I don't know about inexplicable. A bit of research shows that it was intended to favor the development of rail and possibly automobiles (Hitler's Volkswagen project was declared in 1933.) It appears it also allowed for an exception when the bus service was a substantial or significant improvement ( wesentliche Verbesserung ) and, just recently, a young business called Yourbus ( DeinBus ) emerged successfully from the court system with a permit because a lower price counted as a significant improvement.

edit: It occurred to me that it was possible what you found inexplicable was why the law was still on the books. It seems from Deutsche Bahn AG's opposition to Yourbus, that interests such as the (now privatized) state rail and other industries would simply lobby for an advantageous status quo. Especially so, considering that Deutsche Bahn operates its own bus service, and has for a while, in a comfortable niche carved out from and protected by that very law.

except travel to certain destinations like airports. also from nearly every city there is a long distance bus going to berlin ;)