Special Report by the Monopolies Commission pursuant to Sec. 36 of the General Railways Act, Bonn, 22. July 2015

  • Monopolies Commission still sees deficits in competition in the railway sector
  • Monopolies Commission demands stronger commitment of decision makers
  • Monopolies Commission gives policy recommendations for improving competition on  railway markets

The Monopolies Commission has presented its fifth Special Report on competition on the railway markets to both the Federal Government and Legislature. The Report bears the title: “Railway 2015: Competition policy off track?”.

The Monopolies Commission argues that the legal framework has not been conducive to a successful development and that the political decision makers have not taken the necessary steps. “Policy makers have to be more active in advancing competition on the railway markets. A majority of the travelers would benefit from functioning competition”, said the Chairman of the Monopolies Commission, Professor Daniel Zimmer. In its Report the Monopolies Commission fleshes out the necessary measures to create effective competition and to develop attractive offers in rail transport.

The pending regulation bill is not capable of vitalizing significantly the stagnant development of competition. The bill would transpose a European directive into national law without changes. This transposition would lead to legal uncertainty for all stakeholders and weaken both the existing regulation and competition.

The Monopolies Commission approves the incentive regulation and the ex ante authorization of rail infrastructure charging that the bill shall bring along. However, it considers it to be problematic that the incentive regulation will not take into account individual inefficiencies and will even create additional inefficiencies, e.g. by tying the increase of charges to the rate of increase of the federal regionalization funding. Moreover, the bill does not award the necessary powers of monitoring and disclosure to the Federal Network Agency.

The difficulties of private railway companies to buy and finance vehicles count among the main obstacles to competition in regional rail passenger transport. Responsible authorities have developed various ways to cope with this issue. These measures, however, do not address the real reasons of the problem. The dynamic has become self-reinforcing: The more the state remains involved in the procurement of vehicles, the less a private sector market will develop, and even more public involvement will appear necessary. The Monopolies Commission recommends that the responsible authorities reduce their involvement in the procurement of vehicles in order to break with this development.

The Monopolies Commission is convinced that the only way to establish undistorted competition in the German railway sector is to completely separate the infrastructure and transport units of the integrated company Deutsche Bahn AG. The Special Report reveals how an integrated company is structurally able to discriminate against competitors and why current regulation is not suited to prevent discriminiating behaviour. The Monopolies Commission has considered the arguments for and against ownership unbundling. In order to reduce current inefficiencies, the Monopolies Commission recommends the organizational and financial unbundling.

The following documents are now available for download: