2004/139/EC: Commission decision of 23 October 2003 relating to a proceeding pursuant to Article 81 of the EC Treaty and Article 53 of the EEA Agreement Case COMP/C/38.170 — REIMS II renotification (Text with EEA relevance) (notified under document number C(2003) 3892)
Date: 2003-10-23
Institutions: European Commission
Subjects: competition law, inter-company agreement, postal service

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COMMISSION DECISION

of 23 October 2003

relating to a proceeding pursuant to Article 81 of the EC Treaty and Article 53 of the EEA
Agreement

Case COMP/C/38.170 — REIMS II renotification

(notified under document number C(2003) 3892)

(Only the Spanish, Danish, German, Greek, English, French, Italian, Dutch, Portuguese, Finnish and Swedish
texts are authentic)

(Text with EEA relevance)

(2004/139/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Com-
munity,

Having regard to the Agreement on the European Economic
Area,

negative clearance pursuant to Article 81(1) of the EC
Treaty and Article 53(1) of the EEA Agreement or an
exemption pursuant to Article 81(3) of the EC Treaty
and Article 53(3) of the EEA Agreement, upon the
expiry of the exemption granted by the Commission in
its decision of 15 September 1999 (the 1999 exemption
decision) (5).

Having regard to Council Regulation No 17 of 6 February
1962, First Regulation implementing Articles 85 and 86 of
the Treaty (1), as last amended by Regulation (EC) No 1/
2003 (2), and in particular Articles 2, 6 and 8 thereof,

(2)

Having regard to the application for negative clearance and
the notification with a view to an exemption submitted
pursuant to Articles 2 and 4 of Regulation No 17 on 18 June
2001,

Having regard to the Commission decision of 14 April 2003
to initiate proceedings in this case,

(3)

Having regard to the summary of the application and notifi-
cation published pursuant to Article 19(3) of Regulation
No 17 (3),

After consulting the Advisory Committee on Restrictive Prac-
tices and Dominant Positions,

Having regard to the final report of the Hearing Officer in this
case (4),

Whereas:

1.

INTRODUCTION

(1) On 18 June 2001,

(remuneration of
mandatory deliveries of cross-border mails) Agreement
was notified to the Commission with a view to obtaining

the REIMS II

(1) OJ 13, 21.2.1962, p. 204/62.
(2) OJ L 1, 4.1.2003, p. 1.
(3) OJ C 94, 23.4.2003, p. 3.
(4) OJ C 48, 24.2.2004.

The REIMS II Agreement is the instrument by which
certain public postal operators (PPOs) (6) collectively
determine terminal dues. Terminal dues are the remuner-
ation 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.

In the Agreement, terminal dues 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. It received an exemption in
1999. According to the original REIMS II-Agreement,
terminal dues were to increase over a transitional period
until they reached a maximum of 80 % of domestic
tariffs in 2001.
In the 1999 Exemption Decision,
however, the Commission only exempted the Agreement
until the end of 2001 and limited the exemption to a
level of terminal dues not higher than 70 % of domestic
tariffs.

(5) Commission Decision 1999/695/EC in Case No COMP/36.748

— REIMS II) (OJ L 275, 26.10.1999, p. 17).

(6) 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 abroad and delivering
incoming international mail.
the notified
Agreement, PPO refers to both public and private postal operators
which are subject to a universal delivery service obligation.

In the context of

(4)

(5)

(6)

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In limiting the duration of the exemption until the end
of 2001, the Commission stated that the final increase
of 80 % of the domestic tariff should only take place
after the Commission had had the opportunity to review
the system on the basis of proper cost accounting data.
The Commission also made the exemption subject to
the fulfilment by the Parties of several conditions and
obligations (7).

postal services and the improvement of quality of
service (10) (the Postal Directive), as amended by Directive
2002/39/EC (11) (the Amending Directive). Most of the
Parties have been assigned a reserved sector to ensure
their ability to provide the universal service. The Parties
also provide other services which are not part of the
universal postal service obligation.

The renotification in 2001 included a request for a
renewal of the exemption. In the renotified version of
the REIMS II Agreement, 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 (8). This
was followed in April 2003 by the Notice pursuant to
Article 19(3) of Regulation No 17 which set out the
Commission’s preliminary view and gave third parties
an opportunity to comment on the proposed favourable
approach.

2. THE PARTIES TO THE PROCEEDINGS

Thirteen PPOs had signed the original REIMS II Agree-
ment on 9 July 1997. Four more PPOs have since joined.
At the date of the renotification on 18 June 2001, the
17 Parties to the REIMS II Agreement (the Parties)
comprised: Österreichische Post AG, La Poste/De Post
(Belgium), Post Danmark AS, Finland Post, La Poste
(France), Deutsche Post, Hellenic Post ELTA, Iceland
Post, An Post (Ireland), Poste Italiane, Entreprise des
Postes & Télécommunications (Luxembourg), Posten
Norge AS (Norway), CTT Correios de Portugal, Sociedad
Estatal Correos y Telégrafos (Spain), Sweden Post, Swiss
Post and Consignia plc, now Royal Mail Group plc
(United Kingdom) (9). The REIMS II Parties are the
incumbent PPOs in their respective States.

(7)

The business of the Parties is the transportation and
delivery of documents and goods. All of the Parties are
universal service providers as defined in Article 2(13) of
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

(7) See Article 2 of the 1999 Exemption Decision, op. cit.
(8) OJ C 195, 11.7.2001, p. 11.
(9) Swiss Post is not a notifying party since it has not signed the

notification to the Commission.

3. LEGAL AND FACTUAL BACKGROUND

3.1. Remuneration for the delivery of incoming inter-
national mail items (terminal dues)

3.1.1. The UPU system

(8)

Under the Universal Postal Convention (UPU Conven-
tion) (12), members of the Universal Postal Union (the
UPU) (13), involving almost all countries in the world,
agree to provide domestic delivery services for incoming
cross-border mail. The obligation is a mandatory part of
the UPU and underpins the worldwide postal network
which exists today. Originally, PPOs did not compensate
each other for cross-border mail because mail flows
between countries were assumed to be in balance.
However, in the 1960s, large imbalances in the flows of
cross-border mail occurred with the result that PPOs in
some countries were incurring delivery costs
for
incoming mail without generating sufficient revenue
from outgoing mail to cover these costs.

(9)

To compensate receiving PPOs, a system of payments,
called terminal dues, was established in 1969. Under
this system, a receiving PPO was paid a specified rate,
based on weight,
for incoming mail which it was
required to deliver. However, this system resulted in a
divergence between cost and remuneration (14).

(10) OJ L 15, 21.1.1998, p. 14.
(11) OJ L 176, 5.7.2002, p. 21.
(12) The Universal Postal Convention, agreed to and signed by
governments at the UPU Congress, concerns the formation of a
single postal territory, freedom of transit, standardisation of
postage rates, the institution of arbitration proceedings and the
establishment of terminal dues.

(13) The UPU was founded in 1874 and forms the framework for
postal relations between its members. The UPU is an organisation
of governments and was recognised as a special agency of the
United Nations in 1947.

(14) See recital 9 of the 1999 Exemption Decision.

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(10)

(11)

In 1989, a recommendation of the Conférence Euro-
péenne des Administrations des Postes et Télécommuni-
cations (15) (CEPT), which was subsequently implement-
ed through a number of bilateral agreements concluded
between CEPT members, brought terminal dues closer
to costs (16). They were, nevertheless, still based on an
average across the participating administrations and, as
is generally recognised, did not cover costs (17).

Since 1989, the UPU system has made progress in
orienting terminal dues to costs. The 1999 Beijing UPU
Convention contains special terminal dues provisions
industrialised
applicable
countries (18).

exchanges

between

to

3.1.2. The Postal Directive

(12) The main regulatory framework with regard to cross-
border mail and terminal dues, as far as Community law
is concerned, is the Postal Directive.

(13) The Postal Directive contains important provisions with
regard to terminal dues and liberalisation of the outgoing
cross-border mail market.

3.1.2.1. T e r m i n a l d u e s

(15) The first, second and third indents of Article 13(1) of

the Postal Directive provide that:

‘— terminal dues shall be fixed in relation to the costs
of processing and delivering incoming cross-border
mail,

— levels of remuneration shall be related to the quality

of service achieved,

— terminal dues shall be transparent and non-dis-

criminatory’.

3.1.2.2.

L i b e r a l i s a t i o n

(16) To date, only two Member States (Sweden and Finland)
have abolished their postal monopolies. PPOs in all
other Member States benefit from a reserved area by
virtue of national law in which they have the exclusive
right to provide a range of postal services. The bound-
aries within which Member States are entitled to reserve
specified postal services are indicated in the Postal
Directive.

(17) Article 7 of the Postal Directive defines the degree of
liberalisation for both incoming and outgoing cross-
border mail.

(14) With regard to terminal dues, recital 27 of the Postal

Directive states that

(18) As far as domestic mail and the delivery of incoming
cross-border mail are concerned the first subparagraph
of Article 7(1) of the Postal Directive provides as follows:

‘the remuneration for the provision of the intra-Com-
munity cross-border mail service, without prejudice to
the minimum set of obligations derived from Universal
Postal Union acts, should be geared to cover the costs of
delivery incurred by the universal service provider in the
country of destination’.

(15) The CEPT was a restricted subgroup of the UPU which, up to
1992, brought together both the regulators and the operators of
In
the European postal and telecommunication authorities.
September 1992, a major reform of the CEPT was undertaken
and the CEPT adopted a new constitution which reserved
membership to regulatory authorities. The operators created
their own organisation, PostEurope.

