Case C-721/20 – DB Station & Service – Can secondary legislation limit the private enforcement of art. 102 TFEU?

abuse of dominance, competition law, art. 102 TFEU, railways, regulation, DMA, excessive pricing, unfair pricing, private enforcement, stand alone claims

Last month the CJEU delivered an interesting ruling on the scope of application of art. 102 TFEU when dealing with excessive or unfair prices in the railway sector. A first reading of the final conclusion of the CJEU would give the impression that the scope of application of art. 102 TFEU is being unduly restricted with this case by making the application of art. 102 TFEU in such context dependent upon the preliminary assessment of the national sectoral regulator based on secondary legislation. The question is whether this impression is correct and whether secondary legislation is truly capable of limiting the scope of application of art. 102 TFEU? If that is the case what other limitations can we expect in the future when considering other secondary regulatory frameworks? The post seeks to provide you with some answers to these questions.

Factual background and question(s) referred    

The case at hand concerns a dispute in the railways sector in Germany which led to the preliminary procedure before the CJEU. The dispute originates from a disagreement between DB Station & Service (subsidiary of Deutsche Bahn AG) and ODEG with regard to the legality of the fees charged by DB Station & Service for the use of its railway infrastructure by ODEG. The assessment and review of the permissibility of such fees would commonly fall under the exclusive competence of the national regulatory authority set up in accordance to Directive 2001/14, in this case the Bundesnetzagentur (Federal Network Agency, Germany). According to the preliminary assessment of this body, the prices implemented by DB Station & Service between 2005 -2010 were to be considered invalid. DB Station & Service appealed that decision, which at the time of the procedure before the CJEU was still pending.

Following this decision other railway operators filed similar claims with the Bundesnetzagentur against the pricing practices of DB Station & Service. These claims were rejected by the Bundesnetzagentur and were pending (in appeal) before the Administrative Court of Cologne at the time that the preliminary procedure in this case was referred.

The preliminary question was referred in order to clarify the situation that was forming before the civil courts in Germany in parallel to the above mentioned administrative procedures. Accordingly, the railway companies that were challenging the fees of DB Station & Service before the Bundesnetzagentur decided to claim damages for such pricing before civil courts on the basis of art. 102 TFEU. It was not clear., however, whether such courts could indeed decide on the legality of DB Station & Service’s pricing before the assessment of the Bundesnetzagentur on the matter was final in light of Directive 2001/14.

These circumstances led the referring court in the case to refer two questions to the CJEU essentially asking whether Directive 2001/14 precludes national courts from applying art. 102 TFEU to the fees charged by rail transport undertakings independently of the of the monitoring carried out by the regulatory authority (Bundesnetzagentur).

Findings of the CJEU    

The analysis of the CJEU in this case starts, as one would expect, with a reminder that art. 102 TFEU produces direct effect in practice, which national courts must safeguard. The full effectiveness of this provision would, in the absence of the ability of individuals to rely on it, be at risk. Therefore it is very important that individuals are able to make use of private enforcement and be able to claim the compensation of the harm caused to them by infringements of competition law. Accordingly, to the CJUE it is against this background that the relationship between the regulatory authority and national court hearing a claim under art. 102 TFEU must be assessed (paras. 45-50).

When assessing the role of such regulatory body, the CJEU pointed out that these have a special role in monitoring, providing assessments, and enforcing practices which are evidently also intended to promote compliance with art. 102 TFEU. Among such practices the assessment of fees charged in the context of railway networks is also included.  At the same time, the exclusive jurisdiction given to regulatory authorities under Directive 2001/14 cannot prevent national courts from hearing claims for the reimbursement of overcharges of railway infrastructure fees under art. 102 TFEU. Such a possibility is according to the CJEU needed in order to make sure that the full effectiveness of art. 102 TFEU is preserved (para. 79).

However, the CJEU also finds that when facilitating such claims there is a need to also ensure the consistent management of railway networks by taking into account the special role of such regulatory bodies. Therefore, according to the CJEU it is important that undertakings that intend on bringing a claim under art. 102 TFEU in relation to the fees they are subject to must FIRST challenge the lawfulness of such fees before the national regulatory body (para. 81).

For the same reasons national courts, although not bound by the decisions of such bodies, must take them into account when hearing a claim concerning a claim under art. 102 TFEU with regard to infrastructure fees (para. 83). In this context, interestingly, the CJEU notes that national courts are not required to await the outcome of the judicial proceedings against such decisions to reach their decisions under art. 102 TFEU (para. 85).

Against the background of these considerations the CJEU concludes that Directive 2001/14 does not preclude national courts from applying art. 102 TFEU and national competition law concurrently, claims concerning the reimbursement of infrastructure charges, provided, however, that the competent regulatory body has previously ruled on the lawfulness of the charges in question. In that context, a duty of sincere cooperation is incumbent upon those courts which are required to take account of decisions delivered by such regulatory bodies as part of their assessment.

