Amendments to German law enacted last February grant incumbent Deutsche Telekom a 'regulatory holiday' despite its dominant position in the domestic broadband market, said the Commission.
These amendments could lead to an effective exemption of Deutsche Telekom AG's fast internet access network (VDSL) from competition.
"The Commission has repeatedly warned Germany that its new telecom law violates EU Telecom Rules, but without success," said EU Telecom Commissioner Viviane Reding.
"We want to ensure that Germany can benefit from a healthy, competitive and fully functioning market, and encourage competition and investment in broadband markets. This is why we have decided today to go to court."
The Commission also emphasised that the new provisions attempt to limit the discretion granted to the German telecoms regulator, Bundesnetzagentur.
EU rules allow the Bundesnetzagentur to decide, on the basis of an in-depth market analysis, whether or not to allow competitors access to markets.
"The German government knows that they will have to open their market but they also know that Deutsche Telekom can benefit from the three years or so that it will take going through court," said Matthew Howett, research analyst at Ovum.
"All over the world incumbents have had to decide whether to open their domestic markets and everywhere but in Germany they have decided that the answer is to be open. Deutsche Telecom is the last of the old-style incumbents."
The German government insists that the amendments it made to its telecoms laws fall within EU telecom rules.
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