Deutsche Post loses bid to block EU State Aid investigation

Deutsche Post today lost an attempt to prevent the EU Commission from re-opening a long-running investigation into the use of state funding to support the competitive side of the German postal service in the 1990s. The EU General Court in Luxembourg today ruled as inadmissible an appeal from Deutsche Post against the Commission’s decision to investigate pension subsidies provided by the German government.

The ruling can potentially be appealed at the EU Court of Justice on a point of law.

The case stretches all the way back to complaints from rival parcel delivery firm UPS in 1994, suggesting that Deutsche Post had been providing its door-to-door competitive delivery services below-cost.

A subsequent Commission investigation suggested that the German national postal service had been offering loyalty incentives to retain customers, which did effectively mean their parcel services were being provided below cost, meaning that Deutsche Post was abusing its dominant position in the market, subsidising its competitive services with income from its monopoly services.

In 2002, the Commission calculated the “illegal” State Aid to be worth EUR 572m, but the ruling was annulled later in the same year by the EU General Court, with the Commission’s appeal dismissed by the Court of Justice.

Since then, the Commission and UPS have been battling in the European courts to overturn the annulment, but a 2008 appeal upheld in 2010 determined that Deutsche Post does not have to pay back the EUR 572m.

Pensions

Nevertheless, in 2007 the Commission decided to restart an investigation into what went on in the 1990s, with a new focus on the German state financing of Deutsche Post pensions.

Deutsche Post challenged the re-opening of the case, stating that the Commission could only investigate new cases of State Aid, not the issues within the case as annulled in 2002. The Commission’s argument was that looking at pension subsidies was an investigation of new state aid.

The EU General Court said today that the EU Commission had not been clear exactly what kind of State Aid it had been investigating in the pre-2002 action regarding the Deutsche Post parcel services, but ruled that the 2002 decision did not have any effect on the separate investigations later arising from the original complaints about Deutsche Post’s state aid.

“The contested decision (by the Commission to re-open its probe) does not constitute a decision that is open to challenge,” the EU General Court ruled today. “Accordingly, the application must be dismissed as inadmissible.”

The EU Commission decided in May this year to extend further its investigation into Deutsche Post pension subsidies following its privatisation in 1995, suggesting that the national post had been enjoying social contribution rates 10% to 15% lower than its competitors.

The Commission was accepting new evidence and submissions in the case during September and October.

Deutsche Post

Deutsche Post told Post&Parcel today that judging by today’s verdict, it could still be a few years before the issues involved in the current investigation are resolved.

But spokesman Dirk Klasen said his company was examining the EU General Court ruling before it would make a decision on an appeal. “We haven’t taken a decision yet, as our legal experts have to check the verdict first,” he said, adding that the action taken by Deutsche Post since the opening of the new state aid investigation in 2007 had been to protect the company’s legal interests.

Klasen said the current EU Commission probe was investigating issues the 2002 decision had “already covered”.