Brussels, 18 December 2013
Antitrust: Commission accepts legally binding commitments from Deutsche Bahn concerning pricing of traction current in Germany
The European Commission has accepted the commitments offered by the German railway incumbent Deutsche Bahn (DB) regarding its pricing system for traction current in Germany and made them legally binding. Traction current is the electricity used to power locomotives. The Commission had concerns that DB's pricing system, in particular discounts that only railway companies belonging to DB could obtain, may have hampered competition in the German markets for rail freight and long-distance passenger transport in breach of EU antitrust rules. To address these concerns, DB offered to introduce a new pricing system for traction current that would apply uniformly to all railway companies and should enable electricity providers not belonging to the DB group to directly supply traction current to railway companies. After DB amended its initial commitments proposal in light of the results of a market test (see IP/13/780), the Commission is satisfied that the final commitments remedy its competition concerns.
Joaquín Almunia, Commission Vice-President in charge of competition policy, said: "The commitments proposed by Deutsche Bahn will enable the uptake of competition between electricity providers for supplying traction current to railway companies. Since traction current is an essential input for rail services, this will translate into more competition and better services on the rail transport markets themselves".
In June 2012, the Commission opened antitrust proceedings against Deutsche Bahn, because of concerns about the pricing system used by DB Energie, its subsidiary providing traction current to railway companies (see IP/12/597). In particular, certain discounts offered on paper could in practice only be achieved by DB's own subsidiaries providing rail services. This situation may have prevented railway companies not belonging to DB from competing profitably on the rail freight and long distance passenger transport markets. In other words, it may have led to a so-called "margin squeeze" for the competitors of DB. To dispel these concerns, DB offered a set of initial commitments, which it amended in light of comments the Commission received from market participants.
As of 1 July 2014, DB Energie will grant electricity providers access to its network for supplying traction current. In addition, DB Energie will introduce a new pricing system which will market the price of electricity separately from the fee charged for accessing the network. The latter is regulated by the German regulator for network industries, the Bundesnetzagentur. To foster market entry, DB Energie renounces applying any discounts to its electricity offer. For the year starting in July 2014, it will also grant a 4% reduction on the price of traction current to all railway companies not belonging to DB, based on their invoice of the preceding year. This will ensure that railway companies immediately benefit from lower prices until the effects of increased competition will set in. These lower prices for traction current will contribute to ending the margin squeeze and restoring the ability of railway companies to compete with DB on the rail freight and long distance passenger markets.
The Commission concluded that these commitments will introduce competition on the traction current market and will put an end to the "margin squeeze" on the rail transport markets in Germany. The Commission will closely monitor the implementation of the commitments with the support of a monitoring trustee.
Background on the investigation
In June 2013, the Commission informed Deutsche Bahn of its preliminary assessment that DB may have abused its dominant position on the market for the provision of traction current in Germany, in violation of Article 102 of the Treaty on the Functioning of the European Union (TFEU). The practice at stake relates to the pricing of traction current that may have created a margin squeeze on the long distance passenger rail transport and rail freight markets in Germany. A margin squeeze occurs when the prices charged by a dominant company on an upstream market (here the provision of traction current) do not allow equally efficient competitors on the downstream market (here the provision of rail transport services) to trade profitably on a lasting basis.
Traction current is the 16.7 Hertz electricity used to power rail locomotives in Germany and is an indispensable input for railway companies. DB Energie is the only supplier of traction current in Germany, thereby holding a dominant position on this market.
DB Energie currently markets traction current through an "all-inclusive" offer where railway companies pay a price covering both the consumption of traction current and the use of the traction current network managed by DB Energie. Following a judgment of the German Bundesgerichtshof ruling that the traction current network falls under the energy regulatory framework, DB Energie will change its pricing system and charge separately the network access fee – regulated by law – and the price for electricity.
Article 102 TFEU prohibits the abuse of a dominant market position in the internal market, in so far as it affects trade between Member States.
After unannounced inspections in March 2011 (see MEMO/11/208), the Commission initiated formal antitrust proceedings in June 2012 (see IP/12/597). Following discussions on possible commitments with Deutsche Bahn, the Commission informed DB in June 2013 of its preliminary competition concerns. In August 2013, the Commission consulted stakeholders on draft commitments offered by DB to remedy such concerns (see IP/12/986). In light of the results of the market test, Deutsche Bahn submitted an amended set of final commitments.
The Commission's decision is based on Article 9 of the EU's Antitrust Regulation (Regulation 1/2003). It makes the final commitments offered by DB legally binding and ends the Commission's proceedings. It does not conclude on whether EU antitrust rules have been infringed but legally binds DB to respect the commitments. If DB were to break these commitments, the Commission can impose a fine of up to 10% of its annual worldwide turnover, without having to find an infringement of the antitrust rules.