Canada Post a target after ruling in Germany: UPS victimized by predatory pricing
In a decision sure to be closely scrutinized in Canada, the German
post service was ordered yesterday to pay a fine of US$21.7-million
for using profit from its mail monopoly to price competitors out of
the parcel-delivery market.
The predatory pricing ruling was prompted by a complaint by United
Parcel Service Inc., which is mounting a similar challenge against
the federal government in connection with Canada Post.
The U.S. courier has filed suit under the North American Free Trade
Agreement claiming that Canada Post, which operates Purolator,
Priority Courier and Xpresspost, unfairly cross-subsidizes its
courier services with revenue generated from selling stamps. UPS is
asking for US$160-million in compensation.
Tad Segal, a spokesman for UPS, said yesterday’s ruling by the
European Commission should send a clear message to Canada.
“We’ve seen a ruling here that Deutsche Post was cross-subsidizing,
was abusing its dominant position and was acting to prevent fair
competition,” Mr. Segal said from Washington. “We, of course,
maintain that this is occurring in Canada with regard to
preferential treatment being given to Canada Post.
“I think there is a level of similarity between the two cases to the
extent that these are two government monopolies doing two similar
things.”
Canada Post, which is contesting UPS’s allegations, says it has been
reviewed twice by the federal Competition Bureau and had its books
audited to see whether there is any cross-subsidization. The
investigations have uncovered no inappropriate funding of
competitive services with profits from letter mail.
“My translation is that UPS would like to see the competition that
Canada Post represents to them out of the way so they could have a
greater share of the Canadian marketplace — which is what they are
doing throughout Europe ,” Ida Irwin, a spokesman for Canada Post,
said from Ottawa. “That is the gist of it.
“Canada Post has been delivering mail and parcels for 150 years,
long before UPS was ever created. So, I suppose if there is any
competition, it is UPS that is moving into areas Canada Post has
been servicing forever .”
Ms. Irwin said the NAFTA tribunal is expected to start hearing the
case within the next two months.
Yesterday’s ruling, which found Deutsche Post created an unfair and
uneven competitive playing field, will result in a separation of the
German postal service’s monopoly letter mail services and its
competitive parcel business, which competes directly with the
private sector.
Mike Eskew, United Parcel’s vice-chairman, said he hopes the ruling
will reverberate around the world.
“We sincerely hope the European Commission’s ruling will be fully
enforced and will serve as the starting point for other governments
around the world,” Mr. Eskew said in a statement. “Other postal
monopolies like the U.S. Postal Service and Canada Post that are
engaging in similar activities should take note that this type of
behavior is unacceptable.”
There were predictions following the ruling that rival delivery
services will seek to use it to wedge open Europe’s US$55-billion
postal services market to competition.
Copyright 2001 National Post.
Source: World Reporter (Trade Mark) – FT McCarthy.
FINANCIAL POST, 21st March 2001
