Notice pursuant to Article 19(3) of Council Regulation No 17 — Case COMP/38.170 — REIMS II Terminal Dues (Text with EEA relevance)
Date: 2003-04-23
Institutions: European Commission
Subjects: agreement (EU), postal and telecommunications services, postal charges, postal service

23.4.2003

EN

Official Journal of the European Union

C 94/3

Notice pursuant to Article 19(3) of Council Regulation No 17 (1)

Case COMP/38.170 — REIMS II Terminal Dues

(2003/C 94/03)

(Text with EEA relevance)

1. INTRODUCTION

2. THE PARTIES

the EC Treaty/53(1) of

1. On 18 June 2001, the REIMS II Agreement was renotified
to the Commission pursuant to Regulation No 17 with a
view to obtaining a negative clearance under Article 81(1)
of
the EEA Agreement or an
exemption under Article 81(3) of the EC Treaty/53(3) of
the EEA Agreement, upon the expiry of the exemption
decision adopted by the Commission on 15 September
1999 (‘the 1999 Exemption Decision’) (2).

5. Thirteen public postal operators (‘PPOs’ (5)) had signed the
original REIMS II Agreement. Four more PPOs have since
joined. The 17 REIMS II parties (‘the Parties’) (6) now
comprise the PPOs of all the Member States of the EU
other than the Netherlands, and the PPOs of Norway,
Iceland and Switzerland (7).

2. The REIMS

II

agreement

(‘the Agreement’)

the
instrument by which certain Public Postal Operators (3)
(PPOs) collectively determine Terminal Dues (TDs). TDs
are the remuneration that PPOs pay each other for the
delivery of
incoming cross-border mail. The receiving
PPO is remunerated by the sending operator for the
delivery of the latter's cross-border mail.

is

3. In the Agreement, TDs are expressed as a percentage of
domestic tariffs in the receiving country. The original
REIMS II agreement was first notified to the Commission
in 1997 which exempted it under Article 81(3) by
Decision of 15 September 1999. According to the
original REIMS II-agreement, TDs were to increase over a
transitional period until they reached a maximum of 80 %
of domestic tariffs in 2001.
In the 1999 Exemption
the Commission only exempted the
Decision, however,
the end of 2001 and limited the
Agreement until
exemption to a level of TD not higher than 70 %.

4. The re-notification in 2001 included a request

for a
renewal of the exemption. In the renotified version, the
80 % level would not be reached until 1 January 2004 and
two intermediate steps were introduced (73,3 % on 1
January 2002 and 76,6 % on 1 January 2003). A short
summary of the notification was published in the Official
Journal of the European Communities inviting third parties to
comment (4).

(1) OJ 13, 21.2.1962, p. 204/62.
(2) Commission Decision of 15 September 1999 relating to a
proceeding under Article 81 of the EC Treaty and Article 53 of
the EEA Agreement (Case No COMP/36.748 — REIMS II) (OJ L
275, 26.10.1999, p. 17).

(3) The Parties comprise the PPOs of all Member States of

the
and the PPOs of

Community (except
Norway, Iceland and Switzerland.

for

the Netherlands)

(4) OJ C 195, 11.7.2001, p. 11.

6. Participation in the Agreement

is open to public and
private operators of
a mandatory, universal postal
service, provided that they have, or contract to have, an
obligation to provide this service to the other Parties.

3. THE MARKETS CONCERNED

7. The notified Agreement concerns the markets for normal,
as opposed to express, cross-border mail between the
i.e. cross-border mail exchanged
countries concerned,
between ‘REIMS II’
the
countries. More
specifically,
items as defined in
letter-post
Agreement covers all
Article 8 of the Universal Postal Convention (8). This defi-
nition comprises items which in general weigh up to 2 kg.
The importance of cross-border mail varies from country
to country. In smaller Member States, cross-border mail
generally represents a higher share of the overall mail
market than in larger Member States. On average, cross-
border mail has been estimated to represent well under
10 % of the overall mail market in the Community.

(5) Public Postal Operators (PPOs) are corporations or government
departments with the primary obligation of providing universal
postal services across the national
territory, often at a unitary
price. They are also obliged to provide international postal
services passing international mail to PPOs in other countries for
distribution and delivery of incoming international mail.
In the
context of the notified Agreement, PPO refers to both public and
private postal operators which are subject to a universal delivery
service obligation.

