IT’S official: Deutsche Post, Germany’s postal operator, is an abusive monopolist guilty of predatory pricing and anti-competitive practices

IT’S official: Deutsche Post, Germany’s postal operator, is an abusive
monopolist guilty of predatory pricing and anti-competitive practices. On
March 20th, competition officials in the European Commission (EC) enjoyed a
rare moment of satisfaction when their boss, Mario Monti, announced the
findings of a lengthy inquiry into the group’s business practices. On top of
being forced to pay a euro24m ($21.6m) fine, Deutsche Post has agreed to
split its operations, creating a separate entity to run its business-parcel
services and ring-fencing this operation from its monopoly in letters.
The decision is a victory for UPS, an American parcels and logistics group.
It complained to Brussels about Deutsche Post as long ago as 1994 and has
lobbied persistently for a result. It also called attention to the German
operator’s rapid recent expansion into international logistics via
acquisitions, arguing that deals were being unfairly subsidised by monopoly
profits on domestic letters.
That charge, though beyond the scope of the EC inquiry, now looks better
founded. UPS has recently attacked Deutsche Post in America, calling on the
Department of Transport there to suspend the flying licence of DHL Worldwide
Express, a logistics group controlled by the Germans. After this week’s
findings, UPS renewed these calls.
Deutsche Post tried to put a positive spin on Mr Monti’s announcement,
saying that it welcomed the end of the inquiry and that its new structure
will make it more efficient. The truth is that the episode is hugely
embarrassing and potentially costly. When the German government floated 25%
of the group’s shares last November, investors were reassured that questions
from Brussels did not constitute meaningful risks. That now looks
misleading. The fine may be small, but Deutsche Post is being forced to hive
off an important business. Small wonder that the news pushed its shares
below their issue price.
Worse, Mr Monti still has to rule on a second investigation into Deutsche
Post. That case hinges on whether lucrative property sales by the group
constituted state aid. If so, the receipts from such sales will have to be
repaid. This money was a key factor in Deutsche Post’s overall financial
health before its flotation, so a finding against it in that case could have
further serious consequences.
Deutsche Post is trying hard to avoid a second blow. Among its defensive
measures, it has hired a former European commissioner to lobby on its
behalf. And it has political cards that, if played cannily, could help its
cause. Unlike Britain and France, Germany is in favour of faster
liberalisation of Europe’s postal businesses. The European Parliament
recently watered down the commissioners’ latest proposals on opening up the
market. But the issue is far from decided, and the EC knows that it has to
be pragmatic in nurturing allies for its reforms, notably Germany. So while
it might be tough in future on Deutsche Post, it probably will not be too
tough.
That leaves just one question: might Germany’s love of liberalisation be
driven less by ideology than by a desire to see Deutsche Post grab market
share faster than less well-funded rivals? No letters, please.