Anti-competitive structures in the provision of EV charging electricity – Final report on sector inquiry into EV charging infrastructure

The Bundeskartellamt has today published the final report on its sector inquiry into the provision and marketing of public electric vehicle (EV) charging infrastructure. The report shows where there is a lack of competition and what measures can be taken to better protect or strengthen competitive structures in order to make electric mobility more appealing and ensure a successful market ramp-up.

Andreas Mundt, President of the Bundeskartellamt: “In many parts of Germany, competition does not work properly when it comes to the provision of EV charging electricity. Many local authorities awarded most or even all contracts for charging infrastructure installation in suitable public areas to their own municipal utility companies or to specific individual providers. As a direct result, there are now very few providers of charging stations and EV charging electricity in many local markets. The level of concentration in these markets is so high that dominant market positions have emerged. Consumers ultimately have little choice, and the risk of higher EV charging electricity prices increases as providers with market power do not have to worry about customers switching to competing providers. This situation could have been avoided by setting better framework conditions for the award of public areas for charging infrastructure installation.”

Anti-competitive structures

The results of the sector inquiry show that at municipal level, in particular, contracts for charging infrastructure installation in public areas are often not awarded in a non-discriminatory manner. The situation along the motorways varies depending on whether rest areas with services (petrol station, restaurant etc.) are concerned or simple rest areas (parking areas, in some cases with toilets). At the simple rest areas, the federal government has significantly improved the conditions for market entry by inviting tenders for the installation of charging infrastructure in state-owned areas as part of its Germany Network strategy (“Deutschlandnetz”). In contrast to these, however, areas at rest areas with services will continue to be available to the same providers, in particular Tank & Rast, due to long-term concession agreements. Also in this respect there is a risk that Tank & Rast promotes the creation of powerful market positions by exclusively using the areas itself or by awarding areas to only a small number of charging station operators.

When entities such as the federal government, cities or municipalities award contracts relating to their spaces, this does not constitute a sovereign act but an economic activity. Therefore, they must comply with competition law rules, which means they must not restrict competition between different, competing charging station operators when awarding the contracts.

Pricing and potential for abuse

The fact that prices currently vary significantly between charging stations can be an indication that some operators set abusively excessive prices. Where operators have local market power, this tends to increase their incentive and scope of action for setting higher prices. However, individual price increases alone do not allow the conclusion that EV charging electricity prices in Germany are systematically and generally excessive.  Operators have to cover the costs they incurred for installing their charging infrastructure, but usage of the charging stations is still very low in some regions. In some individual cases this may justify high prices.

Powerful providers, however, often do not only sell their own EV charging electricity to end customers. The charging stations are also used by motorists who use payment cards provided by mobility service providers for “filling up” with electricity. Prices and purchasing conditions in turn are set by the operators of the charging stations. Operators with local market power can thus set EV charging electricity prices for competing providers at an abusively high level compared to their own prices, which prevents competing providers from achieving adequate margins (margin squeeze). This could squeeze competitors out of the market or prevent them from entering the market, which again increases the problems caused by market power.

Competition law tools and recommended action

The Bundeskartellamt’s final report discusses in detail the competition law instruments available and options for developing the regulatory framework for EV charging infrastructure.

In individual cases, competition law can help to ensure non-discriminatory award procedures relating to public areas. Competition authorities can also intervene where the practices described above are used to impede competitors. The latest amendment to the German Competition Act (GWB) provided the Bundeskartellamt with new powers to dissolve uncompetitive market structures. However, from today’s perspective, the very strict requirements for such intervention are not met in the EV charging infrastructure sector. Merger control, on the other hand, is a tool which the Bundeskartellamt will continue to make vigorous use of in this sector. Due to the so-called minor market threshold and other turnover thresholds, however, some mergers in this sector cannot be examined under merger control rules.

Andreas Mundt: “Whether the Bundeskartellamt can intervene must always be assessed on a case-to-case basis. Effective improvements that go beyond individual cases and lead to more competition can only be achieved by amending the regulatory framework, in particular. Contracts for charging infrastructure installation in public areas should be temporary and awarded in a transparent and non-discriminatory procedure. A non-discriminatory procedure is generally also required when awarding government funds. This is best achieved with public tender procedures as used in the context of the Germany Network strategy.”

The chosen lot size and structure in tender procedures are key factors in the development of competitive structures. In order to increase the number of providers and effectively strengthen competition, it is especially important to consider that the local markets in question only cover a limited area.

Andreas Mundt: “Regulatory intervention, on the other hand, especially relating to the providers’ pricing, would be counterproductive from today’s perspective. Such intervention can affect the profitability of private infrastructure installation projects, discourage providers from making offers and even hamper the envisaged charging infrastructure ramp-up. The same is true for the current plans to legally require petrol station operators to install a specified quantity of charging stations at their petrol stations. A regulated access model as already applied to electricity networks is, in our assessment, also not the right approach at this point. There are no indications, in particular, that this would lead to lower EV charging prices for consumers.”

In a regulated access regime, end customers can choose their provider themselves at the charging station. Operators of charging stations would then be required to transmit the EV charging electricity offered by alternative providers against payment of an access or transmission fee. Although regulated, this so-called transmission fee would have to take full account of the costs incurred for installing and operating the charging stations. Ultimately the providers of EV charging electricity would pass the full costs on to end customers.

Potential anti-competitive knock-on effects should also be taken into account when considering government measures which primarily aim at increasing price transparency or making charging stations more user-friendly. After all, more transparency would inevitably also benefit providers. This could encourage price coordination and thus weaken price competition.

The final report and a summary of the key findings are available here (in German only).