COMMISSION DECISION (EU) 2023/232

of 25 July 2022

on the State aid SA.55208 (2020/C) (ex 2022/NN) implemented by Czechia for Czech Post

(notified under document C(2022) 5136)

(Only the English version is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1), point (a), thereof,

Having called on interested parties to submit their comments pursuant to the provisions and having regard to their comments,

Whereas:

1. PROCEDURE

(1) On 18 January 2018, the Czech authorities pre-notified compensation to Czech Post for the provision of the universal postal service obligation (‘USO’) over the 2018-2022 period. On 8 March 2019, following pre-notification discussions in particular on the net avoided cost (‘NAC’) methodology, the Czech authorities withdrew this pre-notification.

(2) On 20 August 2019, the Czech authorities again pre-notified compensation to Czech Post for the provision of the USO over the 2018-2022 period (‘the measure’). Compared to the pre-notification of 18 January 2018, the measure was amended in particular as regards the calculation of the NAC.

(3) On 8 and 22 November 2019, the Commission received two formal complaints from two competitors of Czech Post, Zásilkovna s.r.o. (‘Zàsilkovna’) and První Novinová Společnost a.s. (‘PNS’, former ‘Mediaservis’). The complaints were registered under numbers SA.55686 (2019/FC) and SA.55497 (2019/FC) (1) respectively.

(4) The complaints were forwarded to the Czech authorities on 4 December 2019. The Czech authorities replied by letter dated 31 January 2020.

(5) On 28 January 2020, the Czech authorities notified compensation to be granted to Czech Post for the provision of the USO over the 2018-2022 period.

(6) On 12 March 2020, the Commission requested additional information from the Czech authorities, which replied by letter dated 24 April 2020.

(7) By decision dated 23 June 2020, the Commission informed the Czech authorities that it had decided to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (‘TFEU’) in respect of the aid (2) (‘the opening decision’). The Commission requested the Czech authorities to submit their comments and to provide all such information as may help to assess the aid, and also invited all interested parties to submit their comments on the aid.

(8) The Commission received the comments on the opening decision from the Czech authorities and from Czech Post by letter dated 24 July 2020.

(9) The Commission received comments from Zàsilkovna on the opening decision by letter dated 2 October 2020 and from PNS by letter dated 3 October 2020.

(10) The Commission forwarded the comments from all third parties to the Czech authorities on 9 November 2020.

(11) The Czech authorities provided their observations on the comments from third parties by letter dated on 3 February 2021.

(12) On 9 July 2021, the Commission’s services sent a letter to Zàsilkovna and PNS informing them that cases SA.55686 (2019/FC) and SA.55497 (2019/FC) would be closed and that the formal investigation procedure would be jointly processed under case number SA.55208 (2020/C). As a result, the comments and the information provided with the complaints in cases SA.55686 (2019/FC) and SA.55497 (2019/FC) would be examined in the context of the formal investigation procedure SA.55208 (2020/C).

(13) On 12 November 2021, the Commission requested additional information from the Czech authorities. The Czech authorities replied by letter dated 10 December 2021.

(14) On 2 December 2021 Zàsilkovna sent further comments to the Commission.

(15) On 17 February 2022 and 29 March 2022, the Commission requested clarification on the information that the Czech authorities submitted by letter of 10 December 2021. The Czech authorities replied by letters of 16 March 2022 and 1 April 2022, respectively.

(16) Czechia exceptionally agrees to waive its rights deriving from Article 342 TFEU, in conjunction with Article 3 of Regulation No 1/1958 (3) and to have this Decision adopted and notified in English.

2. DETAILED DESCRIPTION OF THE MEASURE/AID

2.1. The beneficiary: Czech Post

(17) The sole beneficiary of the measure is Czech Post, which is the main postal operator in Czechia.

(18) Czech Post is wholly owned by the State and was founded in 1993 by the Ministry of Economy of the Czech Republic, in accordance with the State-owned Enterprises Act (4). Its legal and ownership statuses are regulated by the State-owned Enterprises Act (5).

(19) Besides postal services, Czech Post also provides a number of other services, such as financial services (banking services, cash handling services, and services related to the payment of pensions).

(20) Despite the liberalisation of the Czech postal market on 1 January 2013, competition in the letter market did not develop significantly. The most important competitors of Czech Post in the letter market are PNS and Česká distribuční and, in the parcel market, are PPL CZ (Professional Parcel Logistic), Direct Parcel Distribution CZ (DPD), General Logistics Systems Czech Republic (GLS) and Zásilkovna.

2.2. The USO entrusted to Czech Post

(21) By decision of 12 December 2017 of the national postal regulator, the Czech Telecommunication Office (‘CTO’) (6), Czech Post has been entrusted with the USO from 1 January 2018 to 31 December 2022.

(22) The scope of the USO entrusted to Czech Post is set out in national legislation, namely Section 3, paragraph 1, of the Postal Services Act (7), and includes: (a) the delivery of postal items up to two kilogrammes (domestically and to abroad); (b) the delivery of postal parcels up to ten kilogrammes (domestically and to abroad); (c) the delivery of registered items up to two kilogrammes (domestically and to abroad); (d) the delivery of insured items up to ten kilogrammes (domestically and to abroad); (e) postal money orders (‘PMO’); (f) the free delivery of postal items up to seven kilogrammes for blind and partially-sighted persons (domestically and to abroad); (g) the delivery of postal items from abroad within the scope of services mentioned in points (a) to (d) and (f); (h) the delivery of postal parcels up to 20 kilogrammes from abroad; (i) the delivery of ‘M bags’ up to 30 kilogrammes (to abroad and from abroad only); this service consists of special bags containing newspapers, periodicals, books and similar printed documentation for the same addressee at the same address; (j) international business reply service: a service that allows for the collection in advance from the sender of the cost of postage for a reply letter sent to another country; it is not an independent postal service because it only includes a different method of payment of the price for postal items up to two kilogrammes in the scope of the USO; (k) international reply coupons: a different method of payment of the postage for postal items. The coupon can be exchanged for stamps representing the minimum postage for a priority airmail letter of up to twenty grammes sent to another Universal Postal Union Member State.

(23) As a universal service provider, Czech Post is obliged to ensure accessibility to all universal postal services, at affordable prices, throughout the whole territory of Czechia, and at least once every working day.

(24) The legal basis for the provision of the USO is the following: (a) Act No 29/2000 Coll., on Postal Services and Amending Certain Acts (‘the Postal Services Act’); (b) the CTO’s decision of 12 December 2017 (8) entrusting the USO to Czech Post, from 1 January 2018 to 31 December 2022; (c) Government Order No 178/2015 Coll., on the determination of the minimum number of workplaces for the provision of universal services (9); (d) Decree No 464/2012 Coll., on the determination of specifications of individual universal services and basic quality requirements for their provision; (e) Decree No 465/2012 Coll., on the method of keeping separate accounts for cost and revenues of the postal licence holder; and (f) Decree No 466/2012 Coll., on the method of the CTO in calculating the net costs of fulfilling the obligation to provide universal services.

2.3. Databoxes Information System (‘DBIS’)

(25) Czech Post is also entrusted with the provision of the data boxes information system (‘DBIS’) over the 2018-2022 period. On 2 February 2018, the Commission adopted a decision (10) concluding that compensation for the amount of CZK 2,3 billion (EUR 85,1 million) to be granted to Czech Post for the delivery of DBIS over the period 2018-2022 constitutes State aid compatible with the internal market under the 2012 SGEI Framework (11).

(26) DBIS is an electronic channel for internal communication within the public administration and for secured communication between the public administration and citizens and companies, which, in some cases, replaces conventional postal services such as registered post.

2.4. The notified measure and the compensation mechanism for the USO

2.4.1. Scope of the notification and amount of compensation

(27) The notified measure concerns the public financing for the provision by Czech Post of the USO as defined by the Czech authorities (see recital 22) over the period 2018-2022, to be granted on the basis of the Postal Services Act. Pursuant to Article 34e(3) of the Postal Services Act, the CTO may not transfer funds to pay for preliminary net costs or net costs representing an unfair financial burden until the Commission has taken a decision on the compatibility of the compensation with the internal market.

(28) The compensation to be granted to Czech Post will depend on the net costs of the USO, as defined by the Czech authorities, as verified by the CTO, and is limited to a maximum amount of CZK 1 500 million (EUR 55,5 million (12)) each year (see recital 33).

2.4.2. Procedure to establish the amount to be granted as compensation

(29) Pursuant to Section 34c of the Postal Services Act, the level of the USO compensation for each year is not set in advance, but is calculated and paid annually in three steps.

Step 1: Reimbursement of the provisional nets costs in year t (equal to 50 % of the net costs in year t-1)

(30) For the provisional net costs incurred in a given year, Czech Post may submit a request for reimbursement to the CTO from 1 July until 31 December of that year (year t), in accordance with Section 34c of the Postal Services Act. In such cases, the CTO will issue a decision establishing the provisional net costs as equal to 50 % of the net costs calculated (using the method described in Section 8.2.8) for the preceding year (year t-1) for which the amount has been verified. Within 30 days from the date on which the decision becomes final, Czechia will reimburse Czech Post in respect of the provisional net costs via the CTO.

Step 2: Reimbursement in year t+1 of the remaining nets costs incurred in year t

(31) For the actual net costs incurred in a given year, Czech Post may submit a request for reimbursement to the CTO by 31 August of the following year (year t+1), in accordance with Section 34d of the Postal Services Act. The CTO will perform the verification of the net cost calculated by Czech Post using the NAC methodology. The CTO will establish, by means of a decision, the net costs equating to the amount of the net costs verified in accordance with Section 34b of the Postal Services Act. For reimbursing net costs, the CTO will deduct the provisional net costs already reimbursed to Czech Post. If the provisional net costs paid are higher than the net costs incurred in a given year, Czech Post will reimburse the difference to the State.

(32) The CTO verifies the origin and amount of the net costs in the manner specified in Section 34b of the Postal Services Act. If following this verification it results that the net cost calculation is correct, Czech Post will be legally entitled to the reimbursement of the net costs.

Step 3: The reimbursement cannot exceed CZK 1 500 million for each year

(33) The CTO verifies the net cost of the USO as defined by the Czech authorities in accordance with Section 34b of the Postal Services Act. The net cost is reimbursed up to the maximum amount of CZK 1 500 million for each year, in accordance with Section 34d of the Postal Services Act, based on the analysis of the unfair burden of the USO.

3. COMPLAINTS

3.1. Zàsilkovna’s complaint

(34) Zàsilkovna, a competitor of Czech Post active in the parcel delivery market, contends that Czech Post has benefited from unlawful aid since ‘at least’ 2013. The complaint lodged by Zàsilkovna is summarised below.

(35) Zàsilkovna considers that the entrustment act is not in line with the SGEI Framework, because the method to determine the amount of compensation for Czech Post is not objective and transparent. Zàsilkovna argues that neither the Czech authorities nor Czech Post has explained or published any details about the net cost calculation on the basis of which the amount of compensation was determined.

(36) Zàsilkovna also considers that Czech Post has received excessive financial resources as compensation for the USO, as defined by the Czech authorities, from 2013 to 2017, and that this will be ‘all the more so’ the case for the 2018-2022 period. In that respect, Zàsilkovna points out that the annual unfair burden limit for the period 2018-2022 has increased threefold, to CZK 1 500 million, compared to the amount accepted in the Commission decision covering USO compensation for the 2013-2017 period (the ‘2018 USO Decision’) (13). Zàsilkovna considers that Czech Post uses that excessive compensation to cross-subsidise its non-USO services, notably on the parcel market (14).

(37) In particular, Zàsilkovna considers that Czech Post receives excessive compensation because it allocates the full cost of its delivery and transportation network to the USO, and it therefore does not properly attribute a share of those costs to its ‘Balíkovna’ service (the delivery of parcels to pick-up outlets other than post offices) and hence cross-subsidises this service from its allegedly excessive USO compensation. According to Zàsilkovna, the Balíkovna service is offered ‘substantially below cost’. Zàsilkovna seems to consider that Czech Post has misallocated costs since at least 2013.

(38) Zàsilkovna substantiates its argument concerning Balíkovna’s prices by reference to its own prices and those of other private competitors for the delivery of parcels to pick-up points (which are all, allegedly, higher). In addition, Zàsilkovna notes that the prices for Czech Post’s parcel deliveries to post offices, a service that according to Zàsilkovna is very similar to Balíkovna’s service because they both have a high amount of common costs and the same level of process efficiency, are between two and three times higher.

3.2. PNS’s complaint

(39) PNS alleges that Czech Post will be overcompensated for the provision of the USO, as defined by the Czech authorities. PNS claims that the counterfactual scenario of the NAC is not credible, as the reduction in the number of post offices would have a significant influence on the revenues generated by Czech Post from non-USO services. PNS claims that the counterfactual scenario would involve the loss of all revenues generated through non-USO services, amounting to CZK 4,25 billion (EUR 157,3 million) annually, which is allegedly not properly accounted for by the calculations of the Czech authorities and Czech Post.

(40) PNS also alleges that Czech Post has wrongly categorised certain services as non-USO services and by so doing has artificially lowered the revenues generated by the USO. This leads, according to PNS, to an artificially higher net cost to be compensated.

(41) PNS also notes in that respect that the Postal Services Act has been amended to significantly increase the limits for net cost compensation to CZK 1 500 million (EUR 55,5 million) per year, from CZK 500 million (EUR 18,5 million) per year originally. PNS points out that, in the 2018 USO Decision, the Czech authorities had estimated the net cost of the USO at maximum CZK 984 million (EUR 36,4 million) per year, significantly below that increased ceiling.

(42) PNS also considers that Czech Post has violated the transparency requirements set out in Directive 97/67/EC of the European Parliament and of the Council (15), and in particular Annex 1, part C, subparagraph 1, thereto as well as Article 7(5) thereof, by publishing only the amount of the compensation, and not the calculations of the NAC.

(43) PNS claims that the calculation of Czech Post’s net costs is not in line with Annex 1, Part B, subparagraph 5, to Directive 97/67/EC. The latter provides that ‘the calculation is to be based on the costs attributable to elements of the identified services which can only be provided at a loss or provided under cost conditions falling outside normal commercial standards’. PNS also considers that Czech Post violates Section 33 of the Postal Services Act, which obliges it to offer services within the scope of the universal service at cost-oriented prices.

(44) PNS claims that Czech Post offers ‘immense’ discounts of up to 60 % to large senders, leading to ‘extraordinarily’ low prices, below cost. According to PNS, this is the result of Czech Post’s own pricing policy and should not be understood as falling outside normal commercial standards within the meaning of Directive 97/67/EC, i.e. the USO, as defined by the Czech authorities, does not oblige Czech Post to charge prices below cost. The calculation of Czech Post’s compensation therefore cannot take any losses resulting from that practice into account.

(45) To support this argument, PNS has provided another example and notes that prices for hybrid post (16) have increased by almost 20 % in 2019, meaning, in the view of PNS, that either the new price is too high and exceeds a reasonable profit margin or the previous, lower, price was not cost-oriented as it would have been too low to cover costs.

4. GROUNDS FOR INITIATING THE FORMAL INVESTIGATION PROCEDURE

(46) On 23 June 2020, the Commission opened the formal investigation procedure regarding the USO compensation for Czech Post for 2018-2022 due to its doubts as to the compatibility with the internal market.

(47) In the opening decision, the Commission first expressed its doubts on the scope of the USO, as defined by the Czech authorities. Indeed, the USO entrusted to Czech Post, as described in recital 22, is wider than the services described in Article 3 of Directive 97/67/EC. In particular, the Commission noted that the USO includes postal money orders, which are not listed in that Article and are referred to in Directive 2008/6/EC of the European Parliament and of the Council (17) as additional or complementary services. In addition, the Commission considered that the public was not specifically consulted on the inclusion of postal money orders in the scope of the USO for the notified period. As a result, it concluded that that there were doubts that the USO as defined by Czechia in the Postal Services Act (or at least that post money orders) could qualify as a genuine SGEI.

(48) Second, and related to the doubts on the scope of the USO, as defined by the Czech authorities, the Commission also expressed doubts as to the compliance with EU public procurement rules as regards the direct award of the USO. Indeed, designating a USO provider under Article 4(2) of Directive 97/67/EC is possible if the scope of the activities carried out by the USO provider can be considered a universal service as defined in Article 3 of that Directive.

(49) Third, the Commission expressed doubts in the opening decision on the amount of compensation to be granted to Czech Post. In this regard, the Commission expressed doubts as to the plausibility of the design of Czech Post’s counterfactual scenario. In particular, the Commission had doubts that Czech Post would have closed, under the counterfactual scenario, more than a 1 000 offices that it had been operating voluntarily up to the end of 2015. The Commission noted that the mere entry into force of an implementing decree in 2016 preventing the closure of certain post offices does not, in itself, render the operation of those post offices a burden and that Czech Post could have closed them at any point before the entry into force of the implementing decree, but chose not to do so.

(50) In addition, the Commission expressed doubts as to the quantification of the impact of the changes Czech Post proposed to its postal infrastructure and delivery frequency in the counterfactual scenario. As regards the quantification of the demand effect in the counterfactual scenario stemming from the reduction in infrastructure (18), the Czech authorities carried out a survey which indicated among others that 29 % of respondents would stop using Czech Post for financial services if the post office they were currently using would close, while postal services would also be strongly affected since 20 % of respondents would stop using Czech Post to send registered letters. Even though the demand responses from the surveys should not necessarily lead to corresponding decreases in demand, according to the Czech authorities, in the counterfactual scenario, revenues from non-USO services would decrease by only 4 %, whereas demand for registered letters would decrease by only 1,1 %. In light of the above, the Commission expressed doubts that the demand effects of post office closures have been quantified correctly.

(51) As regards the quantification of the demand effect in the counterfactual scenario stemming from the reduction in delivery frequency (19), the Czech authorities carried out another survey asking a sample of 1 002 citizens that had used Czech Post to send letters in the past six months, whether they would consider it ‘acceptable’ that letters they send would be delivered within two working days, as opposed to the next day. According to the survey, [70-95] % of respondents would consider it acceptable, [2,5-15] % of respondents would consider it unacceptable, and another [2,5-15] % would consider it neither acceptable nor unacceptable. According to the Czech authorities, as a consequence of the reduction in the delivery frequency, volumes for non-registered letters would decrease by [5-15] % in the counterfactual scenario. Considering the aforementioned, the Commission expressed doubts, firstly, that this survey permits any firm conclusions regarding the precise demand effects of reducing the delivery frequency, since whether a respondent finds a change in Czech Post’s delivery rates acceptable or not does not necessarily illustrate how demand would be affected. Secondly, the Commission was doubtful that the Czech authorities quantified that demand effect correctly, given the discrepancy between the results of the survey and the reduction in volumes.

(52) Finally, on the NAC of the USO the Commission expressed doubts that the Czech authorities correctly took into account the net cost for the provision of the DBIS. Indeed, when calculating the NAC of the USO, any double counting with the NAC calculated for the DBIS for which Czech Post has been entrusted for the same period (‘the DBIS decision’) (20) must be avoided. In the present case, the Czech authorities have calculated that the NAC (USO+DBIS) is equal to CZK 15,2 billion (EUR 562,6 million) over 2018-2022. The NAC (DBIS) is equal to CZK 5,2 billion (EUR 192,5 million) for the same period (21). This results in an NAC (USO) of CZK 10,0 billion (EUR 370,1 million). The Czech authorities conclude however that the NAC (USO) is CZK 12,3 billion (EUR 455,3 million), or an average of CZK 2,5 billion (EUR 92,5 million) per year. As a result, the Czech authorities would appear to have committed a methodological error.

(53) In light of the above, the Commission concluded it had doubts as to the estimation of the NAC of the USO for 2018-2022. The Commission noted that, despite the cap at CZK 7,5 billion (EUR 277,6 million), whereas the NAC has been estimated at CZK 12,3 billion, the uncertainties in the NAC were too significant to exclude that the NAC could potentially be even lower than the anticipated compensation cap and that Czech Post may potentially be overcompensated for the USO.

(54) Fourth, the Commission expressed doubts on the efficiency incentive. Indeed, the maximum amount of compensation of Czech Post for the period 2018-2022 is laid down in the Postal Services Act, and that amount is fixed over the entrustment period. To the extent that Czech Post’s compensation ceiling is lower than the NAC, the Commission would consider that approach acceptable to ensure the existence of an efficiency incentive. However, taking into account the uncertainties mentioned in recital 53 above, the Commission also expressed doubts as to whether the USO complied with the efficiency incentives requirement set out in paragraph 39 of the 2012 SGEI Framework (22).

(55) Fifth, the Commission expressed doubts that the transparency requirements set out in paragraph 60 of the 2012 SGEI Framework were met. Indeed, the Commission considered that the public consultation referred to in recital 47, if it had been necessary, should have been published.

5. COMMENTS FROM INTERESTED PARTIES

5.1. Zàsilkovna

(56) Zàsilkovna shares the doubts that the Commission raised in the opening decision and has put forward additional comments with respect to the compatibility of the measure.

(57) In particular, Zàsilkovna takes the view that the USO, as defined by the Czech authorities, or at least the parcel-delivery services, can be performed by private operators as is the case in Germany, the Netherlands and Sweden on a commercial basis without any State aid. To this end, it argues that the current market conditions do not correspond to a market failure for the provision of the USO on a commercial basis and thus that the USO cannot be regarded as a genuine SGEI.

(58) Zàsilkovna explains that its postal parcel network meets the requirement of at least 3 200 post offices as laid down in Government Order N.178/2015 Coll. It also explains that its postal network meets all basic quality criteria to ensure sufficient availability and the vast majority of criteria to ensure sufficient density. Zàsilkovna’s postal network could very quickly fulfil also the remaining criteria to qualify as a nationwide postal network required for the provision of the USO as laid down in Decree No 464/2012.

(59) Zàsilkovna claims that the depreciation periods for the assets for the provision of USO, as defined by the Czech authorities, for the purposes of entrustment period are unfounded, since it is not clear: which of the assets listed in Table 1 of the opening decision are intended to be financed from the USO compensation; when they were purchased or when are intended to be purchased; or whether their depreciation period has lapsed. The list also lacks any substantiation as regards the necessity of the assets for the provision of the USO. In Zàsilkovna’s view, such a list is completely not transparent and cannot be used as evidence.

(60) According to Zàsilkovna, the USO compensation is not in line with the financial transparency requirements set out in the SGEI Framework. In Zàsilkovna’s view, Czech Post has already formally included part of the compensation in the 2019 annual report prior to Commission’s approval and payment of the compensation. In addition, Zàsilkovna claims that Czech Post voluntarily subsidises the below-cost prices for its non-USO services with the USO services, increases its losses and allocates them to USO activities, as defined by the Czech authorities.

(61) Zàsilkovna also claims that the Czech authorities infringed the public procurement rules set out in Article 4(2) of Directive 97/67/EC, since the relevant criteria were set up by the regulator (i.e. CTO) in a discriminatory manner as they were tailor-made for Czech Post. It argues that: (i) the PMOs were intentionally included in the scope of the USO, conferring, in this way, an advantage on Czech Post, which was the only postal operator that could offer such services (i.e. infrastructure, network, special logistics, etc.); and (ii) the evaluation criteria/points were set in a manner that allowed Czech Post to collect the majority of the awarding points.

(62) According to Zàsilkovna, the notified NAC amount leads to overcompensation of the USO, as defined by the Czech authorities, due to several reason such as: (a) Czech Post is not a well-run undertaking, since it does not precisely explain and justify all the costs which are allegedly necessary to discharge the obligations of USO in the factual scenario; (b) Czech Post does not subtract from the final NAC losses, which it voluntarily achieves by providing its non-USO services at below cost prices; (c) the closure of 67,1 % of post offices and the conversion of 14,4 % of them into Post Points, in the counterfactual scenario, is completely unrealistic and has been tailor-made to justify a pre-selected USO compensation; (d) the reduction in delivery frequency (from 5 days per week to 5 days per two weeks) assumed in the counterfactual scenario, is the actual situation for the letters already as from 2020 where CZ Post introduced the two-speed delivery which Czech Post allegedly did not consider within its counterfactual scenario when estimating the respective costs savings; (e) the reduction in delivery frequency would further decrease profitability of Czech Post in the counterfactual scenario and NAC; and (f) the methodology for the calculation of the net cost of the USO is not based on the cost allocation methodology, which allegedly would be generally more suitable, prevent cross-subsidisation and share proportionally the common costs between the SGEI and other commercial activities.

(63) Finally, Zàsilkovna is of the view that the cross-subsidisation of purely non-USO activities mentioned in recital 60 constitutes a stand-alone State aid issue which the Commission should assess separately. According to Zàsilkovna, Czech Post has been cross-subsidizing the below cost prices for its non-USO activities. Moreover, Czech Post is able to provide these services for below-cost prices by not properly sharing the costs for the infrastructure and network operation between USO and non-USO activities.

5.2. PNS (former Mediaservis)

(64) PNS takes the view that the entrustment of the USO, as defined by the Czech authorities, is not in line with paragraph 13 of the 2012 SGEI Framework according to which Member States cannot attach specific public service obligations to services that are already provided or can be provided satisfactorily by undertakings operating under normal market conditions. In that respect, PNS argues that there are several competitors, PNS being one of them, which are not only ready and willing to discharge the USO in Czechia, but which actually already are discharging services that are interchangeable with the services falling within the scope of the USO across the entire Czechia, which could ensure the provision of these USOs to the same extent and in the same quality as Czech Post and at much lower net cost compensation, if at any at all.

(65) According to PNS, PMOs go beyond the definition of the USO as set out by Article 3 of Directive 97/67/EC. This provision of the Postal Services Act therefore represents a direct contradiction with Directive 97/67/EC. PNS also claims that the inclusion of PMOs into the USO does not make any sense economically since PMO services could be easily provided by banks as well as other professional money institutions without any additional cost and surely cheaper than Czech Post. With respect to the NAC of the PMO, PNS considers that it must be excluded from the USO, meaning a reduction of at least CZK 200 million (approximately EUR 8 million) annually (23).

(66) PNS also takes the view that the entrustment of Czech Post with the USO, as defined by the Czech authorities, by way of direct award violates procurement rules. In that respect, PNS argues that the tender for the USO had been discriminatory to operators other than Czech Post. In PNS’s view, PMOs were intentionally included in the scope of the USO, conferring in this way an advantage to Czech Post, being the only postal operator that could offer such services (i.e. infrastructure, network, special logistics, etc.), and the evaluation criteria/points were set in manner that allowed Czech Post to collect the majority of the awarding points.

(67) According to PNS, the mere entry into force of an implementing decree in 2016 preventing the closure of certain post offices does not in itself render those post offices a burden – Czech Post could have closed them at any point before the implementing decree entered into force, yet it chose not to do so.

(68) According to PNS, the USO compensation is based on an unrealistic counterfactual scenario of closed postal offices, which does not reflect any standard or market-oriented behaviour of an ordinary market player, while the number of closed postal offices is chosen intentionally to support the new net cost compensation set from 2018, so that it is higher than the previous one for 2013-2017. The closure of postal offices is against the market trend since major competitors of Czech Post, such as PNS and Zásilkovna, are each operating over 3 000 postal offices without USO.

(69) According to PNS, the NAC for the USO is contrived and calculated incorrectly, without taking into account: (i) a proper quantification of the net cost stemming from the operation of offices to close in the counterfactual scenario; (ii) the savings generated by the new, less frequent delivery scheme of Czech Post; and (iii) the voluntarily losses of Czech Post’s non-USO services which must be deducted from the NAC amount.

(70) PNS also claims that Czech Post does not separate its accounts properly, and that it wrongly allocates the costs related to non-USO services to the USO services, as defined by the Czech authorities, and then requires the compensation of such artificially increased net costs of the USO while it cross-subsidises the losses of the non-USO items. It argues that the regulator, CTO, regularly concludes that Czech Post complies with the requirements of the national law on the separation of accounts, but it does not in fact investigate whether the allocation keys are materially correct. In PNS’s view, the auditor only confirms that Czech Post has correctly inserted numbers into the prepared tables, while no material evaluation of the methodology on the separate accounts has been performed, neither by the CTO nor by an auditor, ever since the CTO has adopted this methodology of separation of accounts more than 7 years ago.

(71) Furthermore, PNS points out that several facts suggest that Czech Post does not discharge its USO in an efficient manner as a well-run undertaking. For instance, a non-profit organisation Hlídač státu (‘State Watchdog’), whose mission it is to shed light and transparency onto the functioning of the Czech government, and any handling of public finances, lists Czech Post in the second place in a blacklist of the allegedly least transparent entities indicating that the risk of corruption is extremely high. PNS is also of the view that Czech Post’s finances are being spent unreasonably, purposelessly and inefficiently. All expenses of this kind must be accordingly eliminated from the NAC calculation, as these costs are irrelevant for both the provision of USO and non-USO services, since they are spent unnecessarily (24).

(72) Finally, PNS brings to the Commission’s attention the contract between Czech Post and the Czech Statistical Office (Český statistický úřad) regarding the 2021 census, which was awarded to Czech Post without any public tender, despite the fact that this contract is worth CZK 876 859 000 (approximately EUR 33 million). PNS urges the Commission to evaluate this contract awarded to Czech Post carefully, as the remuneration for Czech Post under that contract could actually be non-notified State Aid for Czech Post, in breach of Article 108(3) TFEU.

5.3. Czech Post

(73) Czech Post takes the view that the inclusion of the PMO in the USO was subject to a public consultation and, even if the Commission would not regard the consultation which took place as a ‘proper public consultation’, Czech Post considers that it represents ‘[another] appropriate instrument’ by way of which it was verified that the inclusion of the PMO in the USO was necessary in view of interests of the users. Czech Post considers that the public was consulted on the USO in general, including PMO, through the following instruments: (a) the CTO carried out a review aimed at verifying whether the quality of the universal (basic) services corresponded to the needs of the public and whether CTO should again impose the obligation to provide the individual universal services, and whether or not (some of) the universal services would be provided even in the absence of such relevant obligations, in a manner comparable with the requirements for the universal services. As part of the review, a number of entities (25) were contacted as well as a survey in the form of a public opinion poll was commissioned; (b) the CTO subsequently consulted the public in 2016 on its intention to impose an obligation to provide the USO (including the PMO) for a period of 5 years; (c) in 2016, the scope of the USO was then the subject of a review, which specifically dealt with the inclusion of the PMO service in the scope of the universal service and unambiguously qualified as a public service; (d) in addition to the review of 2016, the process of enactment of the amendment to the Postal Services Act which includes the PMO also had the nature of a public consultation, where numerous consultations, working groups and bilateral negotiations were held with the entities concerned; (e) the debate on the draft law on the Postal Services Act during the legislative process in the national Parliament is open to the public since the general public is allowed to take part in the seminar and thus has another opportunity to obtain further information and also possibly present its suggestions on the draft law on this occasion (26).

(74) According to Czech Post, the PMO service has a positive effect on the amount of net costs of the USO, as defined by the Czech authorities (namely, it decreases the amount of those costs). The PMO service thus covers its own costs and contributes to covering the costs of other components of the USO. The provision of the PMO service by Czech Post thus requires no payments from public funds. There is therefore no need for the conditions of the SGEI Framework (including the requirement for a public consultation) to be met with regard to this service, as Czech Post receives no State aid for it.

(75) Czech Post disagrees with the Commission’s assertion that imposing an additional or complementary service within the meaning of recital 30 of Directive 2008/6/EC rules out direct award pursuant to Article 4(2) of Directive 97/67/EC since it had been properly verified that there existed a public interest in ensuring that the obligation to provide PMO services was imposed on the USO provider and, at the same time, it had been verified, through the procedure under the Postal Services Act, that Czech Post was the only entity capable of providing the USO, as defined by the Czech authorities.

(76) As regards the doubts the Commission expressed on the counterfactual scenario (recital 107 of the opening decision), Czech Post submitted that, while there was no formal obligation to maintain a certain (higher) number of post offices until 2016, on the basis of the available information and political discussion of the time, there was no doubt that the theoretical option of reducing the number of post offices to 2 100 was only temporary, since Czech Post would be required by law to reopen any post offices it had closed. Such a procedure would be absolutely irrational in economic terms. Furthermore, Czech Post argues that nothing can be inferred from this in relation to the counterfactual scenario, which models a situation in which Czech Post was not bound by the USO, as defined by the Czech authorities, and the closure of certain post offices was therefore not just temporary.

(77) Czech Post claims that the Commission’s doubts concerning the quantification of the demand effect of closing post offices in the counterfactual scenario is unfounded because: (a) the percentage loss in revenues applied for all post offices to be closed in the counterfactual scenario was the same as for the post offices to be closed in the counterfactual scenario on which the 2018 USO Decision was based (27); and (b) the percentage decrease in demand on the whole is smaller, given the much higher revenue attained at the post offices and depots to be maintained.

(78) Czech Post also claims that the Commission’s doubts concerning the quantification of demand effect of reducing the delivery frequency in the counterfactual scenario is unfounded for two reasons. First, from the customer’s point of view, it is only a matter of a reduced likelihood that their consignment will be delivered the next day, where, as in the vast majority of cases, the customers would not notice the change in the manner of delivery unless they were explicitly advised about it. Second, the counterfactual scenario assumes that no other adequate substitute product (28) is offered for postal consignments with a guaranteed time of delivery, which could contribute to corresponding revenue losses.

(79) Czech Post is of the view that it is, by far, not compensated for the total costs of the USO, as defined by the Czech authorities, and thus constantly motivated to increase the efficiency of the USO services.

(80) Finally, Czech Post claims that paragraph 60 of the SGEI Framework concerning transparency requirements was also complied with. To this end, Czech Post argues that: (i) the results of the CTO Review of 2016 (29) and the public consultation organised by the CTO in 2016 were published on the CTO’s website (30); (ii) the results of the public consultations carried out within the preparation and enactment of the Amendment to the Postal Services Act in 2011 and 2012 are published, as part of the explanatory memorandum on the amendment (31), in the eKLEP library for the public (32) and on the website of the Chamber of Deputies; and (iii) the results of the individual stages of the legislative process are available, together with the stenographic records of each of the sessions of the Chamber of Deputies and of the Senate where the draft Amendment to the Postal Services Act was discussed (33).

6. COMMENTS FROM CZECHIA

6.1. Czechia’s comments on the opening decision

(81) The Czech authorities take the view that the PMO service qualifies as an SGEI and therefore should be included in the scope of the USO. First, they consider that there are no services similar to the PMO provided on a commercial basis (34). Second, the PMO has the nature of a public service in the interest of satisfying the needs of the public (especially vulnerable groups of the population). Third, the scope of the USO was the subject of discussions and consultations with the general public and interested parties when preparing the amendment to the Postal Services Act in 2012. Lastly, the intention to impose the USO, including the PMO, for the 2018-2022 period was based on the conclusions drawn from an extensive review of the quality and manner of providing and assuring the USO and its general availability in the territory of Czechia, conducted by the regulator, CTO. The review concluded that both the postal services and PMO services included in the scope of the USO could not be provided by the market.

(82) The Czech authorities explain that the obligation to provide and arrange for the USO is imposed under Section 22 of the Postal Services Act on the basis of a tendering procedure. The conditions of this tendering procedure were set so that any party interested in providing the USO, as defined by the Czech authorities, could participate and that the applicable requirements for transparency, equal treatment and non-discrimination would be complied with. Prior to the announcement of the tendering procedure, the CTO had been informally advised that several operators would be interested in participating; however, only one candidate eventually registered for the tendering procedure – Czech Post. Due to non-compliance with one of the conditions for participating in the tendering procedure, its application was dismissed.

(83) With a view to ensuring continuous provision of the USO in line with the applicable quality requirements throughout the territory of Czechia, the Czech authorities imposed the USO on Czech Post as it best met the evaluation criteria. In doing so, the Czech authorities applied the procedure laid down in Section 22(9) of the Postal Services Act stipulating that the CTO may impose, by virtue of a decision on granting a postal licence, the obligation to provide and arrange for the universal services set out in the announcement of the tendering procedure on the operator who best meets the evaluation criteria. For this reason, the CTO initiated ex officio administrative proceedings with Czech Post on granting a postal licence for the period from 1 January 2018 to 31 December 2022, as Czech Post best met the criteria set out in the announcement of the tendering procedure. Considering the aforementioned in recitals 81 and 82, in the Czech authorities’ view, all applicable requirements for transparency, proportionality, equal treatment and non-discrimination were complied with in the process of imposing the obligation to provide the USO, as they follow from Directive 97/67/EC and the public procurement rules, thus also meeting the requirements of paragraph 19 of the SGEI Framework.

(84) As regards the plausibility of the counterfactual scenario, the Czech authorities clarify that, in that scenario, reception and delivery of registered letters and parcels will be offered not only in post offices but also in PostPoints along with delivery of express parcels currently falling outside the scope of the USO, as defined by the Czech authorities, (e.g. the services Balík Do ruky, Balík Na poštu, Balík Do balíkovny) as well as in Balíkovna network (i.e. a network of pick-up points offering only one service - ‘Parcel to a Parcel Pick-up Outlet’, in Czech ‘Balík do Balíkovny’) by adding third-party branches and thereby creating an external network of pick-up points operated similarly to that used by the competitors on the Czech parcel market. Czech Post will thus offer postal services in PostPoints and the Balíkovna network, but will not offer commercial non-postal services (e.g. bank services, sale of lottery tickets) at these points. Finally, the Czech authorities explain that what the other providers consider as ‘post offices’ in their own branch networks, are just sales points (e.g. newspaper stands) and pick-up points (third party commission-based service points) that cannot be regarded equivalent to post offices within the meaning of Postal Services Act as they do not meet the relevant requirements to offer the full range of USO services. Czech Post’s post offices offer more services and are thus more costly than the sales points and pick-up points of the competitors.

(85) According to the Czech authorities, the obligation to ensure the availability of the USO at a minimum of 3 200 post offices was already imposed before the designation of the universal service provider for the notified period (2018-2022). This obligation would apply to any designated Universal Service Provider in Czechia. For this reason, the Czech authorities consider the number of post offices where Czech Post offered its services in the 2013-2015 period irrelevant to the assessment of the plausibility of the counterfactual scenario as regards the closure of post offices. However, the Czech authorities explain that it made sense economically for Czech Post to maintain voluntarily 1 118 (non-mandatory) loss-making post offices for the 2013-2015 period, since it was known in advance at the time that that these offices would re-open in 2016.

(86) The Czech authorities also explain that, on the basis of the financial data, the estimated revenue losses due to the closure of the post offices in the counterfactual scenario would be limited since the closed offices generate only a small fraction ([15-35] %) of the total revenues generated by the entire postal network while some of the revenues from the post offices to be closed would be transferred to Postpoints. The revenue loss is inferred not only from the results of a relevant survey, but also from other facts, such as the distance to the nearest post office and availability of a similar service on the market.

(87) With regard to the doubts expressed by the Commission on the use of the survey results for the quantification of the demand effect of the downsizing of the post office network in the counterfactual scenario, the Czech authorities explained that they took into account the survey results (35) indicating that 23 % of respondents would stop using Czech Post for financial services not falling within the scope of the USO as defined by the Czech authorities if the post office they are currently using were to close. This percentage of loss of demand was applied only to the revenues from financial services realised only on closed post offices in the counterfactual scenario (not to all revenues from financial services realised on all post offices provided by Czech Post). However, financial services are only a marginal business activity of Czech Post, since the income from financial services represents less than [5-20] % of Czech Post's total income. Therefore, the respective loss of demand in the counterfactual scenario would also be marginal. The lost demand of registered letters was calculated in the same way. Since approximately only [20-45] % of registered letters are sent by customers from post offices, a rather limited loss of demand would be expected in the counterfactual scenario in that respect.

(88) With regard to the quantification of the remaining demand migrated from the closed offices to the remaining ones in the counterfactual scenario, the Czech authorities explained that they did not assume that the remaining demand of the closed offices would be the same in percentage terms for all closed offices and for all kind of postal services (i.e. irrespective of the proximity to the remaining post office and presence of competition). In particular, the percentage of the loss of revenues of letters depends on the distance that customers must travel to the nearest post office (e.g. for standard letters, up to 3 km, [0,5-2] %, up to 5 km, [1-3] %, up to 10 km, [2-6] % and over 10 km, [3-8] %). A different approach was applied for parcels, where the Czech authorities used a different percentage (i.e. [30-55] %) of the loss of demand regardless of distance between the closed office and the nearest remaining open post office. This approach was based on the fact that the parcel market is highly competitive in Czechia, the competitors' services are available all over the country, therefore they did not consider a different impact to demand depending on distance from nearest post office. In their view, the transfer of the remaining demand to the nearest 3 post offices most closely simulates the actual shift of customers to the remaining postal offices, based on the probability of customer movement. Finally, the Czech authorities explained that they carried out a targeted survey in order to quantify the aforementioned assumptions.

(89) With regard to the impact of the downsizing of the post office network in the counterfactual scenario on the overall operation of Czech Post, the Czech authorities explained that Czech Post carries out a collection from post boxes, sorting and delivery independently of postal offices. Therefore, a reduction in the number of postal offices does not cause an increase in sorting costs.

(90) Contrary to the Commission’s doubts expressed in recital 114 of the opening decision, the Czech authorities claim that the demand effect of the reduction in delivery frequency has been quantified correctly since the CTO took into account the offer of substitution services that could have affected the change in demand, along with the market survey mentioned in recital 113 of the opening decision (‘the market survey’). The Czech authorities explain that Czech Post changed the delivery frequency in February 2020 and offers ‘economy consignments’ with D+n (36) delivery and ‘priority consignments’ with D+1 (37) delivery. Economy consignments are CZK 7 cheaper than priority consignments (this difference applies to both standard and registered letters). Data (38) corresponding to a limited period from February to May 2020 seems to indicate that the demand effect of the reduction in delivery frequency would be rather limited in the counterfactual scenario.

(91) Furthermore, the Czech authorities explained that they estimated the plausible additional capacity required in order for Czech Post to continue operating in the counterfactual scenario. First, they estimated how much capacity is needed to transfer from every closed post office, then they transformed the diverted volume (in work-hours) to the remaining post offices and finally they tested the new capacity of remaining post offices. The Czech authorities explained that the excessive capacity at the commercial (39) post offices relates to the USO because the demand of services is laid out across all obligatory post offices and therefore these postal offices are not fully utilised and profitable (the demand for postal services does not increase proportionally with the number of post offices, i.e. more post offices does not necessarily lead to higher revenues). The low workload on such commercial postal offices is also caused by the peaks and troughs during the opening hours. Czech Post flexibly changes the number of open counters to adapt to peaks and troughs, but there is a limitation to such adaptation due to the working hours of employees.

(92) As regards the Commission’s view set out in recital 115 of the opening decision that the Czech authorities may have committed a methodological error in the calculation in the NAC, the Czech authorities assume that this is a misunderstanding and maintain their view that they have considered properly the DBIS NAC in the calculation of the USO NAC. In their view, they did not deviate substantially from the calculation principles used for the 2013-2017 period, but merely redefined the counterfactual scenario to reflect the current situation on the Czech postal market.

(93) As regards the Commission’s doubts as to whether the requirement under paragraph 39 of the SGEI Framework is met, the Czech authorities argue that setting a maximum permissible amount to cover the net costs is a common tool for ensuring efficiency of the USO provider, which is thus motivated to cut costs and improve the organisation of work with the aim of reducing the costs that will not be compensated. The Czech authorities also consider that the control of the quality (40) of the USO by the CTO can be regarded as another available instrument to exclude overcompensation and ensure efficient provision of the USO.

(94) Finally, the Czech authorities argue that scope of the USO meets the requirement for transparency set out in the SGEI Framework of 2012, since it was imposed subject to a proper consultation, as explained in recital 81 above, including publication of the results of the consultation.

6.2. Comments from Czechia on third-party comments

6.2.1. Czechia’s comments on Zàsilkovna’s comments

(95) Czechia regards as unsound the line of argument by which Zásilkovna uses current data on the market situation to address conclusions made by the CTO as regards the need to impose the USO obligations on completion of the 2016 review, since the situation on the market in 2020 differs from the situation on the basis of which the USO was imposed. The decision to impose USO obligations is based on the outcome of the review carried out in 2016. In assessing the regularity of the approach taken by Czechia when deciding about the need to impose these obligations, it is necessary to evaluate the situation at the moment when such a decision was taken, not the situation as it is today.

(96) As regards Zàsilkovna’s claim that the USO, as defined by the Czech authorities, should not be regarded as a genuine SGEI since it can be performed by private operators on a commercial basis without any aid, Czechia argues that, when imposing the obligation, it proceeded in line with the requirements of the Postal Services Act, which transposes Directive 97/67/EC. That procedure confirmed that the USO services remain an objective public need which should be imposed as an obligation. The intention to impose an obligation to provide the PMO service was included in the public consultation that formed part of the review and was also presented at a workshop with stakeholders organised on 5 January 2017. However, Zásilkovna made no use of its right to comment and raised no objections regarding this intention in the public consultation.

(97) As regards Zàsilkovna’s claim that the depreciation periods of assets for the provision of USO, as defined by the Czech authorities, for the purposes of entrustment period are unfounded, Czechia argues that the expected period of depreciation of the assets of Czech Post was submitted to the Commission for the purposes of the State aid notification for the 2018-2022 period. This overview is in line with the expected lifespan of the assets given in the Financial Part of the Annual Report of Czech Post which is verified by an auditor while the audit opinion forms part of the Annual Report. The CTO considers the assets listed as necessary for the provision of USO and regards as reasonable their assumed depreciation periods.

(98) As regards Zàsilkovna’s argument on the alleged infringement of the financial transparency rules for public undertakings, Czechia argues that the accounting of estimated assets and liabilities is in line with the accounting rules applicable in Czechia while Czech Post accounts have been verified by a competent body (independent auditor). In Czechia’s view, the fact that part of the USO compensation has been recorded in the 2019 accounts does not give rise to a suspicion of infringement of the transparency of financial relations between Member States and public undertakings, but rather suggests that Zásilkovna misunderstood the information stated in the Annual Report.

(99) As regards Zàsilkovna’s claim in recital 61 that public procurement rules were infringed, Czechia argues that: (i) the tender procedure was cancelled for objective lawful reasons and in a manner provided for by law, since none of the participants fulfilled the eligibility criteria to participate in the tender; (ii) Zásilkovna did not declare its interest in participating in the tender procedure in any event; (iii) before the submission of bids, the CTO allowed all potential applicants to ask questions about the tender conditions and scope, with a view to ensuring maximum transparency and enabling everyone to obtain all necessary information to prepare their bids; and (iv) the CTO began to evaluate the bids after the deadline expired, in line with standard practice. The tender procedure was designed in a way that allowed a number of applicants to take part, even if they do not provide the full portfolio of USO services, as defined by the Czech authorities, and also allowed a number of USO licences for different USO services to be awarded to different universal service providers. There was therefore no need to guarantee the provision of all the requested universal services by a single operator. Considering the aforementioned, in Czechia’s view, the tender procedure was not discriminatory but, on the contrary, it was drawn up in a way that enabled any postal services operator to apply for being designated as the universal service provider.

(100) As regards Zàsilkovna’s claim that the counterfactual scenario is unrealistic and has been drawn up only for the purposes of creating a sufficient buffer to justify the net costs of CZK 10 billion for the 2018-2022 period, Czechia argues that: (i) the NAC methodology used for the calculation of the net costs is not at the discretion of the postal licence holder, but it is provided for by the Postal Services Act; (ii) the prices of Czech Post’s non-USO services are considered at the same level in both the factual and counterfactual scenarios and the cost-orientation obligation does not apply to them, contrary to the prices of the services part of the USO; (iii) the reimbursement of net costs is limited by the economic loss from the USO recorded in the separate accounts of costs and revenues; (iv) while only 2 108 compulsory postal offices were used for the calculation of the net costs under the factual scenario before Government Order No 178/2015 was issued, since 2016 the obligation has been extended to 3 200 postal offices, and (v) the counterfactual scenario is plausible and is quantified properly (see recitals 82 to 89) while Czech Post operates in line with the market trends. Czechia considers the existing compensation ceiling to be an effective incentive for achieving cost-efficiency while for the above reasons, the claim that the counterfactual scenario was modified to correspond to the increased limit is unjustified.

(101) As regards Zàsilkovna’s claim that Czech Post overestimated the NAC by not duly taking into account in the counterfactual scenario the launch of economy-class D+n delivery, Czechia argues that this was indeed taken into account as evidenced with the detailed documentation submitted to the Commission on 18 January 2020.

(102) Finally, Czechia disputes Zàsilkovna’s claims that Czech Post cross-subsidises purely commercial activities by setting up 781 Balíkovna pick-up points and subsequently re-directing parcels and respective revenues from less profitable postal offices to these 781 pick-up points in order to artificially inflate the NAC and, in turn, over-compensate Czech Post. Czechia argues that this is not true since: (i) Czech Post has to look for ways of streamlining its operations and making its services more attractive to customers; and (ii) the NAC calculation takes into account properly the net costs of Balíkovna both in the factual and counterfactual scenarios, thus Balíkovna services do not result in overcompensation and there is therefore no cross subsidization of the non-USO services.

6.2.2. Czechia’s comments on PNS’s comments

(103) Similarly to Czechia’s view in recital 95 with respect to Zàsilkovna’s comments, Czechia considers as completely unsound the line of argument in which PNS uses current data on the market situation to address conclusions made by the CTO as regards the need to impose the obligation on completion of the 2016 review.

(104) Similarly to Czechia’s view presented in recital 96 on whether the USO, as defined by the Czech authorities, can be performed by private operators on the commercial basis without any aid, Czechia argues that, when imposing the obligation, it proceeded in line with the requirements of the Postal Services Act, which transposes Directive 97/67/EC. In the public consultation carried out by the CTO in the context of the 2016 review, PNS (i.e. Mediaservis s.r.o. at the time) expressed its view that the imposition of the USO was at the time still necessary since the market could not provide such services. Czechia adds that, during the 2016 review, no other operators were identified as being able to ensure, on a commercial basis, the discharge of postal services in a manner consistent with the provision of the USO.

(105) As regards PNS’s claim that the PMO service can be performed by financial institutions in the same manner but cheaper than Czech Post and therefore it should be excluded from the scope of the USO, Czechia argues that the 2016 review, in which PNS did not oppose the inclusion of the PMO in the scope of the USO, concluded that: (i) the PMO service constitutes an objective public need; (ii) no other market service could substitute for a PMO; and (iii) there was a need to include such service within the scope of the USO. Furthermore, Czechia explains that, based on information from separate records of costs and revenues, the PMO service was not loss-making in 2018 or 2019 (profitability in both years exceeded [5-25] %) and no additional net costs are incurred in the provision of this service, as is also asserted by Czech Post in its letter to the Commission of 21 July 2020 (point [18.])

(106) Similarly to Czechia’s view presented in recital 99 on whether public procurement rules were infringed since, allegedly, the criteria for participation in a tender for the selection of a postal licence holder were designed in a discriminatory manner, Czechia is of the opinion that the tender procedure was not discriminatory but on the contrary, it was designed in a way to enable any postal services operator to apply to be designated as the universal service provider.

(107) As regards PNS’s claim that Czech Post is overcompensated since the number of post offices which would not be operated by Czech Post if no obligation was imposed, had been intentionally modified to result in a higher NAC, in connection with the increased compensation limit since 2018, Czechia, as per its explanations in recital 100, argues that: (i) the change in the number of post offices to close in the counterfactual scenario stems from the change in the obligation to operate a higher number of post offices; (ii) the closure of post offices has been quantified correctly in the counterfactual scenario; and (iii) the overall operation and development of Czech Post’s network is in line with the market trends.

(108) As regards PNS’s claim that that Czech Post’s two-speed delivery (priority D+1 and economy D+n) introduced in February 2020 infringes the obligation of guaranteeing postal delivery every working day, Czechia argues that: (i) Czech Post continues to be obliged to guarantee delivery to any address every working day if customers request it; (ii) customers express this request by paying for priority postal delivery and the post item is delivered under the D+1 regime; and (iii) the modification of the services offered by Czech Post in the form of two delivery speeds and the resulting cost savings were duly taken into account when establishing an estimate of the net costs for the purposes of this notification.

(109) As regards PNS’s claim that Czech Post is misusing the USO compensation to cross-finance the services it provides outside the scope of the USO and offer non-USO services at extremely low prices, Czechia argues that the price comparison example between two services, ‘economy common post item’ vs ‘direct post item’ put forward by PNS in order to illustrate this allegation is not appropriate. While the service of ‘common post item’ (obyčejné psaní) is available to anyone and can be sent by submitting it at any post office of Czech Post or by placing it in a post box, and there is no minimum volume of individual post items (41), the service of ‘direct post item’ (obchodní psaní) is intended for bulk mailers with a minimum volume of a given post item of 500 pieces of identical dimensions and it can be sent only on the basis of a contract with Czech Post and only from selected postal offices, while the post items must be pre-processed (sorted and bundled) according to the requirements laid down in advance in the contract. Moreover, these post items may contain only newspapers, magazines, books, brochures, catalogues, leaflets or printed matter of solely promotional nature, information intended for members of customer and loyalty clubs, as well as communications aimed at raising funds or other resources for activities carried out in the public interest by organisations or individuals. The difference between the prices of the two services reflects the aforementioned differences in quality and company’s resources consumed for the provision of each service. Moreover, Czechia recalls the judgment of the General Court in První novinová společnost (42) which concludes that the SGEI Framework does not in any way preclude a USO operator from being able freely to allocate the compensation paid for that purpose to other services.

(110) Czechia rejects PNS’s claims that: (i) the costs of non-USO services are incorrectly allocated to the USO, as defined by the Czech authorities, in order to create an impression that the provision of the USO represents a significant financial burden for Czech Post; (ii) the rules governing the allocation of costs and revenues for the purposes of keeping separate accounts are entirely at the discretion of the postal licence holder; and (iii) the CTO does not examine in any way whether the allocation rules (keys) are factually correct. Czechia argues that postal licence holders in Czechia are obliged to submit their allocation rules to the CTO for approval under Section 33a(4) of the Postal Services Act, which also lays down the CTO’s competence to examine and approve these rules. The approved allocation rules include a detailed description of the principle governing the allocation of costs and revenues from financial accounting to the level of detail needed for separate records of costs and revenues as required of postal licence holders by the Postal Services Act and in line with Decree No 465/2012 implementing that Act. Considering the aforementioned, in Czechia’s view, Czech Post accounts are properly separated between USO, as defined by the Czech authorities, and non-USO services.

(111) Finally, as regards PNS’s allegations presented in recital 71 that Czech Post spends ‘unreasonably, purposelessly and inefficiently’ in the context of ‘dubious contracts, transactions and circumstances’, Czechia argues that whether Czech Post’s expenditure is effective and efficient is monitored by its founder, i.e. the Ministry of the Interior, while in parallel Czech Post has put in place its own internal Corporate Compliance Programme against corruption and other forms of misconduct (43) and where, despite all the measures in place, there are doubts about unfair practices in the award of a particular contract, the issue is addressed by the competent authorities such as the Municipal Court in Prague.

7. ASSESSMENT OF THE MEASURE

7.1. Existence of aid

(112) According to Article 107(1) TFEU ‘any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.’.

(113) It follows that, in order for a measure to be qualified as State aid within the meaning of Article 107(1) TFEU, the following four cumulative conditions have to be met: (i) the measure has to be imputable to the Member State and granted through State resources; (ii) it has to confer an economic advantage to undertakings; (iii) the advantage has to be selective; and (iv) the measure has to distort or threaten to distort competition and affect trade between Member States.

7.2. Aid imputable to the State and existence of State resources

(114) In order to be qualified as State aid, a measure must be imputable to the State and granted directly or indirectly by means of State resources.

(115) The compensation for the provision of the USO, as defined by the Czech authorities, is paid by Czechia from its own budget and is administered by the CTO. The CTO determines the amount of compensation following the procedure set out by the Postal Services Act (see Section 8.2.2).

(116) Therefore, the compensation granted to Czech Post for discharging its USO is imputable to the State and is granted through State resources.

7.3. Aid granted to an undertaking

(117) Public funding granted to an entity can qualify as State aid only if that entity is an undertaking within the meaning of Article 107(1) TFEU. The CJEU has consistently defined undertakings as entities engaged in an economic activity (44). The qualification of an entity as an undertaking thus depends on the nature of its activity, with no regard to the entity’s legal status or the way in which it is financed (45). An activity must generally be considered to be economic in nature where it consists in offering goods and services on a market (46). An entity that carries out both economic and non-economic activities is to be regarded as an undertaking only with regard to the former (47).

(118) In the present case, Czech Post offers postal services for remuneration on the Czech Postal market and in competition with other providers. Offering postal services on this market constitutes an economic activity. The State compensates Czech Post for the provision of some services (the USO, as defined by the Czech authorities) and therefore compensates an economic activity. Accordingly, with respect to the activities financed by the measures in question, Czech Post qualifies as an undertaking.

7.4. Advantage

(119) An advantage for the purposes of Article 107(1) TFEU is any economic benefit which an undertaking would not have obtained under normal market conditions, i.e. in the absence of State intervention (48). Only the effect of the measure on the undertaking is relevant, neither the cause nor the objective of the State intervention (49). Whenever the financial situation of the undertaking is improved as a result of State intervention, an advantage is present.

(120) The USO compensation is designed to cover all or part of the net cost incurred by Czech Post in performing the USO, as defined by the Czech authorities. Without State intervention, Czech Post would have to bear these costs itself. The measure under assessment relieves Czech Post of some of the costs of its economic activities and improves Czech Post’s financial situation. In consequence, and without prejudice to the question of whether the measure complies with the conditions set by the Court of Justice in its judgment in Case C-280/00 Altmark (50), the measure under assessment prima facie grants Czech Post an advantage.

Compliance with the Altmark criteria

(121) Public service compensation granted to an undertaking that complies with the four criteria laid down in Altmark is deemed not to grant any economic advantage and thus does not constitute State aid. Those four criteria, which are cumulative, are the following: (a) the recipient undertaking must actually have public service obligations to discharge and those obligations must be clearly defined; (b) the parameters on the basis of which the compensation is calculated must be established in advance in an objective and transparent manner; (c) the compensation cannot exceed what is necessary to cover all or part of the costs incurred in the discharge of the public services obligation, taking into account the relevant receipts and a reasonable profit; (d) where the undertaking which is to discharge public service obligations, in a specific case, is not chosen pursuant a public procurement procedure, which would allow for the selection of the tenderer capable of providing those services at the least cost to the community, the level of compensation needed must be determined on the basis of an analysis of the costs, which a typical undertaking, well-run and adequately provided within the same sector would incur, taking into account the receipts and a reasonable profit from discharging the obligations.

(122) Concerning the compensation granted to Czech Post during the period under review, the Czech authorities acknowledge that the fourth Altmark criterion is not fulfilled. The Commission also considers that the fourth Altmark criterion is not met since, in the absence of a public procurement procedure which allows for the selection of the tenderer capable of providing the service at the least cost to the community (51), the Czech authorities have failed to demonstrate that the level of compensation was determined on the basis of an analysis of the costs of a well-run undertaking within the same sector, taking into account the receipts and a reasonable profit.

(123) Due to the cumulative nature of the four Altmark criteria, if any of these criteria are not fulfilled, the compensation will be deemed to constitute an advantage in the meaning of Article 107(1) of the TFEU. Since at least one of the four Altmark criteria is not fulfilled in the present case, the Commission concludes that the compensation for delivering the USO grants an advantage to Czech Post.

7.5. Selectivity

(124) Article 107(1) TFEU requires that a measure, in order to be defined as State aid, favours ‘certain undertakings or the production of certain goods’. The Commission notes that the USO compensation will be granted to Czech Post only. Given that the present case concerns an individual aid measure, the identification of the economic advantage (see recitals 119 to 123) is sufficient to support the presumption that the measure is selective (52). In any event, it does not appear that other undertakings in the same or other sectors in a comparable factual and legal situation benefit from the same advantage. Hence, the measure is selective within the meaning of Article 107 (1) TFEU.

7.6. Effect on trade and distortion of competition

(125) Public support to undertakings constitutes State aid within the meaning of Article 107(1) TFEU if it ‘distorts or threatens to distort competition’ and insofar as it ‘affects trade between Member States’.

(126) Concerning the distortion of competition, a measure granted by a State is considered to distort or to threaten to distort competition when it is liable to improve the competitive position of the recipient compared to other undertakings with which it competes (53). For all practical purposes, a distortion of competition is assumed when a State grants a financial advantage to an undertaking in a liberalised sector where there is, or could be, competition.

(127) Concerning the effect on trade, the case-law of the Court of Justice has established that any grant of aid to an undertaking exercising its activities in the internal market can be liable to affect trade between Member States (54). In the field of State aid, such an effect on trade is not a priori precluded by the local or regional character of the service provided. While there is no strict threshold or percentage below which it may be considered that trade between Member States is not affected, the limited scope of the economic activity, as may be evidenced by a very low turnover, renders the presence of an effect on trade less likely.

(128) As regards the present case, the Commission observes that Czech Post operates in the Czech postal market, which has been liberalised since 1 January 2013. Czech Post, therefore, operates in competition with other providers.

(129) Certain competitors of Czech Post, in particular competitors providing parcel-delivery services, are part of international groups which also operate in other Member States (e.g. DPD).

(130) Therefore, there is trade between Member States in the postal sector and the public service compensation granted to Czech Post strengthens its position vis-à-vis other postal undertakings competing in intra-Union trade.

(131) The Commission concludes that the compensation granted to Czech Post for the delivery of the USO, as defined by the Czech authorities, is liable to affect trade and distort competition.

7.7. Conclusion

(132) Based on the above, the Commission concludes that the compensation granted to Czech Post for the delivery of the USO over the period 2018-2022 meets the criteria set out in Article 107(1) TFEU and, therefore, the measure constitutes State aid within the meaning of that provision.

7.8. Lawfulness of the aid measures notified to the Commission

(133) Based on Section 34c and 34d of the Postal services Act, Czech Post has a right to receive a yearly compensation equal to the net costs (capped at CZK 1,5 billion if the net costs are higher than CZK 1,5 billion) once that the CTO has verified the net costs of Czech Post. Indeed, Section 34c(3) of the Postal services Act provides that ‘the State, through the [CTO], shall reimburse the provisional net costs to the postal licence holder […]’. In addition, Article 34d(4) of the Postal services Act provides that ‘the State shall pay, through the [CTO], an amount equal to the difference between the [provisional net costs and the definitive net costs representing an unfair burden] to the postal licence holder […]’.

(134) Following CTO’s verification of Czech Post’s net costs, Czech Post has already recorded the yearly compensation for the years 2018-2022 in its accounts, even if that compensation is not yet paid (55).

(135) Therefore, the Commission considers that the USO compensation constitutes unlawful aid within the meaning of Article 1(f) of the Procedural Regulation.

8. COMPATIBILITY ASSESSMENT

8.1. Compatibility under Article 106(2) TFEU

(136) Insofar as USO compensation benefiting Czech Post constitutes State aid within the meaning of Article 107(1) TFEU, its compatibility with the internal market needs to be assessed.

(137) The Czech authorities consider that USO compensation constitutes a compensation for carrying out SGEIs. Therefore, the compatibility of such compensation with the internal market is to be assessed on the basis of Article 106(2) TFEU.

(138) Article 106(2) TFEU provides that: ‘undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly shall be subject to the rules contained in the Treaties, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Union.’.

(139) In accordance with this provision, the Commission may declare compensation for SGEIs compatible with the internal market, provided that certain conditions are met. The Commission has laid down the conditions according to which it applies Article 106(2) TFEU in the 2012 SGEI Decision (56) and the 2012 SGEI Framework.

(140) The Czech authorities have notified compensation up to a maximum annual amount of CZK 1 500 million (EUR 55,5 million). To the extent that the compensation to be granted to Czech Post is above EUR 15 million per year, that compensation does not fall within the scope of the 2012 SGEI Decision, as set out in Article 2 thereof.

(141) State aid falling outside the scope of the 2012 SGEI Decision may be declared compatible with Article 106(2) TFEU if it is necessary for the operation of the SGEI concerned and does not affect the development of trade to such an extent as to be contrary to the interests of the Union (57). In this regard, the 2012 SGEI Framework sets out the guidelines for assessing the compatibility of SGEI compensation.

8.2. Compliance with 2012 SGEI Framework

(142) In order to assess the compatibility of the USO compensation granted to Czech Post, the 2012 SGEI Framework describes the relevant conditions that have to be met. These conditions are listed below.

8.2.1. Genuine service of general economic interest as referred to in Article 106 TFEU

(143) As indicated in paragraph 46 of the Commission’s SGEI Communication (58), Member States have a wide margin of discretion regarding the nature of services that could be classified as being SGEIs. The Commission’s competence is limited to checking that the margin of discretion is applied without manifest error as regards the definition of the SGEI and to assessing any State aid involved in the compensation. Paragraph 56 of the 2012 SGEI Framework confirms Member States’ wide margin of discretion to define SGEI.

(144) To demonstrate that the compensation is granted for a genuine SGEI, ‘Member States should show [when granting compensation under the SGEI framework (59)] that they have given proper consideration to the public service needs supported by way of a public consultation or other appropriate instruments to take the interests of users and providers into account.’

(145) The USO as defined in Article 3 of Directive 97/67/EC is recognised as a genuine SGEI (60). As a result, Member States do not have to prove by way of a public consultation or other appropriate instruments that they have given consideration to public service needs when entrusting a provider with the USO as defined in that Article 3.

(146) However, the USO entrusted to Czech Post, as described in recital 22, is wider than the services described in Article 3 of Directive 97/67/EC. In particular, the USO , as defined by the Czech authorities, includes the postal services (‘postal SGEI’) as defined in that provision as well as the PMO services, which are not listed in that provision and are referred to in Directive 2008/6/EC as additional or complementary services which may be made available at national level.

(147) The Czech authorities explained that since PMO services are profitable, the inclusion of the PMO in the scope of the USO does not increase the net cost, but on the contrary has a positive effect on the amount of net costs of the USO (it decreases their amount). The Czech authorities also explained that PMO services do not represent an exclusive right. They are services which are necessary to meet the needs of the public and authorities in relation to certain payments. From the Postal Services Act point of view, PMO services are a part of the USO while the obligation to provide PMO services can be imposed separately or together with other basic postal services.

(148) The Commission considers that PMO services are not included in the scope of the USO as defined in Article 3 of Directive 97/67/EC. However, according to recital 30 of Directive 2008/6/EC, Member States may decide to make accessible to the public, on their national territory, additional or complementary services, such as PMO, with the exception of those relating to the universal service obligations, as defined in Directive 97/67/EC. Member States may impose obligations to provide such services on the universal service provider.

(149) The Commission notes that the CTO took the decision to classify the postal services and PMO services, included in the scope of the USO, as genuine SGEIs in 2016, in the context of a regular 5-year review, considering the market conditions at the time, i.e. 2016. Furthermore, in the context of the 2016 review, neither Zàsilkovna nor PNS objected to the public need for such postal and PMO services. Nor did they object to the decision of the CTO to impose those SGEIs on the basis of a market failure.

(150) With regard to Zàsilkovna’s claims in recitals 57 and 58, as well as PNS’s claims in recitals 64 and 65, that, based on the current market conditions, there is no market failure for both the postal and PMO services, the Commission notes that the Czech authorities have a discretion in organising and ensuring the provision of the SGEIs. To this end, the Czech authorities have established a regular 5-year review of both the postal and PMO services, on the basis of which they assess the public needs along with the market conditions at the time of the review. The review assessing the need to impose the obligation for both services for the current 2018-2022 period, was carried out in 2016 and concluded that there was a market failure for both services, postal and PMO. The current market conditions on the market as well as future possible developments were taken into consideration in the 2021 review concerning the 2023-2027 period.

(151) As outlined in recitals 4 to 8 of Directive 2008/6/EC, the postal universal services as defined on the basis of Article 3 of Directive 97/67/EC are recognised as a genuine SGEI (61). As the postal services included in the scope of the USO, as defined by the Czech authorities, entrusted to Czech Post correspond to the requirements outlined in Directive 97/67/EC, the Commission considers that Czechia does not have to prove that it has given consideration to public service needs by way of a public consultation or other appropriate instruments. Therefore, the Commission considers that paragraph (14) of the SGEI Framework is complied with as regards these services.

(152) With regard to PMO services, the Commission considers that Czechia has proven that it has given consideration to public service needs by way of a public consultation or other appropriate instruments, as explained in recitals 73, 81, 95, 96 and 103 to 105. Based on the information provided in the course of the investigation procedure, the Commission considers that the PMO service provided by Czech Post constitutes a genuine SGEI (‘PMO SGEI’). In particular, the Czech authorities explained that similar services available on the market did not meet the requirements in terms of delivery, territorial scope or affordable price. In light of the foregoing, the Commission considers that the requirement of paragraph 14 of the 2012 SGEI Framework insofar as PMO is concerned has been fulfilled.

8.2.2. Need for an entrustment act specifying the public service obligations and the methods of calculating compensation

(153) As indicated in paragraph (15) of the 2012 SGEI Framework, the provision of an SGEI, within the meaning of Article 106 TFEU, must be entrusted to the undertaking in question by way of one or more official acts. As required by paragraph 16 of the 2012 SGEI Framework, those entrustment acts must specify, in particular: (a) the content and duration of the public service obligations; (b) the undertaking and, where applicable, the territory concerned; (c) the nature of the exclusive rights assigned to the undertaking by the granting authority; (d) the description of the compensation mechanism and the parameters for calculating, monitoring and reviewing the compensation; (e) the arrangements for avoiding and recovering any overcompensation.

(154) Czech Post was designated as the USO provider from 1 January 2018 to 31 December 2022 by a decision of the CTO (see recital 21). Czech Post’s entrustment specifies the content of the public service obligation and the territory concerned (see recitals 22-23). The compensation mechanism and the methodology used to calculate the compensation is set out in the Postal Services Act, as described in Section 2.4.2.

(155) The Czech authorities have confirmed that there are no exclusive rights as regards postal services assigned to Czech Post in line with Article 7(1) of Directive 97/67/EC. As to the arrangements for avoiding and recovering overcompensation, the compensation mechanism ensures that compensation is calculated and reviewed ex-post, preventing Czech Post from being overcompensated (see Section 8.2.10).

(156) With regard to the complainants’ claims in recitals 35 and 42 that Czech Post has violated the transparency requirements set out in the SGEI Framework as well as in Directive 97/67/EC by not publishing the calculations of the NAC, the Commission notes that the transparency requirements set out in paragraph (60) of the SGEI Framework concern: i) the results of the public consultation or other appropriate instruments; ii) the content and duration of the public service obligations; iii) the undertaking and, where applicable, the territory concerned; and iv) the amounts of aid granted to the undertaking on a yearly basis. Article (7)(5) of Directive 97/67/EC stipulates that, when a Member State takes a decision to introduce a mechanism to compensate the universal service provider(s) from public funds, such a decision should be based on objective and verifiable criteria and be made public. Therefore, neither the SGEI Framework nor Directive 97/96/EC requires that the calculations of the NAC should be made available to the public. As already explained in recital 155, the mechanism and the parameters used for the calculation of the compensation are laid down in the Postal Services Act and are therefore available to the public. The Commission therefore considers that those claims of the complainants are unfounded.

(157) The Commission further notes that the USO, as defined by the Czech authorities, entrusted to Czech Post consists of two SGEIs, the postal SGEI, within the meaning of the Directive 97/67/EC, and PMO SGEI. The entrustment act includes the content and duration of the public service obligations; the undertaking and, where applicable, the territory concerned; and the amounts of aid granted to the undertaking on a yearly basis for both SGEIs The Commission considers that the fact that both SGEIs are entrusted with the same entrustment act, does not violate the transparency requirements set out in the SGEI Framework as well as those set in Directive 97/67/EC.

(158) To conclude, the Commission considers that the entrustment of Czech Post for the period 2018-2022 is in line with the requirements of the 2012 SGEI Framework.

8.2.3. Duration of the period of entrustment

(159) As provided in Section 2.4 of the 2012 SGEI Framework, ‘the duration of the period of entrustment should be justified by reference to objective criteria such as the need to amortise non-transferable fixed assets. In principle, the duration of the period of entrustment should not exceed the period required for the depreciation of the most significant assets required to provide the SGEI.’.

(160) Czech Post has been designated by the CTO as USO provider for the period from 1 January 2018 to 31 December 2022, so for a period of 5 years.

(161) According to the Czech authorities, the period of entrustment was determined in accordance with Article 4(2) of the Directive 97/67/EC, which requires that the duration of the designation provides a sufficiently long period for the return on investment.

(162) The Czech authorities have explained that the 5-year duration of Czech Post's entrustment can be justified by reference to the expected depreciation period of the most significant assets required to provide the USO. The investments made by Czech Post in fixed assets in order to ensure the provision of the USO have accounting amortisation periods which vary widely (see table 4). The Czech authorities also explained that in Czechia every undertaking must create a plan of amortisation pursuant to Section 28(6) of the Accounting Act (Act No 563/1991 Coll.). The Accounting Act does not determine an exact depreciation period for each asset type; however, the depreciation period should correspond to the period of use, because accounting data must present a reliable picture of reality. The depreciation period is also verified by a financial auditor. The undertakings publish the plan of amortisation in their financial statements and the plan should be updated annually. The data source used to set the expected depreciation period was the financial statement of Czech Post. In any event, the duration of the entrustment period is determined when proceedings for the granting of a postal licence are initiated, i.e. before the postal licence is granted to a particular postal services provider. The 5-year period is the standard period as established by the Czech authorities in the context of their procedures to organise and ensure the provision of the SGEIs, considering the development of the market and societal needs. Finally, the Czech authorities also argue that the duration of entrustment is consistent with the practice in other Member States (62).

(163) With regard to Zàsilkovna’s claim in recital 59 that the depreciation periods for the purposes of determining the entrustment period are unfounded, since it is not clear which of the assets listed in Table 1 of the opening decision are intended to be financed from the USO compensation, or when they were purchased or when it is intended to purchase such assets or whether their depreciation period has lapsed, the Commission notes that the duration of the entrustment is pre-established, in the context of the procedures that Czechia put in place to organise, and ensure, the provision of the USO and set in advance in the context of the initial tender for the selection of the postal service provider. Thus, before the postal licence holder was known. Furthermore, it is not realistic for the granting authority to know in advance the duration of the depreciation period for all of the assets of all potential postal service providers that may possibly participate in the tender in order to determine the duration of the entrustment. The depreciation period of the assets is used as a reference for determining the entrustment period only. Depreciation costs are not considered in the NAC because they do not represent actual costs, but only non-cash expenses used for tax purposes. According to the case law (63), Czech Post is free to use the USO compensation for any purpose. However, investment costs, such as purchase costs of assets related to the change in operation of Czech Post from the factual scenario to the counterfactual scenario, are not considered in the NAC calculations and therefore they do not have any impact on the USO compensation. Table 4 Depreciation period for Czech Post's assets (needed for delivery of USO) Asset group Depreciation period (years) Buildings 30 -45 Vehicles 6 Railway transport 15 IT central 4 -6 IT retail 3 -6 Office machinery 4 -6 Warehouse machinery 4 -6 Counter machinery 3 -8 Furniture 6 Accessories of buildings 6 -12 Handling technology 5 -12 Safe and other property associated with security 5 -20 Sorting machinery 10

(164) In accordance to Section 2.4 of the 2012 SGEI Framework, the duration of the entrustment period should be justified by reference to objective criteria and, in principle, not exceed the period required for the depreciation of the most significant assets required to provide the SGEI. The Commission considers that an entrustment with the USO for a 5-year period is justified by reference to the depreciation period of the most significant assets required to provide both SGEIs included in the USO. Indeed, Table 4 illustrates that the depreciation period for most of Czech Post’s assets required for the delivery of the USO exceeds 5 years. In addition, the duration of the period of the entrustment is pre-established taking into account depreciation periods normally used for such assets, irrespective of the selection of the USO provider. Therefore, the Commission considers that the Czech authorities have sufficiently justified the duration of the entrustment.

8.2.4. Compliance with Directive 2006/111/EC

(165) According to paragraph 18 of the 2012 SGEI Framework, ‘aid will be considered compat