The Commission said in its seventh annual report on the development of competition within the EUR 9bn German letters market that there are too many barriers to allow rivals to properly challenge the dominance of Deutsche Post.

It wants to see “clearly identifiable improvements” in price regulation in the postal market and an end to Deutsche Post’s sales tax exemptions in order to allow all postal service providers a level playing field.

The Commission is putting forward proposals to amend the country’s Postal Act in order to foster more competition in the postal market.

Justus Haucap, the chairman of the Commission, said: “The increase in market share for competitors to just over 10% cannot hide the fact that the development of competition in the letters market is stagnating, and there is still no functioning competition.”

In its latest report, also out this week, the industry’s regulator, the Federal Network Agency, backed up the Monopolies Commission view that there has been “no significant changes” in the market for letters within the last three years, although it said competition had increased from 9.3% in 2009 to 10.4% in 2010.

Proposals

The Monopolies Commission’s proposals to bring in more competition include re-introducing better licensing systems to give rivals more access to partial services of Deutsche Post. This would allow the kind of worksharing that the Commission suggested was “crucial” to improving competition levels.

The proposals also seek more powers for regulators at the Federal Network Agency, which it said does not have enough scope to investigate and prevent “abusive” behaviour of the dominant Deutsche Post.

The German postal giant should have a new obligation to disclose all details of its individual wholesale agreements to federal regulators, the Commission said, to provide extra protection against competition violations.

The Commission also wants to make it easier for rivals to submit formal complaints about Deutsche Post abuse of dominant position in the market.

As a further move to open up the German postal market to more competition, the Monopolies Commission recommended that the German government reliniquish its financial interest in Deutsche Post. Currently, just over 30% of the company’s shares are held by the state-owned KfW bank.

The Federal Network Agency said in its report that it was working hard to promote competition in the letters market, citing the recent judgement against Deutsche Post’s First Mail unit.

It said there was a promising rise in collaborations between postal companies to set up alternative delivery networks stretching across the country. “The Agency welcomes such activities as a promising feature in strengthening competition in the postal market,” it said.

Parcels

In contrast to the situation in the German letters market, the Federal Network Agency said competition in the parcels market was developing “positively”.

Matthias Kurth, the president of the agency, said parcel revenues were around EUR 18.8bn in 2010, up 14.6% on 2009, with EUR 9.7bn in revenues seen during the first half of 2011.

Kurth said there was a “noticeable” increase in parcel volumes with online retail a particular driver.

“The competitive situation has further improved in the parcels market,” he said. “For some time now, private customers have also been using the nationwide service from Hermes in addition to that of Deutsche Post DHL.”

Source: Post&Parcel/Monopolies Commission/Federal Network Agency

Tags: competition, Deutsche Post, Federal Network Agency, Germany, Hermes