The largest railway undertakings (RUs) in Europe are part of state-owned holdings, both for freight and passenger services, despite both markets being open to independent operators. A new study published from the European Commission (EC) and consulting giant KPMG shows that a reason behind this might be the structure of these public groups, which leaves too much room for unfair competition.
The study focussed on vertically integrated rail undertakings (VIUs), which are corporate structures where a single entity controls both the infrastructure manager (IM) and one or more RUs. “The frequency and persistence of these issues (editor’s note: distorted competition and discriminatory practices) suggest that VIUs create an environment where such practices can emerge”, the study concluded.
“A recurring feature in 7 of the 11 VIUs is intra-group financing, where dedicated subsidiaries or parent companies”, the study said, raises concerns over unfair competition. This has already led to rail freight reforms in some countries, but many call for a full unbundling to enhance competition. Out of the 11 VIUs analysed, only Austria, Slovenia, Ireland, and Hungary don’t have an active debate on restructuring.
Distorted competition and discriminatory practices
Key findings from the study include several instances of distorted competition, such as preferential access to infrastructure for internal operators, lack of transparency in financial flows, and insufficient functional separation between IMs and RUs. The cases identified as distorting competition are mostly financial. From internal loans and cross-subsidisation to access to sensitive information and visibility advantages, VIUs seem to often benefit more than independent private RUs, creating an uneven playing field.
Moreover, the study found 13 cases of discriminatory practices. These include unfair capacity allocation in favour of vertically integrated RUs, such as cancellations of train paths belonging to private operators while maintaining the ones of the incumbents. Other issues of this kind identified by the study concerned discounts for track access charges to VIUs and not for independent ones and a discriminatory application of capacity priority rules. Additionally, there were cases of restricted access to crucial facilities, an issue not only restricted to the countries analysed in the study.
The entities investigated
The EC–KPMG study included 11 VIUs in 10 EU Member States, (with MÀV and GYSEV both being Hungarians). Six of them – DB, ÖBB, SNCF, FS, LTG and SŽ – are controlled by entities managing both IMs and RUs, Two – MÀV and LDz – are controlled by the IMs, one – Irish Rail – operates with internal division lacking separate legal identity and two – CFL and GYSEV – mix these last two models.
