German Monopolies Commission calls for break-up of DB 25/07/19

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German Monopolies Commission calls for break-up of DB

GERMANY’s federal government should consider separating German Rail’s (DB) transport business from its infrastructure activities, according to the conclusions of a report by the country’s Monopolies Commission on July 25.

The Commission’s 2019 Railway Sector Report calls for higher quality services and more competition but warns the current condition of the poor condition of infrastructure and planned upgrading works mean “the political goal of putting more traffic on the railway is a long way off.”

“In order to strengthen rail transport, there needs to be changes to the institutional framework. not just investment in infrastructure,” says the commission’s chairman, Professor Achim Wambach. “Delay liability, quality incentives in regulation and increased competition in rail transport would significantly improve infrastructure quality and train punctuality.”

The report suggests that train delay liability should be directly apportioned to the party responsible for causing the operational disturbance. At present infrastructure manager DB Network has no liability for the impact of delays on train operators and their customers. The commission says a system of compensation payments would incentivise all market players to contribute to improving punctuality.

Quality incentives for infrastructure maintenance are also proposed. The commission recommends that the new Performance and Financing Agreement (LuFV II) currently being negotiated by the federal government and DB should include incentives to use funding for improving infrastructure quality.

DB Network currently receives federal grant funding on a flat-rate basis. Although contractually-agreed quality indicators are already used, the commission says these do not reflect the current condition of the infrastructure manager’s assets.

Last month DB published its ‘Strong Rail’ strategy, which aims to improve punctuality and increase network capacity by 30%.


In addition to the focus on incentives, the report urges the federal government to take action to increase competition on the network, which the commission argues will give train operators their own incentives to improve quality.

Currently open-access operators have a share of less than 1% in the long-distance market, which the commission attributes to high track access charges.

“The new Rail Regulation Act introduced a regulation which is intended to provide DB Network with incentives to reduce its costs and thus track access charges,” the commission states. “However, the potential of this regulation is not being exploited, so excessively high train path prices cannot be ruled out. In the future, DB Network’s calculated cost of capital should be based on its actual risk. This would effectively reduce costs and therefore track access charges.”

Notably, the report calls for the separation of infrastructure and operations, a significant departure from the current structure that successive federal governments have so far resisted implementing. The commission says separation of the infrastructure manager from train operators vital for competition.

“The DB Group is wholly owned by the federal government,” the report states. “As a result, the federal government, through the various business units of the DB Group, operates in an entrepreneurial manner in domestic and foreign competitive markets. There is no regulatory justification for this. Only private companies should be active in competitive markets. “The Monopolies Commission therefore recommends restricting federal ownership of the DB Group exclusively to the regulated parts of the company.”

The report warns that persisting with the current DB Group structure could allow DB to use state subsidies to gain advantage in a competitive market, which could lead to violations of EU competition law.

The commission welcomes the federal government’s proposal to transpose EU Directive 2016/2370 (part of the market pillar of the Fourth Railway Package) into national law as this will introduce greater financial transparency into DB. It also says information on all government grants to DB should be made public in a “timely and easily discernible manner.”

In January a report from the Federal Court of Auditors called on the government to consider splitting DB train operations from infrastructure management.