Logical decision but problematic approach   

The judgement of the CJEU in this case may give rise to some problematic consequences. Although the logic of the decision is sound for the most part, it seems to go a bit further than necessary to achieve the goal of maintaining the consistent application of art. 102 TFEU, its effectiveness and the effectiveness of the specific legislative framework at hand – in this case – concerning railways.

The requirement to consult the specifically delegated authority for railway matters when applying art. 102 TFEU to the fees charged by railway operators is in itself not problematic. Quite the opposite, it is the only logical solution in the circumstances of this case. Not doing so would have meant taking a risk at reaching conflicting outcomes under the two regimes involved in this case as both framework are capable of dealing with the legal issue at hand.

Accordingly, forcing national courts to consult the regulatory authority in cases where they are asked to apply art. 102 TFEU to the fees set by railway operators is necessary in order to guarantee the effectiveness of both legal frameworks. Such an obligation can be said to be already derived in essence from the principle of loyal cooperation.

Furthermore, one may argue that the need to consult the regulatory body in this case was necessary for the adequate application of art. 102 TFEU, as such. When applying art. 102 (or 101) TFEU competition authorities and courts are under the obligation of taking the entire legal and economic context of every case into account before reaching a final decision with regard to a potential infringement. This is also to a great extent the scope of the judicial review that is exerted upon such decision in the appeal phase.

In some cases, such as the one at hand, this legal and economic context will also involve additional regulatory frameworks (and regulators) which also impact the commercial practices of the undertakings concerned. In the case of DB station, that would be the railways regulatory authority which also has a say in the price setting of railways operators and the legality thereof. Therefore, when assessing the fees charged by the dominant undertaking are excessive / unfair under art. 102 TFEU is imperative to know the legality of such fees in the context of the railway regulatory framework. Such a status would have to be taken into account in the legal assessment of excessiveness / unfairness since it inevitably has a bearing on the set prices. Not looking into the legality of the set fees in the context of such regulatory framework which applies in parallel would in essence mean that the decision on art. 102 TFEU did not take into the account the entire legal and economic context as would be required, which may constitute a reason for annulment. In this respect, the CJEU had no other choice that to require national courts to consult the finding of the railway regulatory authority in the case at hand.

So if this all makes sense, what is the problem with the decision by the CJEU? In short, the approach suggested for cooperation between national courts and regulatory authorities. According the CJEU, private parties that wish to bring a claim against the fees set by a railway operator under art. 102 TFEU must first file a complaint with the regulatory authority. It then only after such body has given its decision on the matter that private parties can proceed with filing their claim under art. 102 TFEU. The question is WHY? Why should private parties be required to take such steps beforehand if that is required is ensuring consistent application of the concept of fairness to pricing across multiple legal frameworks? After all, the CJEU notes that national courts are later not bound by the findings of the regulatory body nor do national courts have to wait until the decisions of such bodies have made it through all the stages of appeal in administrative procedures. If the decisions of the regulatory body are not binding and there is no need to wait for them to become formally final, then why isn’t consulting such a regulatory body DURING the procedure before the national court sufficient? Such a consultation would help prevent the inconsistent and ineffective application of art. 102 TFEU alongside the railway regulatory framework just as well. Furthermore, this would also be consistent with the core requirement of taking the entire legal and economic context of a case when applying art. 102 TFEU as would be assessed at the moment of judicial review of such decisions. All these objectives could be achieved without restricting the power of private parties to make use of the private enforcement option of art. 102 TFEU.

In this regard, unfortunately, the solution offered by the CJEU in this case diminishes the position of claimants in comparable cases by forcing them to jump through more administrative hoops than what is required in order to achieve the goals of effectiveness and consistent interpretation.  Although this can turn out to be an isolated case with implications limited to the railways sector, there is always a risk that the CJEU, in an attempt to be consistent itself, may extend such an approach also to other legal frameworks which cross roads with some (key) concepts in EU competition law, e.g. the DMA. This would be in theory quite a serious blow to the effectiveness of private enforcement of EU competition law where claimants already struggle with various hurdles, especially in the cases of direct stand alone actions where the existence of an infringement /abuse needs to be proven.

Conclusion

The judgement of the CJEU in DB Station is a mixed bag of findings. On the one hand the logic of the decision is sound and arguably unavoidable. On the other hand, the way in which the CJEU decided to operationalize its solution undermines to some extent its own objective, namely protecting the effectiveness of art. 102 TFEU.  It remains to be seen whether this approach will be put into action in the context of other regulatory frameworks. Hopefully, such an approach will be (very) limited so as not to undermine the private enforcement of EU competition law.

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Daniel Mandrescu

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Assistant Professor EU competition law, Europa Institute, Leiden University

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