AGCM

The Italian Competition Authority, at its meeting on 13 November 2008, decided to accept and render binding the commitments proposed by FS and RFI with a view to closing the investigation begun on 18 September 2007 without the official establishment of a violation. The initial charge was that FS and RFI had adopted a strategy intended to increase the cost of entering the rail freight traction services market in order to discourage companies desiring to compete with Trenitalia (a subsidiary of FS). Since 2004 RFI had no longer offered the discount known as “K2” on the rental of rail infrastructure. The purpose of this discount had been to compensate rail companies for the higher costs resulting from the technological backwardness of the network and the regulatory inadequacies that do not allow the use of a single engine-driver. RFI, instead, had demanded payment of the full rental charge, threatening cancellation of the contracts.

Specifically, the commitments will offer rail companies that should have benefited from the K2 discount in the years 2004-2007 one of the following options, to be chosen within 30 days from notification of the ruling of 13 November 2008:

1) a direct settlement of a fixed amount of Euro 5.7 million, on condition that the case against RFI regarding K2 be dropped (Option 1); or

2) free technical assistance and engineering services to be provided by RFI with the aim of arriving at type approval of “best of class” rolling stock to be used with a single engine-driver. RFI will also pay any penalty for which the rail companies may be liable as a result of breaking contracts with other providers of services similar to those to be furnished without charge by RFI, as well as any amounts already paid for services under such contracts. All this up to a total value of Euro 5 million and without the necessity of dropping the case (Option 2).

Whether the companies in question choose the lump-sum payment or the supply/reimbursement of engineering services, the FS group in any case undertakes to sell to interested rail companies a sufficient number of its on-order SSB devices (on-board sub-systems) to handle up to 210 items of rolling stock, as well as to modify the Rail Network Information Sheet.

The Authority believes that the commitments presented are sufficient to satisfy the competitive concerns detailed in the initial terms of inquiry, because they will allow Trenitalia's competitors to transition more rapidly and more cheaply to a system requiring only one engine-driver. Such a system, with its lower personnel costs, will permit them to compete effectively in supplying rail traction services.