State aid: Commission opens in-depth investigation into German support measures in favour of DB Cargo

This article is brought to you in association with the European Commission.

The European Commission has opened an in-depth investigation to assess whether certain German support measures in favour of DB Cargo are in line with EU State aid rules.

DB Cargo is a 100% subsidiary of the State-owned, vertically-integrated German rail operator Deutsche Bahn AG (‘DB AG’). DB Cargo has been persistently loss-making. Its losses have been fully and continuously covered by DB AG on the basis of an open-ended profit and loss transfer agreement concluded between DB AG and DB Cargo.

The Commission’s investigation

The  Commission received a complaint alleging that the profit and loss transfer agreement as well as certain other measures benefitting DB Cargo amount to incompatible State aid in favour of the company. In this respect, according to the complainant, such measures give DB Cargo an undue selective advantage over its competitors, by enabling it to invest in the growth and expansion of its business and in the upgrade of its fleet, despite being loss making and without having to take profitability nor liquidity into account.

At this stage, based on its preliminary assessment, the Commission has concerns that certain measures in favour of DB Cargo may not be line with EU State aid rules and has decided to open an in-depth investigation in relation to:

1. the open-ended profit and loss transfer agreement between DB AG and DB Cargo, under which DB AG has been covering DB Cargo’s losses since 2012;
2. the provision by DB AG at potentially favourable pricing terms for of intra-group services to DB Cargo;
3. the potentially advantageous group financing conditions of loans; and
4. the partial coverage by the German Federal Railway Fund of the remuneration of civil servants previously employed by the former national railway company Deutsche Bundesbahn and currently allocated to DB Cargo.

The Commission will now investigate further to determine whether its initial concerns are confirmed. The opening of an in-depth investigation gives Germany, the complainant and other interested third parties an opportunity to submit comments. It does not prejudge the outcome of the investigation. 

Background

Under EU State aid rules, public interventions in favour of companies can be considered free of State aid when they are made on terms that a private operator would have accepted under market conditions (the market economy operator principle – MEOP). If this principle is not respected, the public interventions involve State aid within the meaning of Article 107 of the Treaty on the Functioning of the European Union, because they confer an economic advantage on the beneficiary that its competitors do not have.

The non-confidential version of the decision will be made available under the case number SA.50952 in the State aid case register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition State Aid Weekly e-News.