Deutsche Post ordered to raise prices in German mail unit

Deutsche Post has been ordered to raise postal rates within its low-budget business mail subsidiary First Mail within Germany. The Supreme Administrative Court of the North Rhine-Westphalia region yesterday upheld June’s order by the German regulator, the Federal Network Agency, that the universal service provider was illegally offering business mail delivery below cost within the First Mail unit.

In the interests of competition, the Court said the predatory prices had to be changed immediately.

Düsseldorf-based First Mail provides business mail delivery services in the Düsseldorf, Ruhr and Berlin areas, including bulk mail and advertising, particularly for small and medium-sized businesses. The market is particularly price sensitive, with competition from a number of local delivery firms as well as Dutch postal operator PostNL’s TNT Post Germany unit.

In a statement, the Court said yesterday that it believed the economic power of Deutsche Post had allowed it to absorb losses arising from the below-cost pricing at First Mail, in order to knock out competitors in the geographic areas in question.

“The low-price strategy aimed to restrict competition in the area in favour of the parent company and at the expense of the other competitors,” the Court stated, before adding that healthy competition in the postal market was in the public interest.

The ruling by the Court cannot be overturned on appeal, although Deutsche Post has a separate action against the decision by the regulator in June that is yet to be decided.

Deutsche Post told Post&Parcel this afternoon that in accordance with the ruling, prices would have to be changed at First Mail within a few days, regardless of the continuing legal action.

Spokesman Dirk Klasen said: “First Mail will have to increase its prices and to change its terms and conditions according to the decision of the regulator in June. Although First Mail has filed a principal suit against the regulator which hasn’t been decided yet, First Mail is forced to implement the decision now.

“Several products of that subsidiary are affected but in general, its new prices have to be fixed according to a minimum price level Deutsche Post is offering to its business customers,” added the Deutsche Post spokesman.

“Free and fair”

First Mail’s main competition has welcomed the ruling from the Court this week.

PostNL said the verdict would stop the “destructive negative price spiral” in the German postal market, and would prove an “important step” for TNT Post Germany to achieve profitability from 2013.

The Dutch operator said the ruling by the Court in Münster meant Deutsche Post and its subsidiaries would not be allowed to undermine the price floor imposed by the German regulators.

Harry Koorstra, the CEO at PostNL, said: “As the main challenger to the postal incumbent, TNT Post Germany wants to lead the development of the German market for business mail. Free and fair competition is a necessary condition for this development.”