DB Cargo, the freight subsidiary of Deutsche Bahn, under pressure

Does Deutsche Bahn (DB AG), 100% owned by the German Federal State, improperly support the activity of its freight subsidiary DB Cargo in order to stay ahead of the competition? The European Commission suspects the German company of having allowed its freight subsidiary to benefit from its advantageous position to the detriment of competing companies. An investigation was launched in January 2022 by the Directorate General for Competition, after a complaint from a player in the sector. DB Cargo provides half of the rail freight transport in Germany.

At this stage, the examination of the case is still in progress. If the accusations of distortion of competition were confirmed, the case could pose a serious problem for DB Cargo. Because the freight subsidiary of the DB is the terrible child of the group, itself in crisis: it is the red lantern in terms of delays (a punctuality rate of only 66% in 2022) and is perpetually in deficit. In 2022, DB Cargo thus posted a negative operating result of 665 million euros, according to the company’s annual report published in the spring, after a loss of 466 million the previous year.

“DB Cargo has always been loss-making. Its losses were fully and continuously covered by DB AG on the basis of an indefinite profit and loss transfer agreement concluded between DB AG and DB Cargo”specified the European Commission in its press release of January 31, 2022, stressing that the investigation aims in particular to identify whether this scheme of internal transfers to the company which covers the losses of DB Cargo since 2012 can be considered as aid from irregular condition.

“Undue selective advantage”

“According to the complainant, these measures give DB Cargo an unfair selective advantage over its competitors, allowing it to invest in the growth and expansion of its activities and in the modernization of its fleet despite being loss-making. and that it does not have to take into account its profitability or its liquidity”indicates the document.

The reproach weighs all the more heavily since the DB benefits from very advantageous financing conditions, as a German public company, and could allow its customers to benefit from low prices, the Commission suspects. The NEE federation (Netzwerk Europäischer Eisenbahnen), which represents the competition, considers that DB Cargo very likely sells its services at prices that the competition cannot offer, in order to maintain its market share.

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