Thursday, December 28, 2017

Rail Freight Group Subject to EU Competition Investigation

Accusations of Unfair State Aid to be Probed
Shipping News Feature

ROMANIA – CFR Marfa, fully state owned and one of the country's major rail freight operators, has been struggling with debt for almost a decade and now, following a complaint lodged earlier this year by the Association of Romanian Private Rail Freight Operators, there is to be a full investigation by the European Commission Competition Authority into allegations of state support for the ailing carrier.

Unlike passenger rail transport, the freight rail transport market in Romania is highly competitive, with numerous private operators, some having gained considerable market share following liberalisation of the market in 2007. CFR Marfa stands accused of receiving state support in a €360 million debt to equity swap in 2013 and the failure to collect, for at least seven years, the social security debts and outstanding taxes of CFR Marfa, and of debts towards CFR Infrastructure.

EU State aid rules only allow a state intervention for a company in financial difficulty under specific conditions, requiring in particular that the company is subject to a sound restructuring plan ensuring its return to long-term viability and that the company contributes to the cost of restructuring.

CFR Marfa was incorporated as a joint stock company on 1 October 1998, following the reorganisation of the Romanian Railways incumbent, Societatea Naţională Căile Ferate Române. CFR Marfa provides rail freight transport services of inter alia domestic coal, cement, chemical products, grain and oil, wood, salt and metals.

State support must follow the principle that it is made on terms that a private operator would have accepted under market conditions (the market economy investor principle - MEIP). Failure to do this confer an economic advantage on the beneficiary that its competitors do not have and therefore contravene Article 107 of the Treaty on the Functioning of the European Union. Commissioner Margrethe Vestager, in charge of competition policy, said:

"The rail freight market is an essential component of any economy's transport links. CFR Marfa is the incumbent in this market in Romania and has benefitted from the cancellation of public debts and the failure of public creditors to collect debts owed by it. We need to check whether a private investor would have acted in the same way as the public authorities did here and, if not, to assess whether these measures are compatible with EU State aid rules.”

A non-confidential version of this decision will be made available under case number SA.43549 in the State Aid Register on the competition website once any confidentiality issues will have been resolved.