The Bundeskartellamt has today cleared plans by the Land Berlin to take over Berlin’s district heating network currently operated by Vattenfall Wärme Berlin AG.

Andreas Mundt, President of the Bundeskartellamt: “The project did not raise any concerns under merger control law. Operators of district heating networks have a monopoly on their respective networks. In contrast to the supply of electricity and gas, customers cannot switch supplier when it comes to district heating, which is why they are called “captive customers”. The change in ownership has no effect on this situation.”

Merger control is designed to prevent the structural conditions of competition from deteriorating, but network takeovers in the district heating sector do not normally lead to such a deterioration. The takeover of the district heating network by the Land Berlin is also not expected to adversely affect the conditions of competition with regard to network expansion.

Andreas Mundt: “The importance of district heating is set to increase significantly as part of the Government’s plans to move towards more sustainable heating. For people to accept this transition it is important that district heating suppliers do not abuse their dominant position, irrespective of whether the network is publicly or privately owned. It is also important to give new suppliers a fair chance to enter the market when new district heating networks are built.”

Prohibition of abusive practices under competition law – pricing by suppliers

Dominant district heating suppliers are prohibited under competition law from abusing their dominant position. The Bundeskartellamt and the competition authorities of the Länder have already examined district heating prices in the past and enforced price reductions where they found that a dominant position had been abused (see press release of 14 February 2017). The Bundeskartellamt is currently examining in several model proceedings whether suppliers are abusing their dominant position by applying inadmissible price adjustment clauses (see press release of 16 November 2023)

Prohibition of abusive practices under competition law – local authorities’ rights of way

In order to build and expand district heating networks, suppliers usually have to reach agreements with local authorities to use public ways for the laying of pipes (“rights of way”). It has been established by the courts that as providers of this essential upstream service for district heating, local authorities have a dominant position. When granting new rights of way, local authorities must observe the prohibition of abusive practices under competition law and adopt a non-discriminatory approach. It would be prohibited under competition law for them to favour district heating suppliers owned by the municipality or the Land, unless there is an objective justification to do so.

The Heat Planning Act (Wärmeplanungsgesetz – WPG), which entered into force earlier this year, also prohibits any one-sided preferencing of district heating suppliers owned by the municipality or the Land. The sole purpose of the legal requirement for local authorities to develop heating plans as provided for under the WPG is to identify those areas of a municipality that could, in principle, use district heating. Those plans are, however, not intended to pre-determine which specific supplier will develop and operate the required district heating networks. Instead, the WPG expressly stipulates that local authorities must comply with the prohibition of abusive practices under competition law when drawing up their heating plans.