Call for evidence issued in Deutsche Post state aid probe

The European Commission has issued a call for evidence regarding its investigation into Germany’s provision of state aid to Deutsche Post. The investigation has been ongoing since 2007 following complaints from Deutsche Post’s rivals that the German government provided pension subsidies in the 1990s and early 2000s, potentially in violation of EU competition laws.

European regulation has restrictions on governments providing financial assistance to private companies if it could unfairly benefit them compared to rivals.

National posts can argue their need for assistance to carry out universal service obligations, but in 2007 the European Commission said there were “doubts” whether the assistance for Deutsche Post had been necessary for the fulfilment of universal service.

In May this year, the Commission decided there was enough of a concern to step up its investigation to look more closely at compensation paid when the Deutsche Post took on pension obligations from the state-owned postal administration when it was formed out of the privatisation of Deutsche Bundespost in 1995.

The European Union’s executive branch is specifically interested in why Deutsche Post was allowed to raise its postal rates to cover the “abnormal” pension costs at the same time as receiving other assistance on pension obligations.

Effectively, Deutsche Post was enjoying pension contribution rates 10-15% lower than competitors, the Commission suggested.

“When taking into account both sources of compensation, doubts exist with regard to the compatibility of the pension subsidies as compensation for ‘legacy’ pension costs,” the Commission said yesterday.

Issuing a request for public comment on the matter yesterday, with letters to the German government and Deutsche Post, the Commission set a deadline of October 7, 2011, for views to be submitted.

The German postal market was opened up to private competition in January this year, and the case involving Deutsche Post has potentially important ramifications for liberalising postal markets in other European countries, particularly where the definition and maintenance of the universal service obligation is concerned.

The German government and Deutsche Post believe the EU Commission has a fairly weak case, a view perhaps upheld by last year’s successful appeal in the European Court of Justice, in which Deutsche Post was told it did not have to repay EUR 572m in state aid paid out in the early 1990s to compensate for universal service in Germany.