European Commission extends Deutsche Post state aid probe

The European Commission announced Tuesday it is to extend the formal investigation into the amount of state aid paid by Germany to Deutsche Post.  An in-depth investigation was launched in September 2007 in light of complaints from Deutsche Post’s competitors, including UPS, who alleged the company had “disproportionally benefited from public transfers and pension subsidies between 1990 and 2007”.

 The investigation concerns the subsidies paid to the operator by the German state to cover pension costs of employees who then qualified as civil servants.

 The German state says that pension subsidies – compatible with EU State aid rules – compensated for ‘legacy costs’ from the time when Deutsche Post was a postal administration. However, it is claimed that the state also attempted to cover pension costs by allowing for an increase in regulated letter prices.

 This has led to concerns that Deutsche Post was overcompensated at the detriment of its competitors.

 The Commission confirmed the extension will allow the body to “look more closely into the compensation paid for the pension costs inherited from the public postal administration”.

 It added: “An assessment, which takes into account both sources of compensation, appears to indicate that Deutsche Post effectively benefited from social contribution rates that were 10 to 15 percent below the rates which competitors had to pay.”

 Vice president Joaquin Almunia, responsible for competition policy, said: “The liberalisation of the postal services sector brought many benefits in terms of more business opportunities as well as more and better services for the economy at large.

 “Nearly 20 years after the start of liberalisation we are still saddled with claims of overcompensation to the former monopolies which, if proven, distorts fair and healthy competition. I hope we will be able to conclude the investigation rapidly now and clarify the issue of compensation for pension ‘legacy’ costs as this is not the only case we have.”

 In response to the announcement, Deutsche Post DHL reiterated “there is no basis for the European Commission’s decision to expand the scope of an inquiry on state aid launched in 2007”.

 “The EU Commission has conducted a thorough investigation of civil servant pensions in the past. In a state-aid decision issued in 2002, the Commission was unable to determine the payment of any illegal state aid regarding the pension issue. The facts underlying the case have not changed in recent years,” the operator added.