WRITTEN QUESTION E-1410/02

by Bart Staes (Verts/ALE) to the Commission

(23 May 2002)

Subject: Distortion of competition on the internal market due to unlawful State aid

Now that the European market for postal services has been liberalised to a somewhat greater extent and the monopoly is being further restricted, the problems with post offices cross-subsidising commercial operations with revenue derived from their monopoly, traditional operators abusing their dominant positions, etc., ought to be a thing of the past. Yet, despite the relevant European directives, it seems that it is still not clear what is lawful and what is not.

The Belgian Post Group is increasingly devoting its attention to commercial operations. It may be queried not only whether they yield any profit but also how they are financed.

The same is true of ABX, the logistics branch of the Belgian railways, NMBS/SNCB. This parcel delivery service is making a loss and forms part of NMBS/SNCB. On 22 February 2002, the Belgian government again granted it a loan of EUR 50 million from that government agency.

A case in which the German Post Office is accused of illegally receiving State aid, which will undoubtedly be of relevance to the above Belgian operators as a precedent, has been dragging on for years without any decision being reached.

1. What is the Commission's view of these developments on the ground, which ultimately thwart the Commission's desire to bring about a single market?

2. What will the Commission do in the near future with regard to these very specific cases?

Answer given by Mr Monti on behalf of the Commission

(2 July 2002)

As progress in opening postal monopolies will indeed come at a gradual pace, the period ahead will be marked by the co-existence of services covered by the postal monopoly and services open to competition. In these circumstances the Commission intends to remain extremely vigilant that the incumbent beneficiaries of the monopoly do not exploit the monopoly resources or other State resources at their disposal to leverage their dominance into markets open to competition.

Within the last two years, the Commission has proven its vigilance. This is necessary because the interests of consumers and European industry require modern and competitive postal services. Electronic commerce cannot develop in Europe without a highly performing postal delivery.

Therefore, between December 2000 and June 2002 the Commission has adopted a total of six decisions in the postal sector:

- in December 2000, the Commission adopted a Decision against Italy which confirms that innovative new services, like time-certain hybrid electronic mail services, may not be included in the postal monopoly. With respect to such new services, there should be open competition on the merits;

- in March 2001, the Commission imposed a fine on Deutsche Post for AG (DPAG) abusing its dominant position by granting fidelity rebates to almost the entire German mail order industry. The Commission also established the rule, that revenues from the monopoly should not be used to finance a predatory pricing policy in markets open to competition;

- in July 2001, the Commission adopted a decision with respect to DPAG setting forth the circumstances under which the beneficiary of a postal monopoly may not levy the domestic tariff on incoming cross-border mail;

- in October 2001, a decision against France demonstrated our ongoing concern that there must be adequate and independent regulatory supervision by the Government vis-à-vis the beneficiary of the postal monopoly;

- in December 2001, the Commission adopted a decision holding that the Belgian postal operator La Poste infringed Article 82 of the EC Treaty by making a preferential tariff on the monopoly letter mail subject to the acceptance of a supplementary contract covering a new business to business (B2B) mail service. The B2B service competes with the competitive document exchange B2B service provided by private undertakings;

- finally, in June 2002, the Commission concluded its State aid investigation into DPAG and found that the latter used EUR 572 million of State resources received to finance its public service mission to sustain a five year period of selling below cost in its door-to-door parcel activities, which are open to competition. The Commission found that this policy of below-cost sales cannot be linked to any public service mission entrusted on DPAG. Therefore it decided that this loss of EUR 572 million constitutes incompatible aid, which has to be recovered.

All of these decisions make it clear that the Commission will not accept that postal incumbents exploit the resources of their monopoly in order to eliminate competitors active in those postal markets that are open to competition. They should serve as useful precedents and thereby give guidance to public postal operators as to the Commission's policy goal to protect competition in those competitive postal markets distinct from but neighbouring the postal monopoly.