by Keri Allan
07 Feb 2022
The European Commission (EC) has opened an in-depth investigation into whether certain German support measures in favour of DB Cargo are in line with EU state aid rules.
DB Cargo is a subsidiary of Deutsche Bahn (DB) and has been persistently loss-making. Its losses have been fully and continuously covered by DB on the basis of an open-ended profit and loss transfer agreement between the two.
The EC received a complaint alleging that this agreement, as well as certain other measures benefitting DB Cargo, amount to incompatible state aid favouring the company.
If true, these measures would give DB Cargo an advantage over its competitors by enabling it to invest in the growth of its business despite being loss-making and without having to take profitability or liquidity into account.
A preliminary assessment by the EC raised concerns, which is why an in-depth investigation has been opened.
This will look into the open-ended profit and loss transfer agreement between DB and DB Cargo, under which DB has been covering the subsidiary’s losses since 2012.
It will also review whether DB was providing DB Cargo potentially favourable pricing terms for intra-group services and advantageous group financing conditions of loans.
The German Federal Railway Fund’s partial coverage of the pay of civil servants previously employed by former national railway company Deutsche Bundesbahn and currently allocated to DB Cargo will also be investigated.
The opening of an in-depth investigation gives Germany, the complainant and other interested third parties an opportunity to submit comments.
Once the investigation is completed, the EC’s decision will be made available on its competition website.
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