(16) The CEPT system took account of total weight and number of
items with payment based on a rate per item and a rate per
kilogram. It recognised that the composition of mail in one
direction may well differ from the composition in the other.
(17) See, for example, recital 10 of the 1999 Exemption Decision. See
also the judgment of the Court of Justice in Joined Cases C-147/
97 and C-148/97, Deutsche Post AG v GZS Gesellschaft für
Zahlungssysteme mbH (GZS) and Deutsche Post AG v Citicorp
Kartenservice GmbH, [2000] ECR 1-825, paragraph 54.

(18) Article 48(2) of the 1999 UPU Convention fixes a ceiling of 60 %
of the charge for a 20 gram letter in the domestic service.

‘To the extent necessary to ensure the maintenance of
universal service, Member States may continue to reserve
services to universal service provider(s). Those services
shall be limited to the clearance, sorting, transport
and delivery of items of domestic correspondence and
incoming cross-border correspondence, whether by
accelerated delivery or not, within both of the following
weight and price limits. The weight
limit shall be
100 grams from 1 January 2003 and 50 grams from
1 January 2006. These weight limits shall not apply as
from 1 January 2003 if the price is equal to, or more
for an item of
than,
correspondence in the first weight step of the fastest
category, and, as from 1 January 2006, if the price is
equal to, or more than, two and a half times this tariff’.

three times the public tariff

(19) The conveyance of outgoing cross-border mail, however,
is not included in the list of services which Member
States may continue to reserve pursuant to Article 7 of
the Postal Directive. Therefore that service is completely
liberalised as of 1 January 2003. However, in order to
safeguard the provision of the universal postal service,
the fourth subparagraph of Article 7(1) of the Postal
Directive provides that:

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‘To the extent necessary to ensure the provision of
universal service, for example when certain sectors of
postal activity have already been liberalised or because
of the specific characteristics particular to the postal
services in a Member State, outgoing cross-border mail
may continue to be reserved within the same weight and
price limits’.

(20) The concrete consequence of that new regime, which
applies from 1 January 2003, is that the conveyance of
outgoing cross-border mail
is open to competition
unless the exception provided for in the fourth subpara-
graph of Article 7(1) applies.

4. THE REIMS II AGREEMENT

4.1. The exemption of the original REIMS II Agreement

(21) The original REIMS II Agreement (19) was notified to
the Commission in 1997. On that occasion, after a
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.

(22) The Parties, in order to qualify for exemption, prepared
a first amendment to the REIMS II Agreement (the first
Supplementary Agreement) which entered into force on
1 October 1998.

(23) On 15 September 1999, the Commission granted an
exemption pursuant to Article 81(3) of the Treaty and
Article 53(3) of the EEA Agreement until 31 December
2001. The Commission limited the increase of terminal
dues to 70 % of the domestic tariffs. The Commission
stated that the final increase to 80 % of the domestic
tariffs should only take place after the Commission had
had the opportunity to review the system on the basis
of proper cost accounting data, which was not available
in 1999.

4.2. Amendments to the REIMS II Agreement

(24)

Since the first notification to the Commission on
31 October 1997, the REIMS II Agreement has been
amended by the Parties five times by means of sup-
plementary agreements. Some of the amendments have
been agreed by those Parties at their own initiative, while
others have been agreed in order to meet the competition
concerns expressed by the Commission in its evaluation
of the REIMS II Agreement.

(19) A brief explanation of the REIMS I Agreement and a detailed
description of
the REIMS II Agreement, as notified to the
Commission in 1997, are set out in recitals 12 to 43 of the 1999
Exemption Decision.

(25) The first Supplementary Agreement was signed on
22 September 1998 and related primarily to the link
between terminal dues and quality of service and Level 3
access.

(26) On 14 January 2000, the Parties signed the second
Supplementary Agreement, the aim of which was, on the
one hand, to implement the Commission’s conditions set
out in Article 2(1) of the 1999 Exemption Decision and,
on the other hand, to take into account the accession of
Swiss Post to the REIMS II Agreement.

(27) On 4 April 2000, the Parties signed the third Supplemen-
tary Agreement, the key features of which were to ensure
end-to-end quality of service and to review the quality
of service standards. As regards the former, the third
Supplementary Agreement contemplated the inclusion
of the measurement of the performance of sending
PPOs with respect to outgoing mail in a future model
refinement and the application of appropriate quality-
of-service targets and penalties as of 2002. As regards
the quality-of-service standards, the previous version of
the REIMS II Agreement identified two groups of REIMS
II Parties, each one with a different quality-of-service
target. The third Supplementary Agreement led to a
convergence of those groups to a universal standard of
93 %.

(28) On 7 June 2001, most of the Parties executed a fourth
Supplementary Agreement. To date, 16 of the Parties
have signed that Agreement. The main objective of the
fourth Supplementary Agreement was to extend the
transitional period by another three years. According
the fourth Supplementary Agreement, terminal dues
would reach 80 % of domestic tariffs in 2004, accord-
ingly two years later than planned. The 80 % rate would
be replaced by 73,3 % in 2002 and by 76,6 % in
2003 (20).

(29)

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 terminal dues until
the end of 2004. Consequently, increases of a Party’s
domestic tariff after 1 September 2001 will not be taken
into account in the calculation of terminal dues for
2003 and 2004 (21). However, decreases of domestic
tariffs are to be taken into account, so that the ‘freeze’
effectively creates a ceiling, but allows for downward
adjustments (22).

(20) In view of the discounts that they will grant until the end of
2004 (see footnote 22 below), Deutsche Post AG and Poste
Italiane SpA would only reach the full 80 % level in 2005.
(21) Paragraph 3(4) of Annex 4 to the REIMS II Agreement as
amended by Article 3(3) of the fourth Supplementary Agreement.
(22) Deutsche Post AG continues to grant the discount agreed in the
third Supplementary Agreement until 31 December 2004. Poste
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.

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(30) The fourth Supplementary Agreement also introduced a
‘geographic coverage’ provision. If a Party whose dom-
estic 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 for
the delivery of that mail,
the Party can ask for a
renegotiation of the terminal dues paid by that sending
PPO (23).

(31) The REIMS II Agreement renotified to the Commission
on 18 June 2001 was the consolidated version of the
Agreement as amended by the first, second, third and
fourth Supplementary Agreements.

(32)

Finally, since its renotification to the Commission on
18 June 2001,
the REIMS II Agreement has been
amended again. On 24 January 2003 the Parties signed
the fifth Supplementary Agreement, the purpose of
which is to address the competition concerns identified
by the Commission with regard to the renotified REIMS
II Agreement, mainly relating to the level of terminal
dues and to a low-cost alternative to terminal dues (24).
The REIMS II Agreement which is the subject of this
Decision is the REIMS II Agreement as amended by the
first, second,
fourth and fifth Supplementary
Agreements.

third,

4.3.3.

Products covered

(36) The REIMS II Agreement covers all mail items as defined
in Article 8 of the UPU Convention (with the exception
of ‘M bags’) (25).

4.3.4. Terminal dues

4.3.4.1.

P r i n c i p l e

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

4.3.4.2. D o m e s t i c t a r i f f s s e r v i n g a s r e f -

e r e n c e

4.3. The renotified REIMS II Agreement

(33) Recitals 34 to 50 contain a brief description of the
contents of the REIMS II Agreement as notified by the
Parties in the renotification of 18 June 2001.

(38) Domestic tariffs usually distinguish between different
weight steps (for example, 20, 50 and 100 g for letters).
According to the REIMS II Agreement, those different
tariffs are converted, on the basis of a standard structure,
into ‘linear tariffs’ for the purpose of calculating terminal
dues.

4.3.1. Membership

(34) Membership of the REIMS II 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.

4.3.2.

Purpose

(35) According to the Parties, the main aims of the REIMS
II Agreement are to provide the Parties with fair
compensation for the delivery of cross-border mail
which reflects more closely the real costs of delivery of
each Party, and to improve the quality of the cross-
border mail service.

4.3.4.3.

L e v e l s o f t e r m i n a l d u e s

(39) The REIMS II Agreement distinguishes between four

different levels of terminal dues:

a)

b)

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

Level 2: The delivering PPO may offer rebates on
the Level 1 remuneration on the basis of work
sharing/preparation of mail (for example by pre-
sorting mail according to format or destination).
The same discounts must be offered to all sending
REIMS II PPOs when equal conditions are met.

(23) Article 11(4) to (7) of the REIMS II Agreement, as amended by

Article 2(2) of the fourth Supplementary Agreement.

(24) See section 4.5.

(25) Bags containing bulk mail for one addressee.

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c)

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 periodicals) in the country of delivery.

d) Non-priority mail: The terminal dues to be applied
to mail designated as ‘non-priority’ are 10 % less
than the terminal dues for Level 1 mail.

where the actual result amounts to between 90 % and
100 % of the target to be reached and 31/2 % 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 (29). In the worst
case, if the result actually achieved by the delivering PPO
amounts to no more than 80 % of the target, these
penalties will thus reduce by half the terminal dues to
which a PPO is entitled.

4.3.5. Transitional period (26)

(40)

In the renotified REIMS II Agreement terminal dues are
to be increased, subject to penalties which are to accrue
if the required quality-of-service target is not met, over a
transitional period as follows:

a)

2002: 73,3 % of domestic tariffs;

b)

2003: 76,6 % of domestic tariffs;

c)

2004: 80 % of domestic tariffs.

4.3.6. Quality of service/penalties system

(41) The REIMS II Agreement has introduced 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 which has to be delivered within one working day
after the day of arrival (‘J’) in the office of exchange of
the receiving PPO, provided that it arrives there before
the latest arrival time (27). For example a standard of
‘80 % J+1’ means that 80 % of the incoming mail is to
be delivered to its final destination within one working
day after the day of arrival. The performance of the
individual Parties is measured by means of a diagnostic
system set up by the International Post Corporation
(IPC) (28).

