Insights

On 9 February 2022, the General Court of the European Union (the ‘‘Court’’) delivered its judgement in the case of ‘Sped-Pro S.A. vs. Commission’ wherein it annulled a European Commission (the “Commission”) decision (the “Decision”) issued on 12 August 2019. In its decision, the Commission refused to assess an alleged abuse of dominance on the premise that it wasn’t the best forum. The Court held that in cases where systematic or generalised deficiencies in the rule of law of a Member State exist, the Commission is best placed to examine a complaint related to competition law, rather than a national competition authority (an “NCA“).

By way of background, the matter dates back to 2016 where Sped-Pro S.A. (the ‘‘Applicant’’), a Polish company engaged in forwarding services, attempted to enter into a multi-year cooperation contract with market conditions, with PKP Cargo S.A. (‘‘PKP’’), a company controlled by the Polish State, which offered rail freight transport services.

Following PKP’s refusal to conclude the contract, the Applicant lodged a complaint before the Commission under Council Regulation (EC) No 1/2003 of 16 December 2002, on the implementation of the rules on competition laid down in Articles 81 and Articles 82 of the Treaty (currently Articles 101 and 102 of the Treaty of the Functioning of the European Union (the ‘‘TFEU’’)), alleging that this behaviour amounted to an abuse of a dominant position by PKP on the market for rail freight transport services in Poland (the ‘‘Complaint’’), in breach of Article 102 of the TFEU.

The Commission however, in its Decision, refused to decide on the Complaint, holding that the Applicant was erroneous in filing the Complaint before the Commission and that the proper authority vested with the power to assess it was the Polish Competition Authority (the ‘‘Polish NCA’’).

Feeling aggrieved, the Applicant filed a case before the Court, requesting that the contested decision is annulled in its entirety, with the aim of having the Commission carry out an assessment on the Applicant’s Complaint. The Applicant raised three pleas in law before the Court:

(i) the infringement of the Applicant’s rights to have its case handled within a reasonable time and failure to state reasons in the contested decision;

(ii) breach of the principle of the rule of law in Poland; and

(iii) manifest errors in assessing the EU interest in pursuing the examination of the Complaint.

On the first plea, the Applicant held that the Commission had infringed its rights to have the case heard within a reasonable time, a right which is sacrosanct and enshrined under Article 41(1) of the Charter of Fundamental Rights of the European Union (the “Charter”). While the Court acknowledged that a reasonable period of time had elapsed since the Applicant brought the Complaint before the Commission, and that the Commission was indeed bound to decide on complaints within a reasonable time, the mere lapse of time was not enough.

On this matter, the Court held that as observed in jurisprudence, for a decision to be annulled on the basis that one’s rights under Article 41(1) of the Charter were breached, a breach will only have an effect if it has a direct consequence on the outcome of the case and if the failure to comply with the reasonable time principle had an impact on the Applicant’s ability to defend its position during the proceedings. The Court noted how the Applicant failed to present any evidence on this basis, meaning that the Court’s hands were tied and had to reject this plea.

Moving on to the third plea, the Applicant alleged that in refusing to consider the Complaint, the Commission was falling short of its obligations by committing manifest errors of assessment of the Union’s interest in the continuation of the Complaint to the Commission.

The Commission had rejected the Complaint on the basis that, inter alia, given that the alleged infringement by PKP was mostly limited to the Polish market, and given that the Polish NCA had considerable knowledge on the rail freight services in Poland, the Polish NCA was better tasked to deal with this.

On this matter, the Court, citing jurisprudence and making reference to the Commission Notice  (2004/C 101/05) on the handling of complaints by the Commission under Articles 81 and 82 of the EC Treaty held that, in cases where an NCA is competent in dealing with a complaint and where the alleged harm is restricted to the territory within that Member State (“MS”), the Commission has the power to dismiss the action brought before it, on the basis that it does not affect the Union’s interests and provided that the complainant’s rights are sufficiently protected by the NCA tasked with investigating the infringement.

The Court, while taking into consideration the fact that PKP was an undertaking established in Poland, and that the dominant position it occupied was restricted to the Polish market, held that the assessment of the Commission, and the decision it took in refusing to handle the complaint on the basis that it is not the best tasked body, was fair and no manifest error of assessment had been made. The Court held that even though PKP had several subsidiaries operating in different MSs, this did not de facto mean that the dominant position that PKP held within the Polish market automatically extended to the territories of other MSs. Additionally, the Applicant did not bring any evidence forward to this effect.

The final plea that the Court was encumbered with assessing, was whether Poland’s rule of law deficiencies mean that the Commission would be best tasked to deal with the Complaint, in lieu of the Polish NCA. Poland is no stranger to rule of law controversies and has had quite a few run-ins with the Court of Justice of the European Union (‘‘CJEU’’).  On this matter, the Applicant alleged that since Polish NCA was subordinate to the executive branch of the Republic of Poland and given that the Courts tasked with reviewing the decisions taken by the Polish authority did not have the necessary guarantees of independence, by refusing to deal with the Complaint, the Commission was breaching the Applicant’s right to effective judicial protection.

In assessing this plea, the Court held that compliance with the rule of law is indeed a principle of paramount importance and should be borne in mind when considering which competition authority is best tasked with assessing the Complaint.

The Court articulated on the fact that the Commission should have assessed in a concrete and thorough manner the evidence brought forward by the Applicant in support of this plea, and before rejecting a complaint on the basis that there is a lack of EU interest, the European Commission must ensure that the national authorities can safeguard the complainant’s rights.

The Court took into consideration the evidence that the Applicant brought forward in support of its claims, inter alia, the fact that PKP was state-owned, the fact that the president of the Polish authority served at the pleasure of the executive and given that the Polish NCA had in the past shown a certain degree of leniency towards PKP Cargo and arrived at the conclusion that the fears that the Applicant holds are not unfounded or vexatious but indeed merited and justified.

Taking the above in consideration, the Court concluded that the Commission failed to properly assess and scrutinise the evidence that the Applicant brought in support of its claims and held that there existed a real risk that the Applicant’s right to a fair trial would be breached should the Polish competition authority deal with the Complaint. On this basis, the Court annulled the Decision. Both parties may appeal the ruling of the Court before the CJEU within two months and ten days from notification of this judgement.

This article was first published in the Malta Independent.