It functionally was in the German Confederation. However, unlike the Holy Roman Empire, it was meant to not be under control of a single person/state (ie: Austria) and meant to keep Germany divided rather than unify it. The purpose of Vienna as a whole was to balance the power of Europe. Thus the Prussians were given considerable territorial gains and thus economic weight.

So when the Confederation was made the Prussians and Austrians were the two leading actors and thus rivals in it. However functionally it was a mutual 'alliance' and it was an economic union which tentatively bound the Germanic states together in the sense of the HRE.