Bundeskartellamt's report on public drinking water supply in German cities Large price differences - lack of transparency

The Bundeskartellamt has today published a report on the framework conditions of drinking water supply and the control of fees charged by water suppliers in Germany. For several years the Bundeskartellamt has closely examined drinking water markets in Germany and has successfully concluded proceedings against individual suppliers for charging abusively high prices (see press releases of 24.02.2014 and 05.06.2012 - Berlin -, 09.05.2012 - Mainz - and 19.10.2015 - Wuppertal -).

The prices of drinking water in Germany vary greatly from one city to another. In 2013 the average net revenue of the water suppliers in Germany's 38 largest cities varied between 1.40 and 2.60 euros/m³. These significant differences can be explained partly by the different conditions of supply, such as e.g. density of supply or differences in altitude in the supply areas. However, in individual cases an efficient control of water fees by the authority is necessary to prevent suppliers from abusing their monopoly position to the detriment of consumers.

In its report the Bundeskartellamt describes the legal framework conditions and structures of public water supply. An extensive empirical part of the report illustrates the considerable differences between the individual structural conditions of the water suppliers in comparison with their price levels. However, only a close examination by the authority and an overall appraisal of all structural conditions on a case by case basis can determine whether the water prices are appropriate. A mere price comparison is therefore of limited information value for consumers.

One chapter of the report focuses exclusively on the control of water prices under competition law and the effects of the amendment to the German Competition Act (Act against Restraints of Competition, GWB) of 2013. The change to the law excluded water charges levied by a public law entity from abuse control under competition law. As a result such charges are only subject to the supervision of municipal authorities exercised by the individual Länder, which is based on less stringent criteria than those which apply to abuse control under competition law. This gives municipal water suppliers the possibility to switch from water prices to charges if they wish to avoid price abuse control. Some companies against which the competition authorities had opened proceedings have gone on to switch to charges in the past.

Andreas Mundt, President of the Bundeskartellamt: "In recent years the Bundeskartellamt and individual competition authorities of the Länder have successfully conducted proceedings against water suppliers which charged excessive prices. It is regrettable that in 2013 the legislator decided to exclude water charges levied by municipal suppliers from competition law control. The resulting division of control does not make economic sense. It is certainly of no difference to the consumer whether he pays excessive prices or excessive charges for his drinking water."

The report closes with a list of recommendations:

• The Bundeskartellamt recommends increasing the control of water fees. Extending competition law control to water charges would make the monitoring of fees more effective and end the economically senseless division of control. This would prevent water suppliers from switching to charges.
• Further measures could also increase the efficiency consciousness of water suppliers, preventing excessive prices in the first place. In view of the monopoly positions in the sector, the further development and implementation of benchmarking projects, for example, would be worth considering, which could inform water suppliers about their relative ranking among other water suppliers, identify cost saving possibilities and trigger improvement processes. Additional measures to make prices and charges more transparent could enable consumers to better assess their supplier's price level. This could give suppliers more incentive to supply water more efficiently.

The report on drinking water supply in German cities and a summary of the report (in German only) are available for download on the Bundeskartellamt's website.