(6) Austrian Post, La Poste/De Post (Belgium), Post Danmark, Finland
Post, La Poste (France), Deutsche Post, Hellenic Posts ELTA, Iceland
Post, An Post (Ireland), Poste Italiane, Entreprise des Postes & Télé-
communications (Luxembourg), Norway Post, CTT Correios de
Portugal, Correos y Telegrafos (Spain), Sweden Post, Swiss Post
(Switzerland) and The Post Office (United Kingdom).

(7) The notification has been filed by all the Parties except for Swiss
Post, Switzerland, and Entreprise des Postes & Télécommunications,
Luxembourg which are aware of the notification and have received
a copy of it.

the United Nations,

(8) The Universal Postal Union (UPU), a specialised agency sorting
under
international organisation
is
responsible for international cooperation for postal affairs. The
UPU convention (UPC) provides the regulatory framework for the
international exchange of mail. Since 1969 the UPC contains
provisions stipulating that member countries remunerate each
other for the delivery of international mail by paying TDs.

the

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8. The relevant market can be further divided into a market for
the forwarding of outgoing cross-border mail, on which
PPOs and private companies collect mail from customers
in the originating country for delivery in other countries,
and a sub-market for delivery of incoming cross-border
mail on which PPOs (and for a very small part other postal
operators) offer mail delivery services for cross-border mail
to PPOs and private mail companies (9).

13. On 15 September 1999,

the Commission granted an
exemption pursuant to Article 81(3) (Article 53(3) of the
EEA Treaty) in respect of the REIMS II Agreement on TDs,
until 31 December 2001. The Commission thereby limited
the increase of TDs up to 70 % of the domestic tariffs. The
Commission stated that the final increase up to 80 % of
the domestic tariffs should only take place after
the
Commission had the opportunity to review the system
on the basis of proper cost accounting data, which was
not available in 1999.

9. The distinction between these two sub-markets has been
reinforced by the recent amendments made to the 97/67
Postal Directive (10) by the new Postal Directive (the new
Postal Directive) (11). Under the new Postal Directive, as of
January 2003, outgoing
cross-border mail will be
liberalised in all Member States where it is not necessary
to sustain the
to maintain the monopoly in order
provision of the universal services.

10. The new regulatory rules will therefore expose PPOs to
increased competition regarding the forwarding of cross-
border mail from one EU country to another. This circum-
stance confirms and reinforces the different competitive
conditions which characterise the two markets.

4. THE EVOLUTION OF THE REIMS II AGREEMENT UNTIL

THE RE-NOTIFICATION

4.1. The original REIMS II Agreement

11. The original REIMS II Agreement was notified to the
a
Commission in 1997. On that occasion,
preliminary examination,
the Commission indicated to
the parties several aspects which had to be changed,
adapted or clarified before it could consider adopting a
positive attitude with regard to the agreement.

after

12. The Parties, in order to qualify for exemption, prepared a
first
First
Supplementary Agreement) which entered into force on
1 October 1998.

the Agreement

amendment

(the

to

(9) Concerning the definition of

see also
‘Deutsche Post
II’, Commission Decision of 25 July 2001, OJ
[2001] L-331/40, points 84 to 87. The reasoning there builds
upon but
the
purposes of the Exemption Decision.

is consistent with the definitions made for

the relevant markets,

(10) Directive 97/67/EC of the European Parliament and of the Council
of 15 December 1997 on common rules for the development of
services and the
the internal market of Community postal
improvement of quality of service (OJ L 15, 21.1.1998 p. 14).
the
Council of 10 June 2002 amending Directive 97/67/EC with
regard to the further opening to competition of Community
postal services (OJ L 176, 5.7.2002, p. 21).

the European Parliament and of

(11) Directive 2002/39/EC of

4.2. Assessment of the REIMS II Agreement in the 1999

Exemption Decision

4.2.1. Applicability of Article 81(1)

(Article 53(1) of

the EEA

Treaty)

14. In the 1999 Exemption Decision,

the Commission
considered that the Agreement constituted a restriction of
competition falling within the scope of Article 81(1) (Article
53(1) of the EEA Treaty) because it collectively established a
common level of TDs expressed as a percentage of the
domestic tariff in the receiving country. The Commission
concluded that, although the amounts in absolute terms
were not fixed, the Agreement had the effect of jointly
fixing prices. By linking the price for the cross-border
delivery service to the price for the domestic service,
is
whose price
domestic
considerations,
the Parties eliminated or reduced their
freedom to set the prices they charge for the delivery of
incoming cross-border mail. In fact, the Agreement elim-
inated any incentive to conclude separate agreements on a
bilateral basis between the Parties, although contractually
this remained possible.

determined primarily by

4.2.2. Applicability of Article 81(3)

(Article 53(3) of

the EEA

Treaty)

15. In the 1999 Exemption Decision, the Commission found
that the Agreement fulfilled the four cumulative criteria
required for exemption under Article 81(3) EC (Article
53(3) of the EEA Treaty). The Commission's reasoning
may be summarised as follows.

