Railway market liberalization in Europe: Recent advances and insights for China[铁路监管的两难问题——欧盟铁路市场自由化和对中国的启示]

The railway sector has long been a regulated market. The modern competition law was born because of an antitrust case in the railway sector. Back in the 1880s in the US, with the rapid development of railways, railway companies formed a trust to manipulate market prices. The monopolistic power of the trust hurt the market dynamic and harmed consumer welfare. The federal government eventually passed the Sherman Anti-Trust Act in 1890 to grant the Congress the right to regulation inter-state commerce in order to restrict the monopolistic power of trusts. Nevertheless, the railway sector in most countries of the world today is either operated by a monopoly or with limited level of competition. The importance of railway is non-negligible: it is the most efficient transportation mode for long distances in terms of time cost, monetary cost, environmental cost, and the number of passengers/freight that it can transport. More importantly, transportation is a general interest service. As education, healthcare, and electricity, national and local governments need to ensure minimum universal access to all citizens, which raises the concern of market structure, pricing, and efficiency. In this chapter, we explain the specificities of the railway sector that make it subject to regulation. We then review the history and the state of the art of the EU railway market liberalization. Then, we discuss different regulatory objectives behind the liberalization, and offer mixed evidence on the effectiveness of the objectives. We conclude by offering insights to the Chinese market.