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Competition calls for a change of direction

21.09.2009

Press release

  • The Monopolies Commission notes that competition in the German passenger and freight transport markets is only slowly gaining momentum
  • The Monopolies Commission calls for decisive government action to create stable and fair competitive conditions
  • Monopoly Commission presents a comprehensive plan to promote competition in the rail transport markets

The Monopolies Commission today submitted a special report to the Federal Government on the development of competition in the rail sector. The report is entitled ‘Rail 2009: Competition Requires a Change of Course’. The analysis of the German rail sector shows that competition in the passenger and freight transport markets is only slowly gaining momentum and that significant barriers to competition are restricting the activities of many providers.

The Monopolies Commission has found that there are numerous competition issues in the German rail sector which limit competition in the transport markets. A key cause lies in the structure of the industry leader, Deutsche Bahn AG. Due to the integration of its infrastructure and transport divisions, the company enjoys significant advantages over other providers in terms of access to the railway infrastructure. The Monopolies Commission addresses this and other problems with a comprehensive strategy.

The most important lever for achieving genuine ‘greater competition’ lies in the separation of Deutsche Bahn AG’s infrastructure and transport divisions. The Monopolies Commission therefore recommends that the Federal Government privatise Deutsche Bahn’s transport companies as soon as possible in order to ensure the independence of the railway infrastructure operators. This would remove many incentives for discrimination, and the network, stations and other facilities could be made available to all rail transport companies on equal terms. 

A level playing field in terms of access to infrastructure is an essential prerequisite for efficient competition on quality and price in the rail sector, to the benefit of consumers.

Justus Haucap, Vorsitzender der Monopolkommission

The Monopolies Commission has examined the regulations governing access charges for railway infrastructure and identified significant shortcomings in the effectiveness of the existing regulatory framework. It calls for the introduction of incentive-based regulation, which would enable the railway infrastructure to be managed more efficiently, whilst reducing the scope for discrimination.

In its report, the Monopolies Commission examines in detail the sub-markets for local passenger rail transport, long-distance passenger rail transport and rail freight transport. In local passenger rail transport, the development of competition depends on the willingness to award expiring transport contracts through a competitive tendering process. Competitive tendering procedures guarantee a better range of services. The Monopolies Commission calls for all transport contracts in local passenger rail transport to be put out to competitive tender in future. The legislator should also regulate the procedure by which the common nationwide fare for local passenger rail transport is agreed.

In long-distance passenger rail transport, there has so far been hardly any relevant competition, although the German market is in principle open to private operators. One reason for this is the refinancing risk associated with the substantial investments required of a new operator. The Monopolies Commission recommends a legislative initiative to incorporate transparency obligations for the network operator regarding network utilisation and condition into railway law. Furthermore, the guidelines governing the conclusion of long-term framework agreements on train path usage by railway undertakings should be revised. In this way, the legislator could provide potential new operators with additional opportunities to secure the foundations of their business model.

Rail freight transport has shown the most positive competitive development since the railway reform. However, competition has so far been concentrated on so-called block train services, which do not require trains to be re-formed. In the case of logistically complex services such as single-wagon transport, the development of competition is hampered by access to the necessary service facilities of Deutsche Bahn AG. Stricter regulation and oversight are required to ensure that competitors have non-discriminatory access to marshalling yards and train formation facilities.

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