the Netherlands, the CBb ruled that ACM failed to establish that NS holds a dominant position on the market for the exercise of the right to exploit the MRN. This ruling shows that holding a sole concession and as such exploiting a legal monopoly with a 100% market share, is not sufficient to establish dominance in the meaning of the competition rules. 

ACM decision and annulment by the District Court of Rotterdam

In our earlier update in July 2019 we already discussed the background of this case. In 2017 the ACM imposed a fine of nearly € 41 million on NS for abusing its dominant position as the sole concession holder until 2025 of the MRN in the Netherlands. ACM alleged that NS adopted a predatory pricing strategy (submitting a loss-making bid) and a combination of exclusionary practices during the regional rail transport tender in the Dutch province of Limburg. According to the ACM, the abusive behaviour of NS was conducted outside of the MRN where it held a dominant position (as a result of its exclusive concession for passenger transport on the MRN) but was aimed to disincentivize liberalisation of the MRN and the introduction of competition on the MRN.  

The District Court of Rotterdam ruled however that ACM has not conclusively proven that NS holds a dominant position on the market for passenger transport on the MRN. Establishing market dominance is a prerequisite for an infringement of the abuse of dominance prohibition and for this reason the court annulled ACM’s fining decision.  According to the court, ACM did not thoroughly investigate and establish whether under the terms of the MRN concession, NS can actually determine its market behaviour independently of end users and the State as its customer. Despite the lack of competition on the MRN, the court considered that ACM should have investigated whether the negotiations with the State on the concession terms and the uncertainty about extension of the concession serve as countervailing power for independent market behaviour by NS on the MRN market.

Ruling by administrative supreme court (CBb)

At the court hearing on higher appeal, ACM clarified and specified its position, in the sense that NS’s alleged dominant position would follow from its position as holder and future contender of the MRN concession (so in relation to competition for the market) instead from its position as operator of the MRN concession (so in relation to competition on the MRN market). The key question in higher appeal became for this reason whether at the time of the award of the MRN concession, NS could have behaved to an appreciable extent independently of its customer, the Dutch state. 

ACM argued that there was no other serious contender for the MRN concession, so that there was limited competitive pressure on NS. According to the court, NS was however not the only contender for the 2015-2025 MRN concession and it was no certainty that NS would obtain any future concession or one of similar size. Furthermore, the court considered that the Dutch state is not merely a customer of NS but also determines how, to what extent, the size of and to who the concession will be awarded. The court also considered that the barriers to entry to the market which were high according to ACM, can be put in perspective in light of legal obligations according to which assets and employees of the former concession holder will automatically pass over to the new concession holder.  The court further considered that NS is also dependent on the state as it does not have any other viable business option outside of the Dutch MRN concession and ACM did not specify for which acts in the context of the award of the concession NS was able to act independently of the Dutch state. On this basis the CBb ruled in line with the Rotterdam District Court, but partly on different grounds, that the ACM had not established beyond a reasonable doubt that NS holds a dominant market position. Therefore, there could also not be an abuse of a dominant position by NS.

Conclusion

This judgment shows yet again that the burden of proof for establishing an abuse of dominance infringement is high and that Dutch courts do not shy away for critically scrutinizing competition law fining decisions. Furthermore, this ruling confirms that for establishing a dominant market position a single market share number is not sufficient. All relevant market conditions and other relevant (e.g. regulatory and policy) factors need to be analysed before final conclusions can be drawn on dominance.      

For more information please contact Piet-Hein Eijssen and Matteo Stainer.