Post's Anti-Trust Worries Aren't Over Yet

Deutsche Post AG may have been premature in heaving a sigh of relief when the European Union Commission closed one of three investigations into its business with the imposition of a fine of 24 million euros last month.

“The possibility of further fines on Deutsche Post should not be ruled out,” said a Brussels insider.

In March, the E.U. Commission fined the partly privatized mail and logistics company 24 million euros for the abuse of its dominant position in the German parcels market.

The Commission said Deutsche Post broke E.U. rules through fidelity rebates and predatory pricing in the business parcel services market. It ordered Deutsche Post to end those practices and to establish a separate legal entity unit for business parcel sales. The aim is to ensure that revenue from Deutsche Post’s monopoly letter business isn’t used to finance parcel services.

The Commission, whose investigation stemmed from a 1994 complaint by United Parcel Service Inc. of the U.S., could have imposed a fine of up to 10% of Deutsche Post’s sales, estimated at 31 billion euros last year. But the sum levied was a fraction of this – a fact that Deutsche Post interpreted as a favorable sign for the outcomes of two further antitrust investigations.

Deutsche Post interpreted the mild fine as a favorable sign for the outcomes of two further antitrust investigations.

Now. E.U. Competition Commissioner Mario Monti is said to have turned his attention to Deutsche Post’s monopoly on the delivery of letters weighing up to 200 grams. Commission insiders said efforts will be made to determine whether profits on this business are used to subsidize other areas of business. They added that the question was for the first time being considered of whether the granting of the monopoly constitutes illegal state aid to Deutsche Post.

Recently, the German government extended Deutsche Post’s monopoly on letter delivery from 2002 to 2007.

It’s made clear by people in Brussels that in considering this question, the Commission is moving into uncharted territory. Letter monopolies are seen to present a particularly difficult problem in terms of competition law. The fact that it’s investigating complaints by rival companies means that the Commission has no choice but to address this problem. Otherwise it could be taken to the European Court of Justice. According to people in Brussels, the Commission also has to look at the monopoly over letter delivery enjoyed by France’s La Poste.

Despite the difficult nature of the subject-matter, the EU Commission plans to have completed its investigation into Deutsche Post by the end of this year at the latest. Some of Deutsche Post’s shares are now listed on the stock market, and the Commission has an obligation to inform the company of any outcome as early as possible to ensure that they can undertake their financial planning with as much information as possible