(42) A penalty system is applied when the agreed quality-of-
service standards are not met. The level of terminal dues
which would otherwise be payable is reduced by 11/2 %

(26) The fifth Supplementary Agreement amends the transitional
period and the terminal dues to be applied. See section 4.5.
(27) The ‘latest arrival time’ is the latest acceptable time of touchdown,
permitting delivery of airmail items the next working day.
(28) The International Post Corporation is a company co-owned by a
number of PPOs including, for Europe, all the REIMS II Parties
plus the PPOs of the Netherlands, Cyprus and Norway and,
outside Europe, the PPOs of the USA, Australia and Canada. The
IPC 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.

4.3.7. Non-discrimination rule

(43) Under the REIMS II Agreement (30)‘each Party shall apply
the same rates of terminal dues to all other parties
provided that
the transactions are equivalent.’ That
means that, in principle, two REIMS II PPOs competing
for outgoing cross-border mail
in a given REIMS II
country to another 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 country of destination, or the full inter-
national tariff
in the country of origin, minus any
available discount (31).

4.3.8. Articles 43 and 49 of the 1999 UPU Convention

(44) Article 43 of

the 1999 UPU Convention contains
provisions on the treatment of domestic mail posted
abroad, known as remail. Article 49(4) concerns terminal
dues for incoming bulk mail. Under the renotified REIMS
II Agreement, after the end of the transitional period,
Article 43 and Article 49(4) of the 1999 UPU Conven-
tion are no longer to be applied between the Parties.

(29) 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 11/2 % for each
percentage point accrues. The penalty is thus 3 × 11/2 % = 41/2 %
of terminal dues payable. This means that the delivering PPO
concerned is allowed to charge only 951/2 % (100 %–41/2 %) of
the full terminal dues to which it would otherwise be entitled. In
1998 when terminal dues for Level 1 amounted to 55 % of
the PPO would thus receive terminal dues
domestic rates,
amounting to 521/2 % of domestic rates (namely 951/2 % of
55 %).

(30) Article 2(11) of the REIMS II Agreement.
(31) This is the interpretation of this clause that the Parties have given

in the course of the Commission’s investigation.

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4.3.9. Term

(45) The REIMS II Agreement is entered into for an indefinite
period of time. Any Party may, however, withdraw from
the REIMS II 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 REIMS II Agreement
by giving six months’ notice.

4.3.10.

Link between terminal dues and quality of service

(46) The REIMS II Agreement establishes the principle that
no increase in terminal dues is to take place during the
transitional period if the quality of service of the Party
concerned deteriorates. In order to determine whether
that is the case, the quality-of-service performance in a
given year is compared with the average quality-of-
service performance achieved by that Party in preceding
years. That rule does not apply to those PPOs for which
It is also not to be
transitional arrangements exist.
applicable if the quality-of-service of a PPO deteriorates
but still matches the relevant standard set by the REIMS
II Agreement. Terminal dues 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
that Party to improve its delivery system and is only
temporary in nature.

4.3.11.

Level 3 access

(47) The Parties are bound under the REIMS II Agreement to
grant Level 3 access (namely access to domestic bulk
mail rates) to each other. In order to facilitate such access,
the 1999 Exemption Decision imposed a condition on
the Parties to relax domestic regulations for other Parties
where such regulations are not justified and 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 Parties must use their best
efforts vis-à-vis the relevant national authorities to
remove them (32).

(48) All the tariffs and conditions relevant for Level 3 access
have to be made available to all the Parties through a
database managed by the IPC. The Parties have under-
taken to update that database without delay when their
respective tariffs and conditions change.

4.3.12. Bilateral agreements

(49) The REIMS II Agreement provides that the Parties are
free to conclude bilateral or multilateral agreements on
terminal dues between themselves in which different
conditions, in particular other levels of terminal dues,
may be fixed. Where a Party grants another Party, or
other Parties, lower terminal dues in such an agreement,
it is obliged to apply the same terminal dues to all the
Parties, provided the transactions are equivalent.

4.3.13.

Late, lost and damaged mail

(50) The Parties have introduced provisions on late, lost and
damaged mail which establish a proper system for
dealing with and analysing complaints.

4.4. Main market and other developments since the
1999 Exemption Decision

4.4.1.

Improvements in cross-border mail quality of service

(51) Recital 70 of the 1999 Exemption Decision states that
‘The most substantial advantage which the (REIMS II)
Agreement is expected to produce consists in a substan-
tial increase in the quality of cross-border mail services’.
The information gathered by the Commission in the
course of its investigation upon renotification of the
REIMS II Agreement shows that, since the exemption
was granted, the overall quality of cross-border mail
delivery provided by the Parties has improved. For most
of the Parties in 2000, 2001 and 2002 there has been a
substantial increase of quality in terms of J+1 delivery of
incoming cross-border mail. Those quality increases are
demonstrated in the table set out in Annex I.

4.4.2. Other important developments

(32) See Article 2(1)(b) of the 1999 Exemption Decision which also
stated that: ‘In order to facilitate this 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’.

(52) The Commission’s assessment of the renotified REIMS
II Agreement must take into account the following
developments:

a)

the cost data provided by the Parties showing the
costs of delivery of cross-border mail items;

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b)

c)

the implementation of the REIMS II Agreement
during the period of the exemption;

4.4.2.3. T h e A m e n d i n g D i r e c t i v e

the adoption by the European Parliament and the
Council of the Amending Directive.

(57) As referred to in recital 12, on 10 June 2002 the Postal
Directive was amended by the Amending Directive, with
a view to further liberalisation of the European postal
markets.

4.4.2.1. T h e P a r t i e s ’ c o s t d a t a

(53)

Further to the implementation by the Parties of the
obligation imposed in the 1999 Exemption Decision to
introduce transparent cost accounting systems (33), the
Commission has obtained data showing each Party’s
costs for the delivery of incoming cross-border mail
items.

(54) The cost data, which were not available at the time of
the 1999 Exemption Decision, have permitted a more
thorough evaluation by the Commission of the levels of
terminal dues. The cost-to-revenue ratios (34) of the
respective Parties are set out in the table in Annex II.

4.4.2.2.

I m p l e m e n t a t i o n o f t h e R E I M S I I
A g r e e m e n t

(55) Regarding Level 3 access,

the Parties contractually
committed themselves to relax domestic regulations for
other Parties where those regulations are not justified
and to use their best efforts vis-à-vis the relevant national
authorities to remove them where the regulations con-
cerned have been set by the State.

(56) The investigation carried out in the course of the current
procedure has shown that, despite the amendments
made to the REIMS II Agreement by the second Sup-
plementary Agreement, Level 3 access does not function
as desired by the Commission in the 1999 Exemption
indicate that
Decision. The
although the Parties state that they do offer each other
Level 3 access, there still are significant obstacles for
accessing domestic bulk mail rates.

submitted (35)

reports

(58) One of the major amendments to the Postal Directive is
that, as of 1 January 2003, Member States are not to
include the market for outgoing cross-border mail in the
reserved services (36) unless it is necessary to ensure the
provision of the universal postal service. Accordingly, as
from 1 January 2003, PPOs in principle face competition
with regard to the forwarding of cross-border mail from
one REIMS II country to another.

(59) That new circumstance needs to be evaluated together
with the fact that the REIMS II Agreement is only open
to universal service providers (37) and that, although
nothing in the Agreement prevents them from doing so,
the Commission’s investigation has shown that it is
unlikely that the Parties will enter into identical or
similar agreements on terminal dues with third parties.

(60) As explained in detail below (38), the absence of access
to REIMS II terminal dues for non-REIMS II parties could
in an elimination of competition within the
result
meaning of Article 81(3)(b) of the EC Treaty. The
Commission considers therefore that an exemption
should not be granted in respect of
the REIMS II
Agreement unless non-REIMS II postal operators are
terminal dues at non-
granted access to REIMS II
discriminatory conditions.

4.5. Amendments to the REIMS II Agreement following
the renotification

(61) On 24 January 2003, following discussions with the
Commission, the Parties (39) signed the fifth Supplemen-
tary Agreement. That Agreement amends the notified
REIMS II Agreement with regard to terminal dues to be
applied during the transitional period and the introduc-
tion by the Parties of the international direct mail
product.

(33) See Article 2(2)(a) of the 1999 Exemption Decision.
(34) The cost-to-revenue ratio indicates the ratio — expressed as a
percentage — between the average cost of delivering one
incoming cross-border mail item and the standard tariff for the
corresponding domestic mail item.

(35) Article 2(2)(b) of the 1999 Exemption Decision obliges the
Parties to provide annual reports on several issues including
information on the implementation of Level 3 access.

(36) Article 7(1) of the Postal Directive.
(37) Article 9 of the REIMS II Agreement as notified on 18 June 2001.
(38) See section 9.4 on elimination of competition.
(39) The Agreement has not been signed yet by La Poste/De Post
Belgium, Royal Mail UK and An Post Ireland. These Parties,
however, are still signatories of the REIMS II Agreement as
amended by the
any
implementation of which is not covered by the exemption
granted in this Decision.

fourth Supplementary Agreement,

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4.5.1.

Level of terminal dues

c)

a maximum weight of the item to be delivered of
2 kg;

(62) The fifth Supplementary Agreement amends Annex 4 to
the notified REIMS II Agreement both as regards the
duration of the transitional period and the level of
terminal dues to be applied. The duration of
the
transitional period has been extended from 31 December
2004 to 31 December 2006. The terminal dues to be
applied from 1 January 2002 to the end of the tran-
sitional period have been amended as follows:

a)

73,3 % for 2002;

b)

74,5 % for 2003;

c)

75,7 % for 2004;

d)

78,5 % for 2005 and 2006.

4.5.2. The international direct mail product

(the IDM

product)

(63) As regards the introduction of a low-price alternative to
terminal dues for bulk mail, Article 2 of the fifth
Supplementary Agreement obliges the Parties to deliver
international direct mail items forwarded by other Parties
under the terms of
IDM Agreement.
Article 2 of the fifth Supplementary Agreement provides
that that obligation is to enter into force six months after
the Commission issues a second exemption decision for
the REIMS II Agreement, although the Parties are free to
provide the IDM product before that date.

the REIMS II

(64) On 24 January 2003, the Parties (40) signed the separate
Agreement
for the Delivery of REIMS International
Direct Mail (the REIMS IDM Agreement) which creates
the IDM product (41).

(65) The core product specifications of the IDM product are

the following:

a)

b)

common product specifications that obviate the
need to conform with national product require-
ments;

reference to delivery of direct mail as defined in
Article 2(8) of the Postal Directive;

d)

a minimum volume of 500 items;

e)

f)

a best effort quality of service standard of J+5;

pure cross-border mail product;

g) UPU specifications for maximum and minimum

size;

h)

pre-sorting is not required.

(66) The remuneration for the delivery of the IDM product is
calculated as the lower of
for
comparable unsorted mail and non-priority REIMS II
terminal dues minus 7 %. If there is no unsorted bulk
mail rate, the sorted bulk mail rate plus a mark-up of
3 % is to be used.

the domestic tariff

4.5.3. Other amendments

(67) Recitals 68 and 69 set out other minor amendments
introduced by the fifth Supplementary Agreement at the
initiative of the Parties.

(68)

(69)

First, pursuant to Article 5 of the renotified REIMS II
Agreement, after the end of the transitional period,
Article 25 and Article 49(4) of the 1994 UPU Conven-
tion (42) are no longer to be applied between the Parties.
Article 5 of the REIMS II Agreement as amended by the
fifth Supplementary Agreement now provides that:
‘Nothing in the REIMS II Agreement shall keep a Party
from applying Article 43 of the UPU Convention against
another Party’ (43).

to Article 11 of

Pursuant
the renotified REIMS II
Agreement, any withdrawal from that Agreement takes
effect at the end of the first full calendar year following
the notice of the withdrawal. However, Article 11 of
the REIMS II Agreement, as amended by the fifth
Supplementary Agreement, provides that in particular
circumstances, any Party may withdraw from the REIMS
II Agreement by giving not less than six months written
notice to the end of a calendar month.

(40) With the exception of Royal Mail Group plc and An Post.
(41) International direct mail (IDM) is the name the Parties have given

(42) The renotified REIMS II Agreement refers to Articles 25 and 49
of the UPU Convention signed in 1994. The fifth Supplementary
Agreement refers to the UPU Convention signed in 1999. In the
1999 UPU Convention, ex-Article 25 is Article 43.

to this cross-border mail product.

(43) See section 4.3.8.

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5. THE RELEVANT MARKETS

5.1. Product market

liberalised from 1 January 2003, while in the majority
of Member States most domestic mail services, including
the delivery service, are still reserved. The Commission
has consistently treated outgoing cross-border mail as a
product market distinct from the national market for
the delivery of incoming cross-border mail (45).

(70) The notified REIMS II Agreement concerns the markets
for normal - as opposed to express - cross-border mail
between the countries concerned, that is to say, cross-
border mail exchanged between REIMS II countries.
More specifically, the REIMS II Agreement covers all
letter-post items as defined in Article 8 of the UPU
Convention. That definition comprises items which
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 (44).

(75) A distinction should also be made between the ‘normal’
cross-border mail market and cross-border express deliv-
ery services which are substantially faster than normal
cross-border mail and which may provide the customer
with certain options such as proof of delivery, track and
trace,
insurance and the possibility of altering the
destination of the consignment during its journey. They
are also substantially more expensive. The Commission
has recognised the distinction between normal and
express delivery services in previous decisions (46).

(71) The relevant product market may 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 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 com-
panies.

(76) The distinction between domestic and cross-border mail
was reinforced by the changes to the Postal Directive
introduced by the Amending Directive. From Janua-
ry 2003 outgoing cross-border mail is liberalised in all
Member States where it is not necessary to maintain the
monopoly in order to sustain the provision of the
universal services. The new regulatory rules therefore
expose PPOs to increased competition for the forwarding
of cross-border mail from one Member State to another.

5.1.1. Cross-border and domestic mail

(72)

From the customer’s perspective the outgoing cross-
border mail market is separate from that of domestic
mail since demand for mail services for international
destinations cannot be satisfied by services for domestic
destinations.

(73)

From the supplier’s perspective, international transpor-
tation involves different requirements (international line-
haul, delivery in foreign countries) from those of dom-
estic transportation.

(74) Unlike domestic mail, cross-border mail involves ser-
vices in at least two different countries and, normally,
the engagement of at least two service providers. Inter-
national mail
is therefore more complex logistically
than domestic mail. Outgoing cross-border mail was

(44) This figure is based on the analysis of the data on incoming and
outgoing cross-border mail volumes provided by the Parties in
their answers to the Commission’s formal request for information
of 6 August 2001.

5.1.2. Geographic market

(77) The relevant geographic markets in the cross-border
mail market coincide with national boundaries, as these
mark the boundaries of national monopolies and the
main players on each of
the national markets are
different. Pick-up and delivery is organised on a national
basis within the countries concerned. Prices and pricing
systems differ for every country, largely in relation to
costs (47).

(45) See Commission Decision 2001/892/EC in Case COMP/C-1/
36.915 — Deutsche Post AG — Interception of cross-border mail
(OJ L 331, 15.12.2001, p. 40) (Deutsche Post II), recitals 84 to
87.

(46) See for example, Commission decisions in Case No M.102, TNT
v Canada Post, DBP Postdienst, La Poste, PTT Post and Sweden Post;
Case IV/M.787, PTT Post v TNT-GD Net; Case No IV/M.843, PTT
Post v TNT/GD Express Worldwide; Case IV/M.1168, Deutsche Post
v DHL. See also recital 18 of the Postal Directive.
(47) See the decision in Deutsche Post II, recitals 84 to 87.

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6. STRUCTURE OF THE MARKETS

6.1. Outgoing cross-border mail

6.1.1. Barriers to entry

(78) According to the Parties, in order to compete in the
outgoing mail market, a postal operator may require a
local pick-up service and sales force in country A, access
to a transport service from country A to B, and an agent
in country B to put the mail in the regular mail-stream
there. Any pick-up service can carry out these activities
without significant additional expense. Technical barriers
to entry are also low. However, if a company wishes to
establish a universal collection service such as those
established by the PPOs, this would require substantial
investment. Moreover, postal monopolies, where still in
place, provide a legal barrier to entry.

6.1.2. Market volumes of outgoing cross-border mail

between REIMS II countries

(79) The table in Annex III gives an outline of the dimension
of the market, in terms of number of items sent to or
received from REIMS II countries. It also gives an idea of
the structure of the markets by indicating the market
share of the incumbent and its main competitors.

6.2.

Incoming cross-border mail

6.2.1. Barriers to entry

(80)

In order to compete on the incoming mail market to the
extent that it is allowed under national
law, a new
entrant requires a distribution network. This can be
prohibitively expensive if it intends to cover a whole
country and starts from scratch. However, if the new
entrant limits its service to delivery in one or several
cities or to business mail, there will be much less of a
barrier. Postal monopolies constitute a legal barrier to
entry.

6.2.2. Market volume of

incoming cross-border mail

between REIMS II countries

(81)

Incoming cross-border mail continues to be reserved
within the price and weight limits provided for in the
Amending Directive. Accordingly the structure of the
market tends to be far less competitive with the incum-
bents having very high market shares.

(82) These differences were already present before the adop-
tion of the Amending Directive, since outgoing cross-
border mail had already been de facto or de jure
liberalised in most REIMS II countries. The table in
Annex IV sets out the incumbents’ market shares and
the name of their main competitors in the incoming
cross-border mail markets in 2000. The table in
Annex IV also shows how, already in 2000, the structure
of the two markets was substantially different in many
REIMS II countries.

7. THIRD-PARTY OBSERVATIONS

(83)

In the Notice published pursuant to Article 19(3) of
Regulation No 17 (48), the Commission set out details of
the renotified REIMS II Agreement and indicated that it
proposed to adopt a positive view.

(84)

In total, 10 replies were received by the Commission
to that Notice. The most
important comments are
summarised in recitals 85 to 92.

(85) One of the main concerns expressed by third parties
concerns the lack of an effective low-cost alternative to
paying terminal dues. It is argued that the conditions to
be fulfilled for Level 3 access are unclear and that the
IDM Agreement is not an adequate solution in that
respect, as it only covers direct mail within the definition
given in the Postal Directive. According to those third
parties IDM also needs to be offered to third parties at
non-discriminatory conditions, otherwise it will result
in a serious restriction of competition.

(86) Certain third parties allege that the quality improvements
registered in the cross-border mail sector are only in
part a consequence of the implementation of the REIMS
II Agreement. According to them,
improvements in
domestic mail quality have been the main driver for the
improvements in the quality of service.

(87) According to one third-party it would be more efficient
to have a network of bilateral agreements permitting
PPOs to diversify terminal dues according to the quantity
of mail sent by the counterparts and quality of service.

(88) One commentator alleges that terminal dues should not
be expressed as a percentage of domestic tariffs but
expressed in absolute value and queried whether the
figures indicated in the Notice pursuant to Article 19(3)
of Regulation No 17 indeed represent a reliable proxy
for the Parties’ costs.

(48) See footnote 3.

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(89)

Several third parties stated that there should be quality-
of-service standards for non-priority and bulk mail as
well.

(90) Another third-party states that the ‘geographic coverage’
provision (49) opens the field to possible abuses in its
application by the Parties. The third-party states that
that provision could lead to pricing aimed at excluding
new entrants.

