CD quantifies risk of EC fines for underpricing at CZK 1.7 billion
Creating reserves for potential fines significantly affected last year's business results.
CD Czech Railways revealed the amount it faces in fines for having tried to prevent private carriers from doing business on the country’s railroads. The two cases filed are being dealt with by the European Commission with one having resulted in a Statement of Objections. The total amount involved is CZK 1.7 billion (EUR 70 milion). The carrier has been denying any violation of the law; no final decision has been issued.
Fine provisions were revealed in the company’s last year’s annual report. Reserve creation significantly affected the amount of loss for last year. Czech Railways, which dominates the market, significantly reduced prices after RegioJet and Leo Express went into business. This has been under investigation with the European Commission (EC) having reached a preliminary conclusion that Czech Railways breached antitrust rules by charging prices below cost (i.e. predatory pricing).
Years of litigation
The Commission sent its objections, relating in particular to fares on the line between Prague and Ostrava, to the Czech state-owned carrier. In 2020, a Statement of Objections was issued against Czech Railways. The dispute has been going on since 2011. The carrier stated it sent a “robust reply” to the objections. Should the European Commission decide that Czech Railways’ actions were illegal, it would open up another problem, i.e. compensations to Leo Express and RegioJet.
Another problem for Czech Railways could be the Falcon investigation. The European Commission suspects Czech Railways have entered into a cartel agreement with Austrian ÖBB and Slovak ZSSK in the mutual sale of rolling stock. The agreement was intended to prevent a private carrier from getting access to used ÖBB carriages despite having offered a better price.
In this case, Czech Railways expects to receive a Statement of Objections this year. The provision for a possible fine is CZK 1 billion. In both cases, Czech Railways believes it has not violated the law. “It is the Czech Railways’ intention to defend itself vigorously in this case, including using all available avenues of appeal if necessary,” the carrier stated.
Translation Lucie Trávníčková
PHOTO Czech Railways and RegioJet trains at Prague main train station. Credit: Jan Sůra