16. The Agreement

the

improves

production

and/or
distribution of goods. A transition towards a more
cost-based system and the quality-of-service incentives
would improve the financial situation for the participating
PPOs and allow them to improve the quality of their cross-
border mail services.

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17. The higher quality for cross-border mail services would
benefit consumers, and remuneration based on actual
delivery costs would reduce cross-subsidises previously
necessary to cover losses incurred in delivery of cross-
the Commission obliged the
border mail. However,
REIMS II parties to accept
the full rate of TDs
would only be paid if quality-of-service actually improved.

that

18. In order to make the benefits fully available to consumers,
the Commission imposed the condition that the Parties
provide each other with a low cost alternative to TDs
(the so-called Level 3
for bulk and commercial mail
access) (12).

19. Finally,

the Agreement. However,

the Commission considered that an agreement
collectively fixing TDs as a common maximum percentage
of domestic tariffs was indispensable to attain the desired
the Commission
benefits of
could not verify whether the ultimate level of remun-
eration agreed upon — 80 % of domestic tariffs — was
indispensable
the
exemption was therefore limited to 31 December 2001,
and the parties were allowed to increase the common
percentage to a maximum level of 70 % in 2001, until
adequate cost accounting data provided by them would
prove the proposed level of 80 %.

respect. The duration of

in this

20. In this regard,

in the 1999 Exemption Decision the
Commission obliged the Parties to introduce, by the end
of 1999, a transparent cost-accounting system ensuring
that all
significant cost elements could be identified,
quantified, compared and controlled.

4.3. Amendments to the Agreement following the 1999

Exemption Decision

21. On 14 January 2000, the Parties concluded the Second
Supplementary Agreement whose aim was, on the one
hand,
set
forth in the 1999 Exemption Decision and, on the other
hand, to take into account the accession of Swiss Post to
the agreement.

the Commission's conditions

to implement

22. On 4 April 2000,

the

signed the Third
Parties
feature were
key
Supplementary Agreement whose
mainly:
(i) to ensure end-to-end quality of service: The
agreement contemplated the inclusion of the measurement
of
to
the performance of sending PPOs with respect
outgoing mail in a future model refinement and to apply

(12) See point 5(7).

appropriate quality of service targets and penalties as of
2002; (ii) The review of the quality of service standards.
The previous version of
identified two
groups of parties (A and B) each one with a different
quality of service target (95 % for the parties in Group
A and 90 % for
the new
agreement
the groups to a
universal standard of 93 %.

the parties
led to a convergence of

the Agreement

in Group B),

23. On 7 June 2001, most of the Parties executed a Fourth
Supplementary Agreement.
In the meantime, 17 Parties
have signed this agreement. The main objective of the
Fourth Supplementary Agreement was to extend the tran-
sitional period by another three years. According to the
Fourth Supplementary Agreement, TDs would reach 80 %
of domestic tariffs in the year 2004, i.e., two years later
than planned. The 80 % rate would be replaced by 73,3 %
in 2002 and by 76,6 % in 2003 (13).

24. In addition to extending the transitional period, the Parties
also agreed on a freeze of the domestic tariffs used as a
basis for the calculation of TDs until the end of the year
2004. Therefore, increases of a Party's domestic tariff after
1 September 2001 will not be taken into account in the
calculation of TDs (14). However, decreases of domestic
tariffs will be taken into account, so that
the ‘freeze’
effectively creates a ceiling, but allows for downward
adjustments (15).

25. Finally, the Fourth Amendment Agreement introduced a
‘geographic coverage’. If a Party whose domestic market
is liberalised can prove that the geographical structure of
incoming mail from a sending PPO has changed to such
an extent that the percentage of the domestic tariff used
under the REIMS II Agreement is insufficient to meet the
costs incurred by the Party in question as a receiving PPO
for the delivery of that mail, the Party can ask for a
re-negotiation of the TDs paid by the sending PPO (16).

(13) In view of the discounts that they will grant until the end of 2004
(see below), Deutsche Post AG and Poste Italiane SpA would only
reach the full 80 % level in 2005.

(14) Subparagraph 4 of paragraph 3 of Annex 4 to the REIMS II
Agreement as added by Article 3(3) of the Fourth Supplementary
Agreement.

(15) Deutsche Post AG continues to grant the discount agreed in the
the end of 2004. Poste
Third Supplementary Agreement until
Italiane SpA has also agreed to give a discount until that date:
Paragraphs 9 and 10 of Annex 4 to the REIMS II Agreement as
amended by the Fourth Supplementary Agreement.

(16) Article 11(4) to (7) of the REIMS II Agreement as added by Article

2.2 of the Fourth Supplementary Agreement.

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5. THE RE-NOTIFIED AGREEMENT

5.1. Purpose

26. According to the Parties, the main aims of the REIMS II
Agreement are 1. to provide the Parties with fair compen-
sation for the delivery of cross-border mail which reflects
more closely the real costs of delivery of each party, and 2.
to improve the quality of the cross-border mail service.

5.2. Products covered

27. The Agreement covers all mail items as defined in Article
8 of the UPU Convention (with the exception of so-called
‘M bags’) (17).

5.3. Terminal dues

5.3.1. Principle

28. The REIMS II Agreement links TDs to domestic mail tariffs
in the country of destination and to the quality of service
provided by the PPO that delivers the mail. According to
the notified version of the Agreement, TDs are to increase
over a transitional period until they reach a maximum of
80 % of domestic tariffs in 2004, subject
to penalties
which will accrue if the requisite quality-of-service target
is not met.

5.3.2. Domestic tariffs serving as reference

steps

(e. g. 20, 50 and 100 g for

29. Domestic tariffs usually distinguish between different
letters).
tariffs are
into
the purpose of calculating

weight
According to the Agreement,
converted, on the basis of a standard structure,
so-called linear
for
TDs (18).

these different

tariffs

— Level 2: The receiving PPO may offer rebates on the
Level 1 remuneration on the basis of work sharing/
by pre-sorting mail
preparation
(e. g.
according
same
discounts must be offered to all sending PPOs when
equal conditions are met.

to format or destination). The

of mail

— Level 3: All the parties are obliged to grant each other
access to the ‘generally available domestic rates’ (such
as bulk rates for direct mail, printed matter or peri-
odicals) in the country of delivery. This remuneration
(which will normally be lower than the other
level
is of particular importance for a significant
levels)
volume of cross-border business mail.

— Non-priority mail:

as
‘non-priority’ TDs will be applied that are 10 % less
than the TDs for Level 1 mail.

To mail

designated

5.3.4. Transitional period

31. In the notified agreement TDs are to be increased, subject
to penalties which will accrue if
the required quality-
of-service target is not met over a transitional period as
follows:

2002: 73,3 % of domestic tariffs,

2003: 76,6 % of domestic tariffs,

2004: 80 % of domestic tariffs.

5.3.3. Levels of terminal dues

30. The Agreement distinguished between four different levels

of TDs:

— Level 1: Priority mail items presented in mixed bags
(which may contain letters, flats and packets). TDs for
such items will ultimately be 80 % of domestic tariffs
excluding VAT (19).

(17) Bags containing bulk mail for one addressee.
(18) In doing so, the Agreement distinguishes between three categories:
(i) Letters up to C5 size and a maximum weight of 100 grams; (ii)
Flats up to C4 size and a maximum weight of 500 grams; (iii)
Packets of all shapes up to limits of weight and size set by the
UPU. Linear tariffs are calculated on the basis of this standard
structure, using the so-called ‘least squares’ statistical method.
(19) In countries where postal services have been fully liberalised, where
a uniform tariff is applied throughout the country and where VAT
is applied to domestic postal services, the domestic tariff to be used
for the calculation of TDs is to be increased by a percentage
equivalent to half the rate of VAT, subject to a maximum of
12,5 %.

5.3.5. Quality of service/penalties' system

32. The REIMS II Agreement introduces a system of quality-
of-service standards for Level 1 and Level 2 mail in order
to improve the quality of service. The standards are
defined as the percentage of incoming cross-border mail
(from a particular PPO) which has to be delivered within
one working day after the day of its arrival (J) in the office
of exchange of the receiving PPO, provided that it arrives
there before the Latest Arrival Time (20). A standard of
‘80 % J+1’ for example means that 80 % of the incoming
mail will have to be delivered to its final destination within
one working day following its arrival at
the office of
exchange. The performance of the individual Parties is
measured by means of diagnostic systems set up by
IPC (21).

(20) The LAT is defined as the latest acceptable time of touchdown,

permitting delivery of airmail items the next working day.