(91) Certain third parties state that the additional costs that
third parties incur for having access to REIMS II terminal
dues (in particular the costs related to the system for the
measurement of the quality of service) need to be set out
in detail and monitored carefully by the Commission.

(92)

Finally, according to the Irish postal regulator ComReg,
the price-freeze provision (50) is inconsistent with the
requirement that terminal dues be related to costs.

(93) All comments received have been carefully reviewed and
to the extent that the third-party comments reflect
genuine
the Commission’s
reasoning on the concerns raised is set out in the relevant
parts of the legal assessment.

competition concerns,

8. ARTICLE 81(1) OF THE TREATY AND ARTICLE 53(1) OF
THE EEA AGREEMENT

8.1. Agreement between undertakings

(94) All the Parties to the REIMS II Agreement are engaged in
economic activities and are therefore to be considered
as undertakings within the meaning of Article 81(1) of
the EC Treaty and Article 53(1) of the EEA Agreement.
The REIMS II Agreement is thus an agreement within
the meaning of Article 81(1) of the EC Treaty and
Article 53(1) of the EEA Agreement. This was already
established in the 1999 Exemption Decision.

8.2. Restrictions of competition

8.2.1.

Price fixing

(95)

the Commission
In the 1999 Exemption Decision,
considered that the REIMS II Agreement constituted a
restriction of competition falling within the scope of
Article 81(1) of the EC Treaty and Article 53(1) of the
EEA Agreement because it collectively established a
common level of terminal dues 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 REIMS II 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, which is determined primarily by
domestic considerations, the Parties eliminate or reduce
their freedom to set the prices they charge for the
delivery of incoming cross-border mail. In fact, the
REIMS II Agreement eliminates any incentive to con-
clude separate agreements on a bilateral basis between
the Parties, although contractually this remains possible.

(96) The Commission’s investigation following the Parties’
request for renewal of the exemption has not revealed
any reason to deviate from the assessment made in the
1999 Exemption Decision as regards the applicability of
Article 81(1) of the EC Treaty and Article 53(1) of
the EEA Agreement. Indeed, as regards the collective
agreement on the level of terminal dues, no REIMS II
Party has entered into a bilateral agreement with another
REIMS II Party. It is thus clear that all REIMS II Parties
collectively adhere to the remuneration levels and the
conditions of the REIMS II Agreement.

(97)

Furthermore, developments in postal markets have given
rise to new competitive concerns in addition to those
referred to in the 1999 Exemption Decision.

(98) The markets for cross-border mail have evolved substan-
tially in the last few years. To an increasing extent, PPOs
within the Community and the EEA are in direct
competition with each other and other postal operators
on each other’s home markets for outgoing cross-border
mail.

(99) The Postal Directive, as amended by the Amending
Directive, has now removed outgoing cross-border mail
from the area of service reserved to the universal service
providers unless its revenues are necessary to finance the
net cost of the universal postal service.

(100) According to the REIMS II Agreement (51), receiving
PPOs are obliged to apply the same terminal dues to all
other REIMS II parties. That means that all REIMS II
PPOs sending mail from country A to country B are to
pay the same terminal dues to the PPO in country B. The
costs all REIMS II parties incur for the end-to-end cross-
border service (mail from country A to country B) will

(49) See recital 30.
(50) See recital 29.

(51) Article 2(11) of the REIMS II Agreement.

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thus include the jointly agreed common terminal dues
to be paid to the PPO of country B. As terminal dues
account for the largest portion by far of total conveyance
costs for cross-border mail (52), competition between the
Parties on the outgoing cross-border mail market in
country A will be substantially diminished or even
eliminated.

(101) Therefore, the conclusion should be drawn that the
restrictive effects of
the REIMS II Agreement have
expanded beyond the price-fixing identified in the 1999
Exemption Decision (53) to competition between REIMS
II Parties competing in the market for outgoing cross-
border mail from one REIMS country to another. The
Commission continues to consider the Agreement to
have as its object or effect to prevent, restrict or distort
competition within the common market. Consequently,
Article 81(1) of the EC Treaty and Article 53(1) of the
EEA Agreement still apply.

9. ARTICLE 81(3) OF THE TREATY and ARTICLE 53(3) OF
THE EEA AGREEMENT

9.1. Technical and economic progress

(105) The Commission considers that the REIMS II Agreement
produces improvements which fulfil the first prerequisite
for exemption under Article 81(3) of the EC Treaty and
Article 53(3) of the EEA Agreement. The following
improvements should be taken into consideration:

a)

b)

increased correlation between terminal dues and
the Parties’ costs for the delivery of incoming cross-
border mail; and

improvement in quality of service for cross-border
mail.

8.2.2. Membership restriction

9.1.1. Cost-based terminal dues

(102) Membership of the REIMS II Agreement is limited to
postal operators (private or public) which operate a
mandatory universal service. This could be interpreted
as precluding other operators from benefiting from the
same rates as the Parties to the REIMS II Agreement.
However, nothing in the Agreement prevents the Parties
from entering into identical or similar agreements on
terminal dues with third parties. The condition for
membership of the REIMS II Agreement thus does not
appear to represent a restriction of competition in itself
but would give rise to a restriction of competition if it
prevented third-party postal operators from having
access to REIMS II terminal dues.

8.3. Effect on trade

(103) The REIMS II Agreement concerns the remuneration for
the delivery of incoming cross-border mail services and
therefore has an effect on trade between Member States
and on trade between the contracting Parties to the EEA
Agreement (54).

(104) In view of the importance of the REIMS II Parties on the
markets for incoming cross-border mail between their
respective countries, that effect should be regarded as
appreciable.

(52) Source: Parties’ answers to Commission’s formal request for

information of 6 August 2001.

(53) See recital 65 of the 1999 Exemption Decision.
(54) See decison in Deutsche Post II, recital 179.

(106) The REIMS II Agreement has the effect of increasing the
correlation between terminal dues and the Parties’ costs
for the delivery of incoming cross-border mail (55).

(107) If terminal dues do not cover costs,

losses incurred
delivering incoming cross-border mail have to be
covered, making use of profits generated by domestic
mail or outgoing cross-border mail services. Postal
operators should be entitled to receive remuneration for
the delivery of cross-border mail which covers the costs
caused by that activity. A move towards a cost-based
system allows the postal operators to maintain and
improve their service of incoming cross-border mail
delivery.

(108) In light of the data on costs provided by the Parties, the
Commission acknowledges that the arrangement on
terminal dues in the fifth Supplementary Agreement
increases the correlation between the Parties’ costs for
the delivery of incoming cross-border mail and the
remuneration that they receive for the provision of this
service.

(109) As regards the ‘price-freeze’ provision, the multilateral
nature of the REIMS II Agreement means that the
terminal dues agreed by the 17 Parties cannot be fixed
in relation to each Party’s costs of processing and
delivering incoming cross-border mail. As a conse-
quence, it is more appropriate to look at the average of
the Parties’ costs rather than at their individual costs to
assess if and to what extent terminal dues are fixed in
relation to the costs of processing and delivering
incoming cross-border mail.

(55) See recital 69 of the 1999 Exemption Decision.

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(110) In light of the matters referred to in recital 109, the
Commission considers that the application of the ‘price-
freeze’ clause, which in any event
is to end after
2004, cannot be considered inconsistent with the above
analysis regarding the correlation between REIMS II
terminal dues and the Parties’ costs.

9.1.2.

Improvement in quality of service

(111) The main improvement produced by the REIMS II
Agreement
is the observed increase in the quality
of cross-border mail services, notably the delivery of
incoming cross-border mail. The link between terminal
dues payable to the receiving Party and improvements
in the quality of service is a strong incentive to improve
service quality.

(112) The receiving Party may onlyclaim higher terminal dues
from the other Parties if itmanages to meet the quality-
of-service targets set out in the REIMS II Agreement. If
the receiving Party does not meet the targets, penalties
considerably reduce the terminal dues to which it is
entitled.

(113) The data gathered in the course of the proceedings show
that since the 1999 Exemption Decision, the overall
quality of service for the delivery of incoming cross-
border mail by the Parties has improved substantially (56).

(114) It has been questioned whether those improvements in
quality of service for cross-border mail have causes other
than the implementation of the REIMS II Agreement,
notably improvements in quality of domestic mail
delivery.

(115) The available data show, however, that, since the entry
into force of the REIMS II Agreement, quality of service
for cross-border mail has improved more than quality
of service for domestic mail. For example in 1994 only
69,1 % of all cross-border letters were delivered within
three days of posting (J+3). By 2001, that figure had
risen to 92,0 % and by 2002 to 93,5 % (57). At the same
time the first paragraph of Article 17 of the Postal
Directive provides that Member States are to lay down
quality standards for national mail and ensure that

they are compatible with those laid down for intra-
Community cross-border services, namely 85 % of
J+3 (58). Accordingly, in the period in which the REIMS
II Agreement has been applied, cross-border mail has
achieved a quality of service substantially higher than
that imposed by the Postal Directive with respect to both
domestic and cross-border mail (59). That conclusion is
also confirmed by the data on quality of service provided
by the Parties. These data show that in the period
1999 to 2000 quality of service for the delivery of
incoming cross-border mail has reached, in most Mem-
ber States, a level which goes beyond what is imposed
by the Postal Directive (60).

(116) No specific quality-of-service targets have been set for
Level 3 access. However, the very essence of Level 3
access is that such mail should be treated like domestic
mail. Where there are quality-of-service targets for
domestic mail, they will thus be equally applicable to
the relevant incoming cross-border mail. In addition, the
REIMS II IDM Agreement introduces quality standards
for the delivery of international direct mail.

