Serbian Commission market tests commitments proposed by Serbian Railways

Serbian Railways (Železnica Srbije) is a state-owned railway company, which until recently had a vertically integrated structure, both managing Serbia’s railway infrastructure and providing freight and passenger transportation services. Following accusations of foreclosure of the railway infrastructure market, Railways came under the spotlight of the Serbian Commission for Protection of Competition. In particular, the concern was that Serbian Railways is continuously denying rail track access to other certified transport operators, an issue spotted also by the European Commission.

Serbian Railways claimed it was technically impossible to contractually allocate access to the rail tracks because it is undergoing a reorganization process and that its organizational units, responsible for railway infrastructure, lack legal power to sign contracts with third parties. Not convinced by this argumentation, in December 2013, the Competition Commission has opened an investigation into Serbian Railway’s alleged abuse of dominance in the rail infrastructure management market.

Almost two years after the launch of the investigation, in August 2015, Serbian Railways completed the reorganization by unbundling itself into a holding company (društvo Železnice Srbije ad) with three daughters – railway infrastructure (Infrastruktura železnice Srbije), passenger (Srbija voz) and freight operator (Srbija kargo).

To dispel competition concerns and liberalize railway market, the newly established infrastructure company proposed on 7 December 2015 the following commitments:

  • to draft an Operational Program for 2016 on maintenance, regulation and organization of rail transport and construction and reconstruction of railway infrastructure for the government to approve;
  • to conclude a long-term agreement with the government regulating financial aspects of railway infrastructure management;
  • subject to the approval of the government, to create a framework that will enable access of third parties to the rail infrastructure, including: (i) creating a model agreement for use of railway infrastructure with third parties; (ii) establishing methodology on awarding rail tracks to third parties; (iii) establishing fees for the use of railway infrastructure; and (iv) drafting timetable for international and domestic rail traffic.

On 18 December 2015, the Competition Commission launched a market test regarding the commitments proposal made by Serbian Railways. Interested parties can submit their comments until 7 January 2016. If the Commission, following the feedback of the interested parties, finds the Railway’s proposal appropriate, it will suspend the investigation and adopt a commitment decision imposing measures from the proposal.

The commitments procedure allows parties under investigation to voluntarily propose remedies that would bring alleged infringements to an end, escaping a formal finding of an infringement and avoiding hefty fines that could amount to up to 10% of the company’s annual Serbian turnover. This is the second time that the commitment procedure and market test are employed after the introduction of these facilities by the 2013 amendments to the Competition Act. The first commitments decision was rendered in 2014 related to Telekom Srbija.