Deutsche Post to restructure and pay E24m fine
Deutsche Post, the German postal company, is to pay a E24m ($21.7m) fine and restructure its operations after the European Commission ruled on Tuesday that it had illegally cross-subsidised services.
In a decision that could have important consequences for Europe’s postal liberalisation, the Commission said Deutsche Post broke European treaties by abusing its dominant position. The case was initiated in a complaint by United Parcel Services in 1994.
Deutsche Post will now spin off its business parcel services into a separate subsidiary to prevent further cross-subsidies from its basic services. The subsidiary and the rest of the company will have to charge each other market rates.
“Today’s decision establishes clear rules on the issue of cross-subsidies that postal monopolies who are also engaged in activities open to competition must respect,” said Mario Monti, competition commissioner.
Deutsche Post expressed relief that the investigation had ended. “We consider the result, which offers our clients and the capital markets a basis for future planning, in every way positive,” Deutsche Post said on Tuesday.
The company’s shares have fallen 15 per cent ahead of the Commission’s decision and a subdued outlook for its 2000 earnings due this week.
The pending investigations have overshadowed the share price since the government floated about 25 per cent of the state-owned enterprise in November. After hovering around its E21.00 listing price during large parts of the day, the stock closed 4.93 per cent lower at E20.83. On Monday Deutsche Post became a member of the Dax-30 index of Germany’s 30 blue chips.
The European Commission found that, between 1990 and 1995, the rates charged by the company’s business parcel services did not cover the cost of operations, making competition difficult.
The Commission also ruled that the company had “foreclosed competition” with a scheme from 1974 to 2000 that gave big discounts to heavy users of its mail order parcel services.
Brussels is still looking at whether the high postal rates set by the German government constitute state aid, and also at a complaint by the British Post Office about surcharges on business bulk mailings into Germany.
UPS called the decision a “step in the right direction to stop the distortion of competition”. Most importantly, UPS said, it hoped other postal monopolies in the EU would take note of the ruling.