(117) The REIMS II Agreement will also stimulate the improve-
ment of outgoing cross-border mail quality. Article 3(8)
of the renotified REIMS II Agreement obliges the sending
operators to use their best efforts to afford outgoing
priority mail a quality of service which conforms to the
standards set out
in Annex 7 to that Agreement.
Pursuant to those provisions the Parties aim at achieving
a standard of 85 % J+1 by 2002, that is to say, 85 % of
outgoing priority cross-border mail should arrive at the
receiving operator’s office of exchange within one
working day after having been posted with the sending
Party (61).

9.2. Benefits for consumers

(118) The improvements referred to in recitals 105 to 117, in
particular the better quality of service for cross-border
mail, as well as the obligation for the Parties to give
access to competing postal operators to REIMS II
terminal dues at non-discriminatory conditions (62), are
beneficial for consumers. For the following reasons, the
Commission considers that the REIMS II Agreement will
allow consumers a fair share of the benefits resulting
from it.

(58) See the Annex to the Postal Directive.
(59) The fact that REIMS contributed to the improvement of the
quality of service in cross-border mail is specifically acknowl-
edged in the ‘Study on the Impact of Certain Aspects of the
Application of the Directive 97/67/EC on the Postal Sector’
the Commission in
conducted by Omega Partners
August 2001.

for

(60) See Annex I to this Decision.
(61) The target is slightly lower (80 %) for Greece, Iceland, Portugal

(56) See the table in Annex I.
(57) Source: UNEX official end-to-end results, Europe.

and Spain.
(62) See section 4.4.

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9.2.1. Reduced cross-subsidisation

(119) To the extent that the increases in terminal dues result
in remuneration which is closer to the actual costs of
delivering the mail, the REIMS II Agreement will entail a
reduction of possible cross-subsidisation. Since the users
of domestic mail or outgoing cross-border mail would
thus no longer (or at least to a lesser extent) have to
contribute to the cost of delivering incoming cross-
border mail, the PPOs will be able to adjust the tariffs
for domestic mail and outgoing cross-border mail where
appropriate.

9.2.2.

Increased quality of service

(120) Since terminal dues may only be increased if the quality
of service improves, any increases in tariffs for cross-
border mail due to the increase of terminal dues (63)
would be accompanied by improvements in the service
rendered or by the maintenance of the quality levels
already achieved. Consumers may therefore be expected
to get a fair share of the benefits if the quality of the
service improves (64).

9.2.3.

Low-cost alternative to terminal dues for bulk mail

(121) The REIMS II Agreement itself provides two possibilities
to reduce its financial impact, the Level 3 access and the
IDM Agreement.

(122) Whereas the level of terminal dues established pursuant
to the REIMS II Agreement is a percentage of domestic
tariffs for priority mail, Level 3 access offers the possi-
bility of benefiting from reduced domestic tariffs for
bulk mail. Level 3 mail is treated like domestic mail.
That possibility is of particular significance for bulk mail
but also for items such as newspapers.

(123) The Commission’s investigation with regard to Level 3
access has, however, shown the application of
the
Level 3 access to have been less than expected. One
reason appears to be that as long as terminal dues are
still comparatively low, there is no incentive for sending
PPOs and their customers to avail themselves of Level 3
access. During the period in which the previous exemp-
tion was in force terminal dues paid by the Parties have

remained low because of the 70 % limit imposed in the
1999 Exemption Decision and because of the appli-
cation of the penalties. The volume of cross-border
bulk mail making use of Level 3 access is however
progressively rising from only 34 million items in 1999
to more than 80 million items in 2001 and more than
120 million items in 2002.

(124) The Commission therefore considers that Level 3 access,
if implemented properly, constitutes a viable and less
costly alternative to terminal dues for the delivery of
cross-border bulk mail. Such alternative will contribute
in a substantial way to passing on to consumers the
benefits of the REIMS II Agreement. It appears therefore
necessary to make the granting of the present exemption
depend on satisfactory Level 3 access being granted,
both to the Parties and to third-party competing postal
operators (65), under the same terms set out in the 1999
Exemption Decision.

(125) Furthermore, to address the Commission’s concerns
regarding the lack of harmonisation between the differ-
ent domestic products for bulk mail, 15 out of the
17 Parties signed the REIMS II IDM Agreement on
24 January 2003.

(126) The IDM Agreement introduces the first harmonised
product for bulk mail which can be sold in almost all
the REIMS II countries. The IDM Agreement is applicable
only to a part of the overall bulk mail volumes, namely
direct mail. According to estimates given by the Parties,
of the more than 120 million items that REIMS II Parties
have received as incoming Level 3 mail from other
REIMS II Parties, around 75 % were direct mail items.
The Commission therefore considers that the implemen-
tation of the IDM Agreement, together with an effective
application of Level 3 access, will constitute low-price
alternatives to terminal dues and will allow consumers a
substantial share of the benefits produced by the REIMS
II Agreement.

9.2.4. Third-party access to terminal dues

(127) As will be explained in detail in recitals 145 to 157, the
Commission considers that an exemption cannot be
granted to the REIMS II Agreement unless third-party
postal operators competing with the Parties in the
outgoing cross-border mail markets from one REIMS II
country to another are granted access to REIMS II
terminal dues at non-discriminatory conditions.

(63) It is possible that increases in tariffs are decided by the national
regulators on the basis of different circumstances than increases
in terminal dues. Recital 120 is therefore valid also in these
particular circumstances since such increases of tariffs are not
causally linked to the increases of terminal dues.
(64) See recital 80 of the 1999 Exemption Decision.

(65) Third-party access to Level 3 rates also necessitates access for
third parties to the IPC database in which all the tariffs and
conditions relevant for Level 3 access are made available. See
recital 48.

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(128) The main reason for that consideration is that exempting
the REIMS II Agreement without avoiding important
price discrimination to the detriment of third parties
would result in a substantial elimination of competition
in the recently liberalised market of outgoing cross-
border mail forwarding. If third parties are not in a
position to compete with the Parties for outgoing mail
from one REIMS II country to another,
insufficient
competitive pressure would exist, ultimately resulting in
a detrimental situation for consumers.

(129) On the contrary, third-party access to REIMS II terminal
dues on non-discriminatory conditions strengthens the
likelihood of effective price and non-price competition
by third-party operators which will pay much lower
prices than before for the delivery of their incoming
cross-border mail items.

(130) Accordingly the choice of the consumer will be enriched
with new offers that will most probably be attractive
both on price and on non-price issues since third-party
operators need to compete more aggressively in order
to enter the market.

9.3.

Indispensability

9.3.1. The common level of terminal dues

(131) In order to qualify for an exemption pursuant

to
Article 81(3) of the EC Treaty and Article 53(3) of the
EEA Agreement, restrictions of competition must be
indispensable to the attainment of the relevant objec-
tives. That presupposes that the levels of terminal dues
agreed upon by the Parties reflect the actual delivery
costs. As explained in the 1999 Exemption Decision, the
REIMS II Agreement does not establish a direct link
between terminal dues and actual costs, but expresses
terminal dues as a percentage of domestic tariffs.

(132) Accordingly, the Commission considers that the con-
clusion of an agreement setting terminal dues at the
same percentage of domestic tariffs and upon the
same conditions for all the Parties continues to be
indispensable in order to attain the benefits aimed at by
the Parties. Although the Parties could have concluded
bilateral agreements on terminal dues, it appears unlikely
that such agreements would have attained as quickly
and as efficiently the benefits in terms of quality of
service improvements which the present Agreement
produces.

(133) Although the Commission accepts that the conclusion
of the REIMS II Agreement may be considered indispens-
able for attaining the objectives pursued, it should be
verified whether the level of terminal dues agreed is
indispensable in this respect.

(134) In the 1999 Exemption Decision the Commission
considered that due to the lack of a cost accounting
system enabling them to calculate precisely the cost of a
particular service the Parties were not able to prove that
80 % of the domestic tariffs corresponded to the costs
of delivering incoming cross-border mail (66).

(135) Since the 1999 Exemption Decision, the Parties have
developed cost accounting systems which allow them to
collect and elaborate accounting data on the costs of
incoming cross-border mail delivery.

(136) The cost data provided by the Parties show that approxi-
mately half of the parties have cost-to-revenue ratios
lower than 80 % (67).

(137) Taking into account those elements, the Commission
considers that the Parties have failed to demonstrate that
80 % of the domestic tariffs is a sufficiently accurate
approximation of the cost of delivering incoming cross-
border mail. Increasing terminal dues to 80 % is thus
not indispensable for the achievement of the positive
effects which the REIMS II Agreement is expected to
produce.

(138) On the other hand, the Commission accepts that the level
of terminal dues should, on average, allow operators to
cover their costs of delivery. An increased correlation
between terminal dues and Parties’ costs for the delivery
of incoming cross-border mail is one of the improve-
ments that the REIMS II Agreement produces. The
Commission considers it to be justified to allow the
Parties to apply, during the period covered by the present
exemption, terminal dues corresponding, on average, to
the weighted average of the Parties’ costs over the entire
period (68).

(139) The Commission also acknowledges that

important
investments have been made by the Parties in order to
meet the quality targets set out in the REIMS II Agree-
ment and that such investments have, on average,
increased their costs for the delivery of incoming cross-
border mail.

(66) See recitals 86 and 88 of the 1999 Exemption Decision.
(67) The relevant data are gathered from the Parties’ answers to the
Commission’s request for information, which were received on
24 September 2001.

(68) Weighted average is obtained by multiplying the cost-to-revenue
ratio of each Party by a weighting factor, which is obtained on
the basis of the volumes of incoming cross-border mail processed,
and then calculating the average value.

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(140) Finally, the Commission also recognises that the terminal
dues set out in the fifth Supplementary Agreement (69)
are only the gross values to be applied and are subject to
substantial reductions where penalties are applied. In
that regard, in 2002 the application of the penalties
system excluded 10 out of the 17 Parties from the
application of the full terminal dues set out in the REIMS
II Agreement.

(141) In light of the matters set out in recitals 131 to 140, the
Commission considers that the terminal dues levels
set out
in the fifth Supplementary Agreement are
indispensable in order to achieve the increases in quality
of service as well as the increased correlation between
terminal dues and the Parties’ costs for the delivery of
incoming cross-border mail.

9.3.2. The ‘geographic coverage’ clause

(142) The renotified REIMS II Agreement contains a ‘geo-
graphic coverage’ clause which provides that 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 for
the delivery of that mail, the Party may ask for a
renegotiation of the terminal dues paid by the sending
PPO (70).

(143) That provision is aimed at avoiding an imbalance
between the terminal dues received by the delivering
PPO and its costs for the delivery of incoming cross-
border mail. Such imbalances would reduce the corre-
lation between the costs of the receiving PPO and the
remuneration it receives thus eliminating one of the
major improvements produced by the REIMS II Agree-
ment. In the second place, such an imbalance could also
have the effect of increasing the universal service burden
of the receiving PPO thus possibly threatening its ability
to fulfil its universal postal service obligation.

9.4. Non-elimination of competition

(145) The REIMS II Agreement is only open to universal
service providers (71), which means that other postal
operators are barred from being signatories to the
Agreement. Although nothing in the REIMS II Agree-
ment prevents the Parties from entering into identical or
similar agreements on terminal dues with third parties,
none have done so until now and several Parties have
indeed stated that they do not have any intention to
conclude such agreements.

(146) Given the restriction of competition between REIMS II
parties for the outgoing cross-border mail from one
REIMS II country to another as a result of the commonly
agreed level of terminal dues and the non-discrimination
clause contained in Article 2(11) of
the REIMS II
Agreement, there is a risk that that Agreement will
eliminate competition on a substantial part of the market
for outgoing cross-border mail
from one REIMS II
country to another.

(147) The Amending Directive has legally opened to compe-
tition outgoing cross-border mail in most Member States
from 1 January 2003. Without access to delivery services
on equivalent or more favourable terms in receiving
countries, private competitors would be unable to
compete on price with the sending REIMS II Parties for
outgoing cross-border mail between REIMS II countries.

(148) At present, a private operator competing with a REIMS
II Party in the markets for outgoing cross-border mail
has two alternatives:

a)

b)

turning the mail over to the sending PPO in the
country of origin and paying the full international
tariff; or

transporting the mail itself to the receiving country
where the mail is handed over to the incumbent
REIMS II Party and the full domestic tariff
is
paid (72).

(144) The Commission therefore considers that, to the extent
that the conditions for a renegotiation of the terminal
dues are met and that
the new terminal dues are
proportionate to the new geographical cost structure of
mail delivered by the invoking Party, the ‘geographical
coverage’ clause is indispensable for the attainment of
the improvements produced by the REIMS II Agreement.

(149) Removing the national monopolies for outgoing cross-
border mail while allowing the REIMS II Parties to deny
competitors access on non-discriminatory terms for
delivery of incoming cross-border mail would, therefore,
negate the procompetitive impact of the market opening
for outgoing cross-border mail.

(69) See section 4.5.
(70) Article 11(4) to (7) of the REIMS II Agreement as amended by

(71) Article 9 of the REIMS II Agreement as amended by the fourth

Supplementary Agreement.

(72) The only exception is Sweden where alternative providers of

Article 2(2) of the fourth Supplementary Agreement.

delivery services are being used.

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(150) If competition between the parties to an agreement is
eliminated or severely curtailed, an exemption will
depend on the intensity of third-party competition (73).
Because none of the Parties have granted access to
terminal dues on REIMS II terms to competing postal
operators, it is very difficult, if not impossible, for the
latter to compete on price with the Parties in the markets
for outgoing cross-border mail between REIMS II
countries, since they would always have to pay 100 %
of the domestic tariffs in the country of delivery or the
full international tariff in the country of origin.

(154) As mentioned in recital 152, third parties must be
given access to REIMS II terminal dues under non-
discriminatory conditions. As regards the remuneration
for the delivery of outgoing cross-border mail conveyed
by them, these operators should therefore be treated on
a similar basis as REIMS II Parties.

(155) That means that any unjustified difference between the
treatment of third parties and that applied by the Parties
to each other is not in line with that requirement.

(151) In other words, the price that third parties must pay for
delivery would always exceed the price for REIMS II
Parties. There is thus insufficient competitive pressure
from third parties which would help to neutralise
the negative effects of the elimination of competition
between the REIMS II Parties. In order to create a viable
competitive alternative to the Parties for outgoing cross-
border mail in REIMS II countries, competing postal
operators should therefore be granted equal access to
the terminal dues applicable to the Parties.

(152) In the absence of such an opportunity for non-REIMS II
parties, the restrictive effects of the REIMS II Agreement
in the outgoing cross-border mail market could result in
a possible elimination of competition within the mean-
ing of Article 81(3)(b) of the EC Treaty and Article 53(3)
of the EEA Agreement. Therefore, an exemption should
not be granted in respect of the REIMS II Agreement
unless non-REIMS II postal operators are granted access
to the incoming cross-border mail delivery provided by
the REIMS II Parties on conditions which are non-
discriminatory as compared to those offered to the other
Parties. Terminal dues and other conditions offered to
third-party postal operators need not be better than
those offered to the REIMS II Parties.

(153) This analysis only applies to cross-border mail as defined
in section 5 on market definition. Cross-border mail is a
service which is distinct and separate from domestic
mail. As a consequence, this analysis does not apply in
the event that third-party operators request that dom-
estic mail be delivered at terminal dues rates.

(156) In particular, the Commission considers justified that, in
order to have access to REIMS II terminal dues, third-
party postal operators should comply with operational
requirements set forth in the REIMS II Agreement.

(157) The Commission also considers justified that terminal
dues payable by third-party postal operators may, in
some cases, exceed those payable by the Parties. This is
the case where the Parties are able to demonstrate that
the cost of administering REIMS II, the cost of setting up
and operating the quality-of-service monitoring system,
the extra cost incurred by accepting mail items from
non-UPU members and other such costs are not covered
by the terminal dues paid by the sending operator. This
is also the case where the Parties are able to demonstrate
that the cost of handling mail items forwarded by third-
party postal operators exceeds the costs of handling mail
forwarded by the Parties.

9.5. Conclusion on Article 81(3) of the Treaty and
Article 53(3) of the EEA Agreement

(158) For the reasons set out in recitals 105 to 157, the
Commission considers that the requirements for exemp-
tion pursuant to Article 81(3) of the EC Treaty and
Article 53(3) of the EEA Agreement are fulfilled, pro-
vided that certain conditions are met.

10. DURATION OF THE EXEMPTION CONDITIONS AND
OTHER REQUIREMENTS IMPOSED BY THE COMMISSION

(73) See Commission Decision 83/390/EEC in Case No IV/30.437
Rockwell v Iveco (OJ L 224, 17.8.1983, p. 19);
judgment of
the Court of Justice in Case C-75/84 Metro SB-Grossmärkte v
Commission [1986] ECR 3021, paragraphs 34 to 46; Commission
Decision 94/29/EC in Case No IV/29.420 Grundig’s EC distribution
system (OJ L 20, 25.1.1994, p. 15) recitals 39, 40 and 41.

(159) Article 8(1) of Regulation No 17 provides that a decision
in application of Article 81(3) of
the Treaty shall
be issued for a specified period and conditions and
obligations may be attached thereto.

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10.1. Duration

(160) In the 1999 Exemption Decision the Commission
limited the duration of the exemption to 31 December
2001 in order to make the exemption period come to
an end before the final increase in terminal dues from
70 to 80 % of domestic tariffs was implemented.
The reason was that the Commission had insufficient
evidence that terminal dues had to be increased to a
level of 80 % of domestic tariffs to enable the Parties to
cover their costs.

(161) In the present case, however, the Parties’ costs are known
to the Commission. It is therefore appropriate that the
exemption should cover a longer period of time than
the previous one. Accordingly the exemption should be
granted for a period of five years, from the date of the
expiry of the previous exemption. The exemption period
should therefore commence on 1 January 2002 and end
on 31 December 2006.

10.2. Amendments to the REIMS II Agreement at the
request of the Commission: level of terminal dues

(162) The Commission has come to the conclusion that the
Parties have failed to demonstrate that 80 % of the
domestic tariffs is a sufficiently accurate approximation
of the costs of delivering incoming cross-border mail.

(163) The Commission therefore considered that Article 2 of
the REIMS II Agreement should be amended so that
terminal dues for priority mail to be applied during the
period of the exemption are oriented to the weighted
average of the Parties’ costs for the delivery of inbound
cross-border mail over the period from 1 January 2002
to 31 December 2006.

(164) The Parties have already amended the REIMS II Agree-
ment in that respect. Following discussions with the
Commission, on 24 January 2003, the Parties signed the
fifth Supplementary Agreement.

(165) As referred to above (74), the fifth Supplementary Agree-
ment amends Annex 4 to the notified REIMS II Agree-
ment both as regards the duration of the transitional
period and the level of terminal dues to be applied. The
transitional period has been prolonged to 31 December
2006.

(74) See section 4.5.

(166) The terminal dues to be applied from 1 January 2002 to
the end of the transitional period have been amended as
follows: 73,3 % for 2002, 74,5 % for 2003, 75,7 % for
2004 and 78,5 % for 2005 and 2006. In that respect, the
Commission considers that a more gradual progressive
increase in terminal dues is a smoother and better
solution than abrupt increases. The Commission has
therefore evaluated the correlation between terminal
dues and the Parties’ costs with regard to the whole
period of the exemption. In this respect, the Commission
acknowledges that the average of the rates to be applied
over the entire five-year period corresponds to the
weighted average of the Parties’ costs for the delivery of
inbound cross-border mail (75).