(21) The International Post Corporation is a company co-owned by a
number of PPOs (including all the REIMS II Parties). Inter alia, it
provides administrative and practical services to the REIMS II
Parties. The UNEX quality-of-service measurement system, which
serves as the basis for the REIMS II quality targets and determines
penalties, is operated by the IPC.

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33. A penalty system, or curve,

is applied when the agreed
standards are not met The level of TDs which would
otherwise be payable is reduced by 1½ % where the
actual result amounts to between 90 % and 100 % of the
target to be reached and 3½ % where the actual result
amounts to between 80 % and 90 % of the target to be
reached respectively for each percentage point by which
the PPO concerned fails to reach the requisite quality-
of-service standard (22).
the result
actually achieved by the delivering PPO amounts to no
more than 80 % of the target, these penalties will thus
reduce the TDs to which a PPO is entitled by 50 %.

In the worst case,

if

5.3.6. Non-discrimination rule

34. According to the Agreement (23) ‘each Party shall apply the
same rates of terminal dues to all other parties provided
that the transactions are equivalent.’ This means that, in
principle and provided that no special bilateral agreement
has been signed,
two REIMS II PPOs competing for
outgoing cross-border mail in a given REIMS II country
would bear the same costs for the delivery of this mail in
the country of destination. The same rate, however, will
not be available to non-REIMS II operators competing in
the same market which will be obliged to pay the full
domestic tariff in the State of origin minus any available
discount (24).

35. This

is

circumstance

since,
according to the new Postal Directive, outgoing cross-
border mail
is liberalised as from 1 January 2003 in
most of the EU Member States.

particularly

important

5.4. Articles 25 and 49 of the UPU Convention

36. Article 43 of the UPU Convention contains provisions on
the treatment of domestic mail posted abroad, so-called
remail. Article 49(4) concerns TDs for incoming bulk
mail. According to the notified Agreement, after the end
of the transitional period, Articles 25 and 49(4) of the
UPU Convention will no longer be applied between the
Parties (25).

5.5. Term

37. The Agreement is entered into for an indefinite period of
time. Any Party may however withdraw from the

(22) For example if the quality-of-service target provides that 90 % of
incoming cross-border mail must be delivered the next day, and
that the actual result is that only 87 % of the mail
is delivered
within this time, then only 97 % of the target is reached (87 is
97 % of 90). Thus, the loss of quality is 3 %. Since this figure is
within the 90 % to 100 % range, a penalty of 1½ % for each
percentage point accrues. The penalty is thus 3 x 1½ % = 4½ %
of TDs payable. This means that the delivering PPO concerned is
allowed to charge only 95½ (100 %-4½ %) of the full TDs to which
it would otherwise be entitled. In 1998 when TDs for Level 1
amounted to 55 % of domestic rates,
the PPO would thus
receive TDs amounting to 52½ % of domestic rates (i. e. 95½ %
of 55 %).

(23) Article 2.11 of the REIMS II Agreement.
(24) This is the interpretation of this clause that the Parties have given

in the course of the investigation.

(25) See point 7.1.3.

Agreement at any time. Such withdrawal becomes effective
at the end of the first full calendar year after notice has
been given. In particular circumstances, a Party may also
withdraw from the Agreement by giving six months
notice.

5.6. Link between TDs and quality of service

38. The Agreement establishes the principle that no increase in
TDs will take place during the transitional period if the
quality of service of the party concerned goes down. In
order to determine whether this is the case, the quality-
of-service performance in a given year is compared to the
average quality-of-service performance achieved by that
Party in preceding years. There will be no margin of inter-
pretation. This rule does not apply to those PPOs for
which transitional arrangements exist.
It will naturally
also not be applicable if the quality-of-service of a PPO
deteriorates but still matches the relevant standard set by
the Agreement. TDs may also be increased if it can be
shown that a deterioration of a Party's quality of service
is caused by special efforts undertaken by this Party to
improve its delivery system and is only temporary in
nature.

5.7. Level 3

to each other.

39. The parties have clarified that they are bound under the
REIMS II Agreement to grant Level 3 access (i.e. access to
domestic bulk mail rates)
In order to
the 1999 Exemption Decision
facilitate such access,
for
obliged the Parties
other Parties where these regulations are not
justified
and which would in reality bar the other Parties from
access to domestic bulk mail rates. Where the domestic
regulations concerned have been set by the State,
the
to use their best efforts to remove
Parties are meant
them in cooperation with the competent national auth-
orities.

to relax domestic regulations

40. All the tariffs and conditions relevant for Level 3 access
have to be made available to all the parties through a
database managed by IPC. The Parties have undertaken
this database without delay when their
to update
respective tariffs and conditions change.

