WRITTEN QUESTION E-3141/00

by Benedetto Della Vedova (TDI) to the Commission

(6 October 2000)

Subject: Take-over of DHL by Deutsche Post

The press has reported that Deutsche Post AG (DP), the postal services company controlled by the German Government, is about to take over

the DHL group. Since DP has a monopoly on the German market in the delivery of letters weighing less than 200 grams and since the Commission has itself observed that the resources generated by this monopoly (which since 1984 has always made a substantial profit, thanks to some of the highest postage rates in Europe, set by the State) are used systematically by DP to offset the losses made on activities open to competitors (ordinary commercial activities such as parcel post, which have always operated at a loss), this constitutes indirect State aid.

The profits generated by the monopoly provide DP with the financial resources it needs to acquire control of a large number of competitors, the latest of which is DHL.

What stage has been reached in the cases being brought against DP by the Commission (in particular that initiated in July 1999 concerning State aids and the cases brought in May and August 2000 relating to abuse of a dominant position in the international coach transport sector and in the mail-order sector respectively) and what steps will it take to prevent the income enjoyed by DP as a result of its monopoly undoubtedly excessive as regards public service obligations and justified neither by the Directive on postal services nor by Article 86(2) of the EC Treaty from interfering with the proper operation of competition in the postal sector?

Answer given by Mr Monti on behalf of the Commission

(10 November 2000)

In response to a number of complaints, and a judgement in the Court of first instance finding that the Commission had wrongly failed to act in the matter, the Commission, on 8 August 2000, initiated formal proceedings against the German postal operator Deutsche Post AG for abuse of its dominant position(1). These proceedings are concerned in the first place with Deutsche Post's pricing of parcel delivery services for mail-order business. The Commission's preliminary enquiries suggest that Deutsche Post allows large mail-order traders substantial discounts if they undertake to send all their parcels through Deutsche Post. This means that no private provider of parcel services to mail-order firms has been able to achieve any firm foothold in Germany. The proceedings likewise question the postage charged by Deutsche Post for the letters it delivers under its monopoly rights.

In light of new evidence concerning Deutsche Post AG's contracts with its major mail order customers, the Commission, on 4 October 2000, has widened the scope of its formal proceedings launched on 8 August 2000 against the German postal operator(2). The Commission's examination of these contracts has revealed that they contain a combination of fidelity and target rebates. According to these rebate schemes Deutsche Post grants discounts to its large mail-order traders on the double condition of them sending all their parcels and an annual minimum volume through Deutsche Post AG. Deutsche Post's rebate scheme means that no private provider of parcel services to mail-order firms has been able to achieve any firm foothold in Germany. Discounts of this kind have lock-in effects that damage competition.

In February 2000, while the investigation into the mail-order sector continued, the German Association of Postal Service Users (DVPT) lodged a complaint against what it alleged was an excessive level of postage for the letters service which does form part of Deutsche Post's monopoly. The association argued that postage for standard letters bore no reasonable relation to the service actually provided. The Commission made enquiries, and requested further information from Deutsche Post.

From a detailed comparison, which also took account of quality of service and population density, it appeared that German customers were paying by far the highest postage in Europe.

Formal proceedings for the infringement of the EC Treaty competition rules begin with the sending of what is known as a statement of objections. The statement of objections sent to Deutsche Post gives a detailed account of the allegations made and explains why the Commission believes that

Deutsche Post has infringed Article 82 (ex Article 86) of the EC Treaty. In preparing its defence, Deutsche Post has the right to consult the relevant documents which are in the Commission's file. It has two months in which to make submissions on the objections raised by the Commission. Deutsche Post may produce evidence of its own, and may ask for a hearing at which it can present its defence also orally.

The Commission will then decide whether it should prohibit the conduct at issue. The Commission also has power to impose fines for infringement of the Community competition rules. The level of the fine depends on the gravity and the duration of the infringement.

In July 1999 the Commission initiated proceedings for unlawful state aid. Those proceedings are concerned with cross-subsidisation of a number of domestic and foreign company acquisitions by Deutsche Post using revenue from the general letter mail monopoly, and the use of revenue from the letters service to offset losses on the parcel service(3).

In May 2000, following a number of complaints, the Commission initiated separate proceedings for abuse of Deutsche Post's dominant position, on the ground that Deutsche Post had disturbed international mail traffic(4). The Commission accused Deutsche Post of infringing the competition rules of the Community by frequently and systematically intercepting incoming cross-border mail, imposing surcharges and delaying delivery. The proceedings in that case have no direct implications for the other cases referred to above.

(1) Commission's press release IP/00/919.

(2) Commission's press release IP 00/1108.

(3) see IP/99/530.

(4) see IP/00/562.