Between May and December 2012, the Moldova Competition Council has examined a case of infringement of competition law on the market „services for rail freight” by the S.E. „Railways of Moldova” (Î.S. „Calea Ferată din Moldova”). This has led to non-discriminatory treatment of all consumers with the purpose of increasing economic efficiency.
The S.E. „Railways of Moldova” applied discriminatory measures against some of its customers that placed them in an unfavourable situation compared to other undertakings from October 2011 to June 2012, by imposing the international tariff on some of them. While undertakings using rail freight services within the territorial boundaries of the Republic of Moldova had to pay the lower local rate, undertakings that had as one of the points of departure or arrival the Giurgiulesti International Free Port (hereinafter GIFP) – which also makes part of the Republic of Moldova and the other – and any other point of the territory of the Republic of Moldova had to pay the higher international rate.
This case was initiated following a notification by the Ministry of Economy, that identified a competition issue in the non-transparent application of SE „Railways of Moldova”’s pricing policy for the supplied services – a company with a dominant market position
Thus, given that the activity type of S.E. „Railways of Moldova” is the provision of rail passenger services, cargo, baggage and messengers, the relevant product market was defined as the provision of rail freight services. According to Art. 5 paragraph. (3) of the Railway Code No 30-XV from 17.07.2003, the S.E. „Railways of Moldova” operates throughout the country, including the territory of the GIFP. For this reason, the relevant geographic market was identified as national, determined by the geographical coverage of the S.E. „Railways of Moldova” infrastructure.
The S.E. „Railways of Moldova”, being the only undertaking to provide rail freight services in Moldova, was established as an undertaking with a dominant position in that market, holding a market share of 100%.
The relevance of the examined case stems from the fact that the different tariffs for rail freight services have a strong impact on the markets in which S.E. “Railways of Moldova’s” customers compete, because transport costs determine the final cost of goods and their price and have an influence on the competitive environment and the competitive capacity of the customers of S.E. „Railways of Moldova”.
The implemented tariff was discriminating against undertakings which used as one of the points of departure / arrival GIFP , while the other point was on the territory of the Republic of Moldova, applying to them an international average price of 20.21 euro / ton, excluding VAT. Other customers which had as the points of departure / arrival any other place on the territory of the Republic of Moldova were charged a considerably lower local fee of 11.77 € / ton, excluding VAT.
In terms of procedure the anti-competitive practice, as well as its effects were analysed on the basis of the following evidence: information of the parties, verbal explanations, the official order on tariff, objections of undertakings, invoices, orders of payments, as well as the current legislation governing the legal regime of the free economic zone, railway services, the methodology of establishing international and local fees and other financial documents.
An instrument used to investigate the case which proved to be particularly helpful and which led to the removal of the abuse 1 month after the initiation of the investigation, was the organisation of working sessions attended by the representatives of the S.E. „Railways of Moldova”, the Ministry of Economy and the Ministry of Transport and Road Infrastructure.
Regarding the effects of the identified anticompetitive practice on final consumers, we can state the following:
a) increased transport costs for nine undertakings that used from rail freight service from / to GIFP to / from another point of Moldova, which had direct influence on their costs and ultimately the price of the transported goods, thus diminishing the competitiveness of these customers;
b) termination of the mining products supply contract with a local undertaking by another undertaking. Thus, the unfounded increase in fees created difficulties for domestic producers led to a reduction of their internal and external competitiveness.
The impact of the discriminatory conduct has been calculated in accordance with the OECD Guide on Competition Impact Asssessment.
In order to determine the impact on consumer welfare, in the tables below, the tariffs applied by the S.E. „Railways of Moldova” during the implementation of the anti-competitive practices (October 2011 – June 2012) and the losses incurred by the customers are stated.
International tarif -20,14-20,34euro/ton, excluding VAT Local tariff- 11,77euro/ton, excluding VAT The average international tariff – 20,21 euro/ton, excluding VAT
Thus, the direct customer harm for 2011 amounted to 87,841.94 EUR and for the year 2012 to 282,182.19 EUR.
As for the public resource efficiency indicator, it should be mentioned that for the examination of this case, there were used about 1,000 EUR worth of resources (of which 2/3 was the salary fund and 1/3 administrative expenses). Thus, comparing the value of harm to customers that has been avoided as a result of stopping the abuse, to the amount of resources used for the given case, an efficiency ratio of 370 EUR (stopped harm) to 1 EUR (used resources) was achieved.
In addition, S.E. „Railways of Moldova” had to pay a fine of a 85,217 EUR, which represented app. 10% of the income derived from the infringement of the competition law (991,682.58 EUR).
At the same time, it is worth mentioning that for competition advocacy purposes, the case was extensively promoted through the website of the Competition Council and the local media (11 media appearances (TV and print media))
Another noteworthy effect as a result of the efficient co-operation in this case between the Competition Council and the Ministry of Transport and Roads Infrastructure, was that first steps were taken, through adopting the Transport and Logistics Strategy for the years 2013-2022, which aims at: providing quality services for rail passengers at an acceptable cost to society and providing support for the internal and international trade operations at medium distance freight transportation, towards implementing pro-competition reforms on market liberalization through:
– the creation of the normative and legislative framework for restructuring the S.E. “Railways of Moldova” and the gradual liberalization of services;
– the separation, within the S.E. “Railways of Moldova”, of three commercial units (passenger transportation, freight transportation and rail infrastructure).
Thus, we conclude that the measures taken by the Competition Council have been an impetus for further actions by the Ministry of Transport and Road Infrastructure, which will ultimately contribute to enhancing economic efficiency through the liberalization and de-monopolization of the market on which the S.E. „ Railways of Moldova” operates.
“Promoting pro- competitive reforms that Foster Growth and Reduce Inequality” Biannual OECD-GVHH RCC Newsletter, Issue No.5, July 2015/ http://www.oecd.org/daf/competition/hungarycentrenewsletter.htm