5.8. Bilateral agreements

41. The REIMS II Agreement clarifies that the Parties are free
to conclude bilateral or multilateral agreements on TDs
between themselves
in
particular other levels of TDs, may be fixed. Where a
Party grants another Party, or other Parties, lower TDs in
such an agreement, it is obliged to apply the same TDs to
all the Parties, provided the transactions are equivalent.

in which different conditions,

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5.9. Late, lost and damaged mail

42. The Parties have introduced provisions on late,

lost and
damaged mail according to which a proper system for
dealing with and analysing complaints will be introduced,
each
including an acknowledgement of
complaint and standard time limits for the reply to such
complaints. Customer services and access to such services
will thus be improved, for example by introducing a ‘green
number’ for complaints and by cooperating with consumer
organisations.

receipt

for

6. MAIN DEVELOPMENTS SINCE THE 1999 EXEMPTION

DECISION

6.1. Improvements in cross-border mail quality of service

43. According to the 1999 Exemption Decision ‘The most
substantial advantage which the (REIMS II) Agreement is
expected to produce consists in a substantial increase in
the quality of cross-border mail services.’ The information
gathered in the course of the procedure shows that, during
the period of the exemption, the overall quality of the
service of cross-border mail delivery provided by the
Parties has indeed improved substantially (26).

6.2. Other important developments

44. After the adoption of the 1999 Exemption Decision, there
have been important developments which have partially
modified the elements on the basis of which it was
adopted. These new elements have accordingly influenced
the Commission's current preliminary assessment of the
Agreement. In particular, as a consequence of those devel-
opments, the Commission considers that the conditions
under which an exemption can be granted need to be
from those imposed in the 1999 Exemption
different
Decision.

45. The following are the most important new elements taken
into consideration: (i) The accounting data on the Parties
costs for the delivery of cross-border mail items coming
from other REIMS II countries; (ii) The experience of the
implementation of the Agreement during the period of the
(iii) The adoption by the Council and the
exemption;
European Parliament of the new Postal Directive.

data
Commission has obtained detailed accounting
regarding each Party's costs for the inbound delivery of
cross-border mail items coming from REIMS II countries.

47. This information, which was not available when the 1999
Exemption Decision was adopted, has permitted a more
thorough evaluation of the levels of TDs (27).

48. In particular, it appears that the TDs to be applied for the
delivery of REIMS II cross-border mail as defined in the
notified Agreement (28) are not in line with the cost data
provided by the Parties. Accordingly these levels of TDs
are not indispensable for the attainment of the positive
effects that the agreement is meant to bring about.

6.2.2. Level 3 access

49. The 1999 Exemption Decision obliged the Parties to take
to grant each other

the necessary steps in order

all
effective Level 3 access (29).

50. The investigation carried out in the course of the current
procedure has shown that Level 3 access does not function
as desired by the Commission in the 1999 Exemption
Decision. Although the Parties have offered each other
it is still extremely difficult for most of
Level 3 access,
them to take advantage of this opportunity. Thus, the
Commission considers
that Level 3 access does not
function as a viable, less costly alternative to REIMS II TDs.

6.2.3. The new Postal Directive

51. On 10 June 2002 the Council of the European Union and
the European Parliament adopted the new Postal Directive
on further liberalisation of the European postal markets.

52. One of the major changes introduced by this Directive is
that, as from 1 January 2003, Member States are no more
allowed to include the market for outgoing cross-border
is necessary to
mail
service.
ensure the provision of
Accordingly, as from 1 January 2003, PPOs will
face
competition with regard to the forwarding of cross-border
mail from one REIMS II country to another.

in the reserved area (30) unless it

the universal postal

6.2.1. The Parties' cost data

46. Further to the implementation by the Parties of the obli-
gation imposed in the 1999 Exemption Decision to
the
introduce a transparent cost accounting system,

(26) Information gathered from answers to Article 11 letters to the
Parties show a substantial increase of quality of service in terms
of J+1 delivery for most of the Parties.

(27) See point 5.3.3.
(28) See point 5.3.4.
(29) See Article 2 of the 1999 Exemption Decision which also stated
that:
‘In order to facilitate this (Level 3) access, the Parties must
relax domestic conditions for other Parties where those rules are
not justified and could in practice bar other Parties from access to
the domestic rates or (where it is not in their power to do so) they
must use their best efforts vis-à-vis the relevant national authorities
to remove those rules.’

