Over PLN 60 million in a fine for discriminating contracting parties, plus an order to immediately change the practice in one case and a decision finding no anticompetitive practices in another - these are the outcomes of UOKiK’s antitrust investigations against PKP Cargo

PKP Cargo provides cargo transportation services on the territory of Poland and abroad. The company is the third largest rail carrier in Europe and the second largest in the European Union. Until 2001 it had a monopolistic position on the Polish market being the only entity providing services of this type. Currently, despite of formal liberalisation of the market, PKP Cargo still holds a dominant position: in 2008 it handled over 70 per cent of all rail transport in Poland. Moreover, the company’s belonging to the PKP capital group, which provided comprehensive railway transportation services and railway infrastructure management, provides PKP Cargo with a significant economic, logistic, organisational and technical advantage over other railway freight providers. Under the Polish law, it is not forbidden to have a dominant market position, however, practices leading a dominant company to use its market power in a way that harms competition are unlawful.

UOKiK has just finished two proceedings initiated based on information obtained from enterprises operating on the railway freight services market. In the first case, the motion for action was submitted by CTL Logistics, PKP Cargo’s competitor. This company accused the monopolist of restricting competition by refusing to conclude special agreements with enterprises recognised as its competitors.

The materials collected in the course of the proceedings proved that PKP Cargo has been using its market power to impose onerous cooperation terms on several of its contracting parties. The company provides carriage services based on general terms, i.e. general freight agreements concluded at cargo booking offices, and based on special terms connected with offering the contracting parties attractive discounts. PKP Cargo claims that both forms of cooperation are available to all its customers on equal basis. However, according to the company’s policy, an enterprise recognised as its competitor as regards transporting a given type of cargo, can only sign an agreement based on general rules. Consequently, some enterprises are deprived of the possibility to do business on more advantageous terms.

PKP Cargo’s policies may lead to unequal treatment of two contracting parties, despite the fact that they both order the shipment of an identical quantity of identical goods, on the same route and using the same draft of cars: if one of them uses PKP Cargo services only and the other transports the goods on its own, the first one could benefit from better terms, of which the other could be deprived, despite the fact that the actual costs incurred by PKP Cargo would be identical.

This practice affects PKP Cargo’s competitors, who could reduce its market power, take over part of its customers or force it to lower its prices.

In UOKiK’s view the system is not based on objective economic criteria, but aims at limiting the operations of other carriers and preventing new entities from entering the market.

More beneficial cooperation terms have also not been available to companies which are not PKP Cargo’s competitors, but belongs to the same group as an enterprise recognised as PKP Cargo’s rival. Such a practice is an unjustified interference in the operations of independent entities: by imposing such contract terms, the monopolist has also been limiting the economic freedom of companies having no agreement with PKP Cargo and infringing their right to choose the sphere of their activity freely.

This decision was given an order of immediate enforceability as in the Office’s assessment, further application of the policies in question may lead to irreversible changes on the market.

The company was also fined with over PLN 60 million. The amount of the fine was influenced by the fact that PKP Cargo had been punished by UOKiK several times before for infringing competition law, including for applying similar practices. In its decision of 2004 UOKiK concluded that the company abused its dominant position by imposing onerous cooperation terms in its long-term contracts and fined it with PLN 40 million. This decision is now final and binding; in 2008 the company began to pay the fine due.

The second of the two most recent investigations against PKP Cargo was launched upon the motion of Sped-Pro and aimed at checking whether using different models of cooperation with its customers, i.e. based on general terms, special terms or long-term agreements, PKP Cargo has been differentiating between its contracting parties despite identical - in Sped-Pro’s opinion - scope of services provided. UOKiK did not find the practices applied by PKP Cargo in this case to be restricting competition. The Office concluded that the cooperation system did not discriminate the contracting parties, and the price differentiation (different discounts) offered within individual cooperation models was economically justified.

Both decisions are not legally binding yet. The company may appeal to the Court of Competition and Consumer Protection.

Additional information:
Małgorzata Cieloch, Spokesperson for UOKiK
Pl. Powstańców Warszawy 1, 00-950 Warsaw, Poland
Tel. (+48 22) 827 28 92, 55 60 106, 55 60 430
faks (+48 22) 826 11 86
E-mail: malgorzata.cieloch@uokik.gov.pl