The European Commission (EC) concluded its investigation into the Italian railway holding Ferrovie dello Stato (FS) concerning a possible infringement of State Aid rules between 2000 and 2014. Most of the measures analysed were in line with State Aid rules, with the exception of some compensation provided to Trenitalia Cargo, the predecessor of Mercitalia Rail.

“Italy now has to recover the incompatible aid from Trenitalia and to determine the amount to be recovered, in line with the Commission decision adopted today”, the EC stated. According to sources from FS, the amount to be paid will be a significantly small percentage of the total contested, which revolves around 4 billion euros.

The EC investigation was launched in March 2014 and focussed on two points. First, the transfer of certain railway infrastructure assets free of charge within the FS Group between 2007 and 2011. More specifically, the transfer was from the country’s infrastructure manager, Rete Ferroviaria Italiana (RFI), to the two freight transport companies of the time, Trenitalia Cargo and FS Logistica. According to the Commission, these initiatives do not constitute State aid as they did not “confer an economic advantage” to the two companies.

What will FS need to pay for?

The second aspect under the Commission’s magnifying glass was a series of compensations from the Italian government to Trenitalia Cargo. The compensations paid for certain services between 2000 and 2014 did not “affect trade or distort competition in the Single Market”, as the EC put it. However, for other specific services, the story is different. The investigation underlined that compensation for international rail freight transport services through the port of Trieste between 15 March 2003 and 31 December 2008 was incompatible with EU State aid rules. The same conclusion was reached for “national rail freight transport services on certain connections between Northern and Southern Italy” between December 2012 and December 2014.

Concerning the international services via Trieste, the Commission claimed that the incompatibility is due to the fact that “the nature of the public service obligations was not sufficiently defined by Italy”. For the national ones between northern and southern Italy, the issue is that “Italy did not establish the existence of a market failure on those connections prior to entrusting the public service mission to Trenitalia”. It is not yet clear the amount that the Italian government will decide to recover, but the EC stressed that it needs to happen “without delay in order to remove the distortion of competition created by the aid”. The FS source said that the exact amount that the government will have to reclaim will be established over the next couple of months.

A short recent history of Ferrovie dello Stato

The FS Group was restructured between 2000 and 2001 due to European directives which entailed a clear separation between infrastructure management and operations. Trenitalia, with its freight subsidiary Trenitalia Cargo, was established to carry out both freight and passenger services in June 2000. RFI was founded in April 2001 to manage the railway network. A new division between the freight and passenger segments within FS occurred in 2017. Trenitalia kept carrying out passenger transportation, whereas, for freight and logistics services, Mercitalia Logistics was set up. This newer company fully controls Mercitalia Rail, Mercitalia Shunting & Terminals and TX Logistik. Moreover, it has partial control over Terminal AlpTransit, shared with Hupac, which builds and manages rail freight terminals in northern Italy, and Mercitalia Intermodal.

State aid investigations in France and Germany

The EC investigation into FS in 2014 might be seen as the first step toward stricter controls concerning national rail freight companies throughout the European Union. For example, French Fret SNCF will have to undergo major changes to avoid sanctions from the Commission. This investigation was launched after Fret SNCF had around 5,3 billion euros of debt, between 2007 and 2019, that was cancelled by its mother company SNCF. In this case, the French government intervened to save the company and agreed with the EC about a significant restructuring. The Commission also started an investigation into German support measures in favour of DB Cargo, Deutsche Bahn’s rail freight arm for similar reasons, for which a decision has not been made yet.