No power without charging  

At the beginning of this month, the German Federal Cartel Office (FCO) released its 160-page report on its sector inquiry into the provision and marketing of public electric vehicle charging infrastructure. Before you stop reading right away because you are still fully committed to combustion engine cars for the next decade anyway – don’t. The report, and hopefully this blog, offers many intriguing insights into competition in an evolving market that go beyond the specific industry.   

Setting the scene

There’s no denying that electrification is revolutionizing the automotive industry, and it seems like hardly a day passes without the topic dominating headlines and political discussions. Recently, the EU made the decision to impose tariffs on electric vehicles imported from China (in time for the Paris Motor Show). Due to the still relatively low range and charging time compared to combustion engines, a crucial point for the acceptance of electric vehicles is a functioning charging infrastructure, which is the subject of the report.

Key findings of the FCO

There are numerous factors that affect the deployment of charging infrastructure, which are also covered in the report. However, for this blog, I will highlight the points I found most interesting and simplify some of the statements made by the FCO:

• Regarding market definition, the FCO distinguished separate product markets based on charging power (up to 22kw and above 22kw). As regards the geographic market definition the market for charging points below 22kw are locally limited to a radius of 1 km to a maximum of 4 km around the respective location. The market for charging points with a charging power above 22kw extends 50-60 km along highways and covers a driving time of 20-30 minutes on local roads (which is the same distance the FCO applies for the sale of conventional fuels). Charging Point Operators (CPOs) compete with E-Mobility Providers (EMPs), which offer charging cards to their customers which can be used at several charging stations from different CPOs.
• At the municipal level, most publicly accessible charging points are operated by a single CPO. This is largely due to the common practice of local authorities granting exclusive or preferential rights for suitable public spaces to their own municipal utility companies or to a single CPO.  According to the FCO, this limits competition in two ways: First, the absence of competition allows CPOs to set higher prices. Second, it enables CPOs to impose restrictive access conditions and electricity purchase prices on EMPs, potentially undermining their ability to compete and even driving them out of the market.  
• According to the FCO, market conditions are more favourable on highways, as the federal government has allocated federally owned land at unstaffed rest areas (such as parking lots) to various providers through competitive tenders. However, access to managed rest areas (which include restaurants and gas stations) is still restricted due to long-term concessions held by Tank & Rast, which controls the distribution rights at most rest stations across Germany.

How can competition law tackle these problems?

The report discusses a variety of options to tackle the aforementioned problems:  

• The FCO has stated that it will address anti-competitive market structures through strict enforcement of merger control rules. However, it acknowledges that some transactions may not meet the German merger thresholds, preventing the FCO from reviewing them – an issue it recognizes in other industries as well.
• Additionally, the FCO asserts that public authorities, such as cities and municipalities, do not act in a sovereign capacity when awarding public contracts (the FCO cites all the classical case law in this regard). Therefore, they must comply with rules regarding the abuse of a dominant position. This applies to CPOs that hold a dominant position in a particular geographic market, who should not stifle competition through practices such as price squeezing, discrimination, or abusive pricing.
• It’s also noteworthy that the FCO – at this point in time – does not see a requirement to make use of their new enforcement tool, which allows the FCO to intervene in the aftermath of a sector inquiry to remedy identified disruptions of competition.

Electrify me

The sector inquiry is intriguing for several reasons. It highlights that even emerging markets can face limited competition, and that this restriction can, in some cases, be driven by public authorities. This trend should also be viewed in the broader context of the German energy market, where many cities and municipalities run their own energy suppliers (there are around 1,000 municipal energy companies in Germany), and naturally use them to cross-subsidize their budget aim to maintain their profitability. This may not be the ideal foundation for fostering competition.

Ultimately, without a competitive and efficient charging infrastructure, the widespread adoption of e-mobility will not be possible.

Photo by Michael Marais on Unsplash