(167) Having revised the cost data provided by the Parties with
regard to the delivery of incoming cross-border mail and
the data on quality of service achieved by the Parties in
2001 and 2002, the Commission considers that the
average value of terminal dues applicable during the
exemption period corresponds to the weighted average
of Parties’ costs for the inbound delivery of cross-border
mail (76). Also, the Commission has taken into account
that the terminal dues levels set out in the fifth Sup-
plementary Agreement are only gross values and that the
terminal dues actually payable are subject to substantial
reductions where penalties are applied. In conclusion,
the Commission considers that the terminal dues set out
in the fifth Supplementary Agreement correspond to a
sufficiently accurate approximation of the Parties’ costs.

10.3. Conditions

(168) In light of the analysis developed in Section 9 on the
applicability of Article 81(3) of the EC Treaty and
Article 53(3) of the EEA Agreement, the Commission
considers that, in application of Article 8 of Regulation
No 17, an exemption should only be granted in respect
of the REIMS II Agreement provided that certain con-
ditions are met.

(75) The cost data in question are gathered from the answers to the
Commission’s request for information of 6 August 2001 and
make reference to Parties’ costs for the delivery of incoming
cross-border mail in 2000.

(76) It has been specified by the Parties that the cost data submitted

to the Commission do not include any profit margin.

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10.3.1. Non-discriminatory third-party access

(169) The Commission considers that, following the liberalis-
ation of outgoing cross-border mail, the mechanism
contained in the REIMS II Agreement for the remuner-
ation of the delivery of incoming cross-border mail leads
to price discrimination in favour of the Parties and to
the detriment of third-party operators carrying outgoing
cross-border mail from one REIMS II country to another.

(170) Pursuant to Article 2(3) of the REIMS II Agreement, the
REIMS II Party in the country of delivery charges REIMS
II terminal dues 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.

(171) In the light of the matters referred to in recitals 145 et
seq., the Commission considers that each REIMS II
Party should provide to any third-party postal operator
competing with the REIMS II Parties for the provision of
outgoing cross-border mail services in any other REIMS
II country, delivery of incoming cross-border mail in its
country at terminal dues and under conditions which
are non-discriminatory as compared to those that the
REIMS II Party offers to the REIMS II Party(ies) in the
sender’s country.

(172) A detailed description of how the REIMS II Parties
should grant third-party access in order to comply with
this condition is set out in Annex V.

10.3.2.

Level 3 access

(173) As already referred to in the 1999 Exemption Decision,
the existence of a viable low-cost alternative to terminal
dues and in particular Level 3 access, are of considerable
importance to the consumer, since direct mail and
other types of commercial mail account for the most
important part of cross-border mail. Enabling sending
parties to benefit from the delivering operator’s domestic
tariffs for such mail is therefore essential to balance the
negative effects of the REIMS II Agreement.

(174) The investigation carried out has shown that Level 3
access is increasingly sought as the level of terminal
dues rises. Accordingly, the Commission considers it
necessary to include in this Decision the same require-
ment as in the 1999 Exemption Decision with regard to
Level 3 access (77).

(175) In order to facilitate Level 3 access, when such access is
requested by another Party or by a third-party postal
operator, the Parties should relax domestic conditions
where those rules are not justified and could in practice
bar the access to the domestic rates. Where it is not in
their power to do so, the Parties should use their best
efforts vis-à-vis the relevant national authorities to
remove those rules.

(176) In order to ensure that the Parties comply with that
requirement and grant each other and third-party postal
operators effective Level 3 access, it is necessary to make
the exemption subject to a condition to that effect.

(177) Moreover, the Commission has come to the conclusion
that, in addition to the application of Level 3 access,
there is a need for an increased degree of harmonisation
as far as cross-border bulk mail exchanged between
REIMS II countries is concerned.

(178) The Commission considers that with respect to the part
of bulk mail which falls under the definition of ‘direct
mail’ contained in the Postal Directive, the IDM product
may be considered a viable and less expensive alternative
to terminal dues.

(179) Level 3 access, delivery of international direct mail at
IDM conditions and any other special bulk mail rates
that the Parties will offer each other in the framework of
the REIMS II Agreement should also be offered, under
non-discriminatory conditions,
to third-party postal
operators competing with the Parties for outgoing cross-
border mail from any REIMS II country to any other
REIMS II country.

(180) The Commission considers that the measures relating to
Level 3 access and the IDM product provide both the
Parties and their competitors in outgoing cross-border
mail markets with low-cost alternatives to REIMS II
terminal dues.

(181) In order to ensure that the Parties comply with that
it is necessary to make the exemption

requirement,
subject to a condition to that effect.

(77) Article 2(6) of the REIMS II Agreement obliges the Parties to

grant such access to other Parties.

(182) This Decision is without prejudice to the application of
Article 82 of the Treaty and Article 54 of the EEA
Agreement,

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HAS ADOPTED THIS DECISION:

Article 4

Article 1

Exemption

Pursuant

to Article 81(3) of

the EC Treaty and
1.
Article 53(3) of
the provisions of
the EEA Agreement,
Article 81(1) of the Treaty and Article 53(1) of the EEA
Agreement are declared inapplicable to the REIMS II (remuner-
ation of mandatory deliveries of cross-border mails) Agree-
ment, as amended for the last time by the fifth Supplementary
Agreement of 24 January 2003, from 1 January 2002 until
31 December 2006.

2.
The exemption provided for in paragraph 1 shall be
subject to compliance with the conditions set out in Articles 2
and 3.

Article 2

Level 3 access between the REIMS II Parties

The Parties to the Reims II Agreement shall take all the
necessary steps in order to grant each other effective access to
the generally available domestic rates in the country of delivery
(Level 3 access). In order to facilitate such access, the Parties
shall relax domestic rules for other Parties where such rules
are not justified and could in practice prevent other Parties
from having Level 3 access.

Where it is not in their power to relax domestic rules, the
Parties shall use their best efforts vis-à-vis the relevant national
authorities to remove those rules.

Article 3

This Decision is addressed to:

Österreichische Post AG
Postgasse 8
A-1011 Wien

Poste Italiane SpA
Viale Europa 175
I-00144 Rome

De Post/La Poste
Muntcentrum/Centre Monnaie Télécommunications
8a, Avenue Monterey
B-1000 Brussels
L-2020 Luxembourg

Entreprise des Postes &

Post Danmark AS
Headquarters
Tietgensgade 37
DK-1566 Copenhagen V

Finland Post Corporation
(Suomen Posti Oyj)
Postintaival 7
FI-00230 Helsinki

Posten Norge AS
Biskop Gunnerusgt 14
NO-0001 Oslo, Norway

CTT Correios de Portugal, SA
Rua de José, 20
P-1166-001 Lisboa

La Poste
Siège social
44 boulevard de Vaugirard
F-75757 Paris Cedex 15

Sociedad Estatal Correos y
Telégrafos, SA
Vía de Dublín 7
E-28070 Madrid

Deutsche Post AG
Zentrale
Charles-de-Gaulle-Str. 20
D-53113 Bonn

Hellenic Post ELTA
1 Apellou Street
GR-10188 Athens

Iceland Post
Storhofdi 29
IS-110 Reykjavik, Iceland

Posten Sverige AB
S-105 00 Stockholm

Royal Mail Group plc
148 Old Street
London EC1V 9HQ,
United Kingdom

An Post
General Post Office
O’Connell Street
Dublin 1, Ireland

Non-discriminatory third-party access to REIMS II ter-
minal dues and conditions

Done at Brussels, 23 October 2003.

The Parties shall grant third-party postal operators competing
with the Parties for the provision of outgoing cross-border
mail services in any other REIMS II country access to terminal
dues and other special arrangements on the same conditions
as those applied to other Parties, in accordance with Annex V.

For the Commission

Mario MONTI

Member of the Commission

24.2.2004

EN

Official Journal of the European Union

L 56/97

ANNEX I

Quality-of-service improvements

(Business secrets)

REIMS
penalty
threshold
2001

On-time %
performance
2001

REIMS
penalty
threshold
2002

On-time %
performance
2002

Progress
2002 vs
2001

93

93

93

93

93

93

93

93

93

93

93

90

90

90

91,5

85

80

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

93

93

93

93

93

93

93

93

93

93

93

90

90

90

93

85

85

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

[...] (*)

AT

BE

CH

DK

FI

IE

IS

LU

NO

SE

DE

FR

UK

IT

PT

ES

EL

Österreichische Post

The Belgian Post Group

Swiss Post

Post Denmark

Finland Post Corporation

An Post

Iceland Post

Postes et Télécommunications

Posten Norge

Posten

Deutsche Post

La Poste

Royal Mail Group plc

Poste Italiane

CTT Correios de Portugal

Correos y Telégrafos

Hellenic Post ELTA

(*) Business secrets.

L 56/98

EN

Official Journal of the European Union

24.2.2004

ANNEX II

Parties’ cost-to-revenue ratios

Austria

United Kingdom

Spain

Luxembourg

Portugal

Belgium

Ireland

Finland

Norway

Denmark

France

Greece

Sweden

Germany

Italy

Iceland

24.2.2004

EN

Official Journal of the European Union

L 56/99

ANNEX III

Structure of the outgoing cross-border mail markets (1)

Market
volume
(× 1 000) (2)

USP’s share

Main competitors

8 500

[...] (*)

1. Deutsche Post AG; 2. TNT; 3. Globe Mail

10 357

[...] (*)

1. La Poste Fr.; 2. TNT (Mailfast); 3. DHL International; 4. Royal
Mail; 5. Belgian Mailhouse (A. Baeke)

Austria

Belgium

Denmark

9 905

[...] (*)

1. DHL; 2. TNT; 3.
4. Deutsche Post AG; 5. Sweