STATE AID – DENMARK

State aid SA.57991 (2021/C) (ex 2021/NN) – Denmark

USO compensation for Post Danmark 2020

State aid SA.55918 (2020/FC) – Denmark

Alleged State aid for Post Danmark for USO in 2020

Invitation to submit comments pursuant to Article 108(2) of the Treaty on the Functioning of the European Union

(Text with EEA relevance)

(2021/C 469/02)

By means of the letter dated 23 July 2021 reproduced in the authentic language on the pages following this summary, the Commission notified Denmark of its decision to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union concerning part of the abovementioned measure.

Interested parties may submit their comments on the measure in respect of which the Commission is initiating the procedure within one month of the date of publication of this summary and the following letter, to:

European Commission, Directorate-General for Competition State Aid Greffe 1049 Bruxelles/Brussel BELGIQUE/BELGIË Fax + 32 22961242 Stateaidgreffe@ec.europa.eu

These comments will be communicated to Denmark. Confidential treatment of the identity of the interested party submitting the comments and/or of parts of the comments submitted may be requested in writing, stating the reasons for the request.

PROCEDURE

On 22 December 2019, the Brancheorganisation for den danske vejgodstransport A/S (‘ITD’), a Danish transport and logistics association, lodged a State aid complaint in which they argue that compensation for the universal postal service obligation (‘USO’) entrusted to Post Danmark A/S constitutes incompatible State aid.

On 21 March 2021, following prenotification contacts, the Danish authorities notified compensation to Post Danmark for the provision of the USO in 2020.

DESCRIPTION OF THE MEASURE

The measure concerns compensation for an amount of DKK 225 million (EUR 30 million) to be granted to Post Danmark for carrying out the USO. The compensation is based on two individual licenses signed on 20 December 2019 and 25 June 2020 respectively, a decree from the Minister of Transport and an agreement concluded between Post Danmark and the Danish authorities.

Post Danmark in its current form was founded in 2009 following a merger with the Swedish postal company Posten AB. Following the merger, the holding company PostNord AB was created, which is jointly owned by Sweden (60 % of the shares) and Denmark (40 % of the shares). Voting rights are split equally.

Post Danmark is active on the Danish postal markets and offers a variety of postal services such as the delivery of letters, parcels, express deliveries, courier services, electronic mailbox services, cargo services, and the operation of a network of post offices. Post Danmark has been operating in full competition with other postal operators since the liberalisation of the Danish postal market in 2011, in accordance with the Postal Directive. As USO provider, Post Danmark is obliged to ensure accessibility to all universal postal services, including e.g. the delivery of letters up to 2 kg and that of parcels up to 20 kg, at affordable prices, throughout the whole territory of Denmark for at least five days a week.

ASSESSMENT OF THE MEASURE

The Danish authorities consider that the measure constitutes aid under Article 107(1) TFEU and is compatible under Article 106(2) TFEU since it fulfils all the requirements laid down in the Communication from the Commission — European Union framework for State aid in the form of public service compensation (1) (‘the Services of General Economic Interest (“SGEI”) Framework’).

The Commission also considers that the measure constitutes State aid under Article 107(1) TFEU, but has doubts that all of the compatibility requirements under the SGEI Framework are met.

The Commission has reached the preliminary conclusion that the USO compensation complies with several provisions of the SGEI Framework. Notably that the compensation targets a genuine SGEI, that the entrustment act contains the elements required, that the duration is sufficiently limited in time, that the relevant public procurement rules are complied with, that Denmark has introduced sufficient incentives for the efficient provision of the USO and that transparency requirements are complied with.

However, the Commission has doubts on the compliance with certain other provisions of the SGEI Framework:

— The compliance with Commission Directive 2006/111/EC of 16 November 2006 on the transparency of financial relations between Member States and public undertakings as well as on financial transparency within certain undertakings (2) (point 18 of the SGEI Framework): Indeed, on 15 January 2021, the Rigsrevisionen, the Danish State auditor, published a report in which it casts doubts on the regulatory supervision of Post Danmark’s accounts and the validation of these accounts by external auditors. Denmark has shared the report with the Commission and, until the Danish authorities properly address the doubts expressed by the Rigsrevisionen, the Commission can only share the doubts of the Rigsrevisionen. This is particularly important since Denmark has used the accounting data as an input for calculating the net costs that Post Danmark incurs because of the USO that it is entrusted with. The net costs calculation is the basis for establishing the level of compensation to which Post Danmark is entitled.

— The implementation of the net avoided cost (NAC) methodology (point 25 to 27 of the SGEI Framework): the NAC methodology requires establishing how Post Danmark would have operated in the absence of the USO with which it is entrusted leading to the so-called counterfactual scenario. The Commission has doubts as regards the estimation of the impact of some assumptions made in that counterfactual scenario on the cost of delivering letters or parcels.

In accordance with Article 16 of Council Regulation (EU) 2015/1589 (3), all unlawful aid can be subject to recovery from the recipient.

TEXT OF LETTER

(1) OJ C 8, 11.1.2012, p. 15.

(2) OJ L 318, 17.11.2006, p. 17.

(3) Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (OJ L 248, 24.9.2015, p. 9).

(4) Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (OJ L 248, 24.9.2015, p. 9), ELI: http://data.europa.eu/eli/reg/2015/1589/oj

(5) Regulation No 1 determining the languages to be used by the European Economic Community (OJ 17, 6.10.1958, p. 385).

(6) Lov om Post Danmark, Nr 88 of 8 February 1995, https://www.retsinformation.dk/eli/lta/1995/88

(7) Lov om postvirksomhed, Nr 89 of 8 February 1995, https://www.retsinformation.dk/eli/lta/1995/89

(8) Lov om Post Danmark A/S, Nr 409 of 6 June 2002, https://www.retsinformation.dk/eli/lta/2002/409

(9) See: https://www.cvc.com/media/press-releases/2009/02-02-2009-123603833

(10) The legal basis for the merger was in Denmark provided by: Lov om ændring af lov om Post Danmark A/S, LOV nr 542 of 17 June 2008, available at: https://www.retsinformation.dk/Forms/R0710.aspx?id=120348

(11) Commission Decision of 21 April 2009, Case No COMP/M.5152 — Posten AB / Post Danmark A/S. Notification of 26.2.2009 pursuant to Article 4 of Council Regulation No 139/2004, available at: https://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=2_M_5152.

(12) Directive 97/67/EC of the European Parliament and of the Council of 15 December 1997 on common rules for the development of the internal market of Community postal services and the improvement of quality of service (OJ L 15, 21.1.1998, p. 14).

(13) See Postloven, LOV nr 1536 of 21 December 2010, available at: https://www.retsinformation.dk/Forms/R0710.aspx?id=135208. The law has been amended several times.

(14) Both licenses have as title ‘Midlertidig tilladelse til Post Danmark A/S’.

(15) Danish Transport and Construction Agency, Ny individuel tilladelse til Post Danmark A/S, 2 June 2016, available at: https://www.trafikstyrelsen.dk/da/Post/Lister/Publikationsliste

(16) Commission Decision SA.47707(2018/N) of 28 May 2018, State compensations granted to PostNord for the provision of the universal postal service — Denmark, available at: https://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_47707

(17) Judgment of the General Court of 5 May 2021, ITD, Brancheorganisation for den danske vejgodstransport A/S and Danske Fragtmænd A/S v European Commission, Case T-561/18, ECLI:EU:T:2021:240.

(18) See: https://uk.rigsrevisionen.dk/about-us

(19) See: https://uk.rigsrevisionen.dk/our-work

(20) The report is available on the website of the Rigsrevisionen: Beretning om tilsynet med Post Danmarks regnskabspraksis, beretning nr. 10/2020, 15 January 2021, https://rigsrevisionen.dk/revisionssager-arkiv/2021/jan/beretning-om-tilsynet-med-post-danmarks-regnskabspraksis

(21) Communication from the Commission — European Union framework for State aid in the form of public service compensation (OJ C 8, 11.1.2012, p. 15).

(22) The decree is dated 19 August 2020 (nr 2020-6466) and was endorsed by the Financial Committee on 27 August 2020.

(23) Kontrakt vedrørende midlertidig kompensation til Post Danmark A/S for befordringspligten i Danmark, dated 25 June 2020.

(24) Claims unrelated to the USO compensation are not the subject of this Decision.

(25) Judgment of the General Court of 5 May 2021, ITD, Brancheorganisation for den danske vejgodstransport A/S and Danske Fragtmænd A/S v European Commission, Case T-561/18, ECLI:EU:T:2021:240, paragraph 86-93.

(26) The transformation plan is referred to as the new production model in Section 2.2 of the 2018 Decision.

(27) Referred to in the 2018 Decision.

(28) Judgment of the General Court of 5 May 2021, ITD, Brancheorganisation for den danske vejgodstransport A/S and Danske Fragtmænd A/S v European Commission, Case T-561/18, ECLI:EU:T:2021:240, paragraph 94.

(29) ITD explains that the vehicles financed by Post Danmark for the USO will only be used for the USO for 60 % of their capacity while the remaining (40 %) will be used for PostNord Logistics’ freight services, without Post Danmark billing PostNord Logistics for the use of the vehicles. In addition, Post Danmark’s employees would provide services for PostNord Logistics without remuneration, the customer service of PostNord Logistics would be carried out by Post Danmark without payment and Post Danmark would pay for IT (software and hardware) that is used by PostNord Logistics without remuneration.

(30) In this regard, ITD refers to Article 20 of Danish Law no. 1040 of 30 August 2017 (the Danish Postal Act), which provides that ‘[t]he company holding the Universal Service Obligation must issue stamps (with “Denmark” printed on them)’ and Article 15(4) of the same law which provides that ‘[t]he Transport Minister authorises the price of the stamps for letters weighing up to 50 grams’.

(31) ITD refers to a PostNord press release ‘Billigere pakker på posthuset fra 2019’ dated 28 September 2018 where it is stated ‘og derfor justerer vi priserne fra årsskiftet’.

(32) See recital (137) of the 2018 Decision.

(33) Commission Decision 2012/21/EU of 20 December 2011 on the application of Article 106(2) of the Treaty on the Functioning of the European Union to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest, OJ L 7, 11.1.2012, p. 3, available at: http://data.europa.eu/eli/dec/2012/21(1)/oj

(34) This conclusion was later upheld by the General Court, see footnote 14.

(35) To further substantiate this, Denmark refers to the political agreement of 27 May 2010 on ensuring the universal service in a liberalised market, which was attached to the preliminary works of the Postal Act adopted on 21 December 2010 (LOV nr 1536 af 21/12/2010) and contains the following wording: ‘The designated Universal Service Provider… has an exclusive right and an obligation to issue stamps with “Denmark” printed on them’ (translation provided by Denmark). In Danish this reads as: ‘Den til enhver tid befordringspligtige virksomhed …, har eneret og forpligtelse til at udstede frimærker påtrykt ’Danmark’’. Only the obligation to issue stamps is mentioned in the wording of the Postal Act (and not the exclusive right). In addition, the license for Post Danmark to provide postal services mentions only an obligation to issue stamps.

(36) See Article 8 of Directive 97/67/EC of the European Parliament and of the Council. In addition, recital (20) of the same Directive states: ‘for reasons of public order and public security, Member States […] are entitled to appoint the entity or entities responsible for issuing postage stamps identifying the country of origin’.

(37) Denmark explains that the word used in Section 15(4) of the Postal Act is ‘godkender’, which rather translates as ‘approves’.

(38) The Commission considers that the architecture of the SGEI package would be rendered ineffective if it were to be considered that entrusting exactly the same service in two different consecutive periods (within the same year) suffices to define two separate SGEIs. The Commission recalls that, below the threshold of EUR 15 million, the SGEI Decision applies, with no notification obligation and lighter compatibility rules; over this threshold, the stricter requirements of the SGEI Framework must be respected.

(39) Judgment of the Court of First Instance of 12 December 1996, Compagnie nationale Air France v Commission of the European Communities, Case T-358/94, ECLI:EU:T:1996:194, paragraph 56.

(40) Judgment of the Court of 14 October 1987, Federal Republic of Germany v Commission of the European Communities, Case 248/84, ECLI:EU:C:1987:437, paragraph 17; Judgment of the Court of First Instance of 6 March 2002, Territorio Histórico de Álava — Diputación Foral de Álava (T-92/00), Ramondín, SA and Ramondín Cápsulas, SA (T-103/00) v Commission of the European Communities, joined Cases T-92/00 and T-103/00, ECLI:EU:T:2002:61, paragraph 57.

(41) Judgment of the Court of 12 September 2000, Pavel Pavlov and Others v Stichting Pensioenfonds Medische Specialisten, Joined Cases C-180/98 to C-184/98, ECLI:EU:C:2000:428, paragraph 74.

(42) Judgment of the Court of 23 April 1991, Klaus Höfner and Fritz Elser v Macrotron GmbH, Case C-41/90, ECLI:EU:C:1991:161, paragraph 21; Judgment of the Court of 12 September 2000, Pavel Pavlov and Others v Stichting Pensioenfonds Medische Specialisten, Joined Cases C-180/98 to C-184/98, ECLI:EU:C:2000:428, paragraph 74.

(43) Judgment of the Court of 16 June 1987, Commission of the European Communities v Italian Republic, Case 118/85, ECLI:EU:C:1987:283, paragraph 7.

(44) Judgment of the Court of 11 July 1996, Syndicat français de l'Express international (SFEI) and others v La Poste and others, Case C-39/94, ECLI:EU:C:1996:285, paragraph 60; Judgment of the Court of 29 April 1999, Kingdom of Spain v Commission of the European Communities, Case C-342/96, ECLI:EU:C:1999:210, paragraph 41.

(45) Judgment of the Court of 24 July 2003, Altmark Trans GmbH and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH, and Oberbundesanwalt beim Bundesverwaltungsgericht, Case, C-280/00, ECLI:EU:C:2003:415, paragraph 87 to 95.

(46) See cases Judgment of the Court of 4 June 2015, European Commission v MOL Magyar Olaj- és Gázipari Nyrt, C-15/14 P, ECLI:EU:C:2015:362, paragraph 60; Judgment of the Court of 30 June 2016, Kingdom of Belgium v European Commission, C-270/15 P, ECLI:EU:C:2016:489, paragraph 49; Judgment of the General Court of 13 December 2017, Hellenic Republic v European Commission, T-314/15, ECLI:EU:T:2017:903, paragraph 79.

(47) Judgment of the Court of 17 September 1980, Philip Morris Holland BV v Commission of the European Communities, Case 730/79, ECLI:EU:C:1980:209, paragraph 11; Judgment of the Court of First Instance of 15 June 2000, Alzetta Mauro and others v Commission of the European Communities, joined cases T-298/97, T-312/97, T-313/97, T-315/97, T-600/97 to 607/97, T-1/98, T-3/98 to T-6/98 and T-23/98 ECLI:EU:T:2000:151, paragraph 80.

(48) Judgment of the Court of 17 September 1980, Philip Morris Holland BV v Commission of the European Communities, Case 730/79, ECLI:EU:C:1980:209, paragraphs 11 and 12; Judgment of the Court of First Instance of 30 April 1998, Het Vlaamse Gewest (Flemish Region) v Commission of the European Communities, Case T-214/95, ECLI:EU:T:1998:77, paragraphs 48-50.

(49) Communication from the Commission on the application of the European Union State aid rules to compensation granted for the provision of services of general economic interest (OJ C 8, 11.1.2012, p. 4).

(50) Article 3(1) of Directive 97/67/EC provides: ‘Member States shall ensure that users enjoy the right to a universal service involving the permanent provision of a postal service of specified quality at all points in their territory at affordable prices for all users.’

(51) Communication from the Commission: European Framework for State aid in the form of public service compensation (OJ C 8, 11.1.2012, p. 15).

(52) For example, in France (La Poste), Italy (Poste Italiane), Spain (Correos) and Greece (ELTA), the period of entrustment is up to 15 years.

(53) Commission Directive 2006/111/EC of 16 November 2006 on the transparency of financial relations between Member States and public undertakings as well as on financial transparency within certain undertakings.

(54) Judgment of the General Court (Seventh Chamber) of 15 October 2020, První novinová společnost a.s., venant aux droits de Mediaservis s. r. o. v European Commission, Case T-316/18, ECLI:EU:T:2020:489, paragraph 198.

(55) Business to Consumer

(56) Business to Business

(57) Consumer to other

(58) Proclaim return receipt (postforkyndelse in Danish) are letters containing a writ or other document to be served on the recipient. Only the courts, public authorities other than the courts, and approved private boards of complaint or appeal can sent proclaim return receipt.

(59) Danish Value Added Tax Act, LBK nr 1021 of 26.9.2019 (link: https://www.retsinformation.dk/eli/lta/2019/1021).

(60) Assessment made by annalect (January 2020).

(61) Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC (OJ L 94, 28.3.2014, p. 243), ELI: http://data.europa.eu/eli/dir/2014/25/oj

(62) Danske Fragtmænd A/S's labour productivity is something of an outlier. This can be explained by the fact that Danske Fragtmænd A/S is a transport and logistics company, which transports goods and offers warehouse facilities to customers. Delivery costs and the average price of goods are significantly higher than delivery costs and average prices on letters and parcels.

(63) Cost of delivering one letter or one parcel.

(64) One could buy one or multiple codes online and write them on the envelope or print the code and stick it on the envelope.

(65) Judgment of the General Court of 5 May 2021, ITD, Brancheorganisation for den danske vejgodstransport A/S and Danske Fragtmænd A/S v European Commission, Case T-561/18, ECLI:EU:T:2021:240.

(66) This may be illustrated by the following simplified calculations. Assume the cost of delivery of parcels nationwide is 200 and the revenue is 150, such that it is a loss- making activity. Now assume that the cost of delivery in urban areas is 75 while the revenue is 100, such that parcel delivery in urban areas is actually profitable. By discontinuing the entire activity, Post Danmark’s NAC on this activity would be equal to the avoided costs (200) minus the foregone revenues (150) = 50. If Post Danmark were to discontinue only the non-urban delivery of parcels, its NAC for the activity would be equal to the avoided costs (200-75) minus the foregone revenues (150-100) = 125 – 50 = 75.

(67) Ibid, paragraph 123-124.

(68) Ibid, paragraph 138-159.

(69) Ibid, paragraph 155.

(70) Ibid, paragraph 148.

(71) See in this regard also recital (119)(e) where it is explained that Post Danmark would optimize these quality measurements in the absence of the USO.

(72) Recital (70).

(73) See recital (28) of the 2018 Decision.

(74) Paragraph 40 of the SGEI framework.

(75) Judgment of the General Court of 5 May 2021, ITD, Brancheorganisation for den danske vejgodstransport A/S and Danske Fragtmænd A/S v European Commission, Case T-561/18, ECLI:EU:T:2021:240, paragraph 164-165.

(76) See footnote 12.

(77) Judgment of the General Court of 5 May 2021, ITD, Brancheorganisation for den danske vejgodstransport A/S and Danske Fragtmænd A/S v European Commission, Case T-561/18, ECLI:EU:T:2021:240, paragraphs 170 and 172.

(78) Ibid, paragraph 176.