This report examines market power in rail markets in Europe arising from horizontal and vertical mergers in the sector, and is intended to provide a high-level basis for discussion at the round table itself. It presents factual information on horizontal and vertical merger cases involving rail freight operators, highlighting the processes used by competition authorities to determine the circumstances in which such mergers should be approved. It also provides commentary on the economics of these markets and, hence, the likely prospects for their future shape. The topic of the report is timely. The first set of results are available from a preparatory study for the European Commission on whether policy objectives with respect to moving freight onto rail can best be achieved by giving freight more priority on the rail network.1 The 'Problem Definition' section of the paper highlights the finding that the 'legislative initiatives put forward so far have not produced the expected benefits' as a reason why rail freight's market share declined up to 2005. The perceived limitations of the legislative framework have led the Commission to consider a 're-cast' of the key access charging Directive 2001/14/EC in order to improve outcomes. In addition, a number of recent mergers in the rail freight sector have proceeded following investigation by competition authorities. Mergers have included Deutsche Bahn (DB) buying both Transfesa and EWS at the larger end of the scale, and Freightliner buying freight terminals at the smaller end. The need to balance increased competition both now and in the future are crucially important in any discussions around such corporate activity.