(30) Article 1(1) of the new Postal Directive.

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C 94/9

7. REMEDIES REQUIRED BY THE COMMISSION AS A

PREREQUISITE FOR A FAVOURABLE ATTITUDE

53. The arrangements as notified presented a number of
problems from the point of view of competition policy
which stood in the way of a favourable attitude on the
part of the Commission. During the course of the notifi-
cation procedure, the following issues were resolved in a
satisfactory manner, subject to third party comments:

— Level of TDs

to be applied between the Parties

according to the Agreement;

— Introduction by the parties of an effective low price

alternative to REIMS II TDs for direct mail;

— Non-discrimination between REIMS II Parties and their
for
from one

competitors
forwarding of outgoing cross-border mail
REIMS II country to another.

in the newly emerging markets

7.1. Amendments to the Agreement

54. The first two points have been dealt with by means of
amendments
to the Agreement. Following discussions
with the Commission, on 24 January 2003 14 out of
the 17 Parties (31)
Fifth Supplementary
signed the
Agreement.
notified
the
agreement
This
amends
the TDs to be applied
Agreement with regard to 1.
during the transitional period and, 2. the introduction by
the Parties of an effective low cost alternative to TDs for
direct mail.

7.1.1. Level of TDs

55. The Fifth Supplementary Agreement modifies Annex 4 to
the notified Agreement both as regards the duration of the
Transitional Period and the level of TDs to be applied. The
duration of the Transitional Period has been prolonged
from for 31 December 2004 to 31 December 2006.

56. The TDs to be applied from 1 January 2002 to the end of
the Transitional Period have been modified as follows:

2002: 73,3 %;

2003: 74,5 %;

2004: 75,7 %;

2005: 78,5 %;

2006: 78,5 %.

57. The Commission, having revised the cost data provided by
the parties with regard to the delivery of incoming cross-
border mail, considers that these rates correspond to a
sufficiently accurate approximation of parties' costs.

7.1.2. Low price alternative to TDs for direct mail

58. As regards the introduction of a low price alternative to
TDs for direct mail, Article 2 of the Fifth Supplementary
‘within six months of the
Agreement obliges the Parties,
second exemption decision of
to
the Commission . . .’
deliver international direct mail items.

59. On 24 January 2003, the Parties with the exception of
Royal Mail Group plc. and An Post signed the separate
‘Agreement for the Delivery of REIMS International Direct
Mail’ (‘the REIMS IDM Agreement’) which creates the IDM
product (32) with the following features:

C o r e p r o d u c t s p e c i f i c a t i o n s

— common product specifications that obviate the need

to conform with national product requirements,

— direct mail as defined in Directive 97/67/EC,

— maximum weight of 2 kg/item,

— a common minimum volume of 500 items,

— a best effort quality of service standard of J+5,

— pure cross-border mail product,

— UPU specifications for maximum and minimum size,

— no pre-sorting required.

R e m u n e r a t i o n

the

lower of

The remuneration for the delivery of the IDM product is
calculated as
for
comparable unsorted mail and non priority REIMS II
TDs minus [. . .] %.
If there is no unsorted bulk mail
rate, the sorted bulk mail rate plus a mark-up of [. . .] %
will be used.

the domestic

tariff

(31) The Agreement has not been signed yet by La Poste/De Post

(32) International Direct Mail (IDM) is the name the Parties have given

Belgium and An Post Ireland.

to this cross-border mail product.

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Official Journal of the European Union

23.4.2003

7.1.3. Other amendments

60. Other minor

amendments

Fifth
Supplementary Agreement at the initiative of the Parties
are:

introduced by

the

A p p l i c a t i o n
C o n v e n t i o n (33)

o f A r t i c l e s

4 3

o f

t h e U P U

According to Article 5 of the notified Agreement, after the
end of the Transitional Period, Articles 25 and 49(4) of the
1994 UPU Convention will no longer be applied between
the Parties. This clause has been modified. The new
version of Article 5 reads as follows:
‘Nothing in the
REIMS II Agreement shall keep a Party from applying
Article 43 of the UPU Convention against another Party.’

62. The Commission is therefore of the opinion that any new
exemption would have to require that each REIMS II Party
will provide to any third party postal operator competing
the provision of
with any other REIMS II Party for
in any REIMS II
services
outgoing cross-border mail
country, delivery of
in its
country at TDs and on conditions which are non-discrimi-
natory as compared to those offered to the REIMS II Party
in the sender's country. The Parties have been informed of
this necessity.

inbound cross-border mail

63. The Commission has elaborated the text of

such a
to be introduced in a future exemption

requirement
decision which is available as an annex to this Notice.

W i t h d r a w a l f r o m t h e A g r e e m e n t

8. CONCLUSION

64. On the basis of the above, the Commission intends to take
a favourable view in respect of the notified Agreement as
amended by the Fifth Supplementary Agreement. Before
adopting a favourable opinion,
the Commission invites
to send their observations within four
third parties
weeks of
this Notice by e-mail
(Rosario.Baratta@cec.eu.int), by fax ((+32-2) 296 70 81)
or by mail
following address, quoting the
reference Case No COMP/C2/38.170-REIMS II:

the publication of

to the

European Commission,
Directorate-General for Competition,
Anti-trust Registry,
J 70,
Office 0/28,
B-1049 Brussels.

If a party considers that its observations contain business
secrets, it must indicate the passages which in its opinion
ought not to be disclosed on the ground that they contain
business secrets or other confidential material, and state
the reasons. If the Commission does not receive a request
with reasons it will assume that the observations do not
contain any business secret.

According to Article 11 of the notified Agreement, the
withdrawal from the Agreement takes effect at the end
of the first full calendar year following the notice of the
withdrawal. The new version of the provision states that
the Party may withdraw from the agreement by giving not
less than six months written notice to the end of the
calendar month.

7.2. Other requirements

61. As regards the third problem identified during the inves-
tigative phase, the Commission considers that, further to
the
the
liberalisation of outgoing cross-border mail,
mechanism contained in the REIMS II agreement for the
remuneration of the inbound delivery of cross-border mail
leads to price discrimination in favour of the Parties and to
the detriment of third party operators carrying outbound
cross-border mail from one REIMS II country to another.
Pursuant to Article 2.3 of the Agreement, the REIMS II
Party in the country of delivery charges REIMS II TDs for
the delivery of mail items forwarded by any other REIMS II
Party. Third party operators
engaged in forwarding
outgoing cross-border mail must, however, pay the full
domestic tariff for the delivery of the mail items in the
country of destination.

(33) The notified agreement makes reference to Articles 25 and 49 of
the UPU Convention signed in 1994. The Fifth Supplementary
Agreement makes reference to the UPU Convention signed in
1999.
In this new version of the UPU Convention Article 25
has changed its numeration in Article 43.

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Official Journal of the European Union

C 94/11

ANNEX

ON TPA

General

Each REIMS II party shall provide to any third party postal operator competing with REIMS II parties for the provision
of outgoing cross-border mail services in any other REIMS II country, delivery of inbound cross-border mail in its
country at terminal dues and on conditions which are non discriminatory as compared to those that the REIMS II party
offers to the REIMS II party in the sender's country. This obligation is limited to mail from senders in REIMS II countries
and to requests from third party postal operators

(i) that are entitled to provide outgoing cross-border mail services under the domestic rules applicable in the sender's
country and provided that outbound cross-border mail has been liberalised for the mail items in question in the
country in which the mail was produced and those through which it may have transitted;

(ii) that are competitors of the REIMS II parties for the provision of these services; and

(iii) that enter into an agreement with the delivering REIMS II party, pursuant to which they agree

— to comply with REIMS operational conditions and requirements, including participation in the quality of service

measurement systems (1),

— to pay the terminal dues offered to the REIMS II party in the sender's country plus an appropriate share of the
cost of administering REIMS and the extra cost incurred by handling their mail as compared to mail from other
REIMS parties, if any,

— to pay the delivering REIMS II party's internal rates for mail items tendered under this obligation that fall under

the exception set out below,

— upon request to post adequate security for such payments,

— to endeavour to provide specimens of larger quantities of business mail items,

— and to respect the reserved area of the REIMS II party and provide all their incoming reserved mail to be

delivered by the REIMS II party.

Exceptions

This obligation does not apply to domestic mail. Further, this obligation shall not apply to mail items that senders
residing in the country of the delivering REIMS II party post or cause to be posted in a foreign country with the object
of benefiting from lower rates available through this obligation. Within the limits of the present and future case law of
the Court of Justice, the latter exception to the obligation shall apply both to mail items made up in the sender's country
of residence and then carried across the frontier and to mail items made up in a foreign country.

Interface with Article 5 of the consolidated REIMS II Agreement

When Article 5 of the consolidated REIMS II agreement as notified takes effect, the REIMS II parties will no longer be
entitled to invoke the above exceptions to the obligation imposed by this Decision.

(1) Currently UNEX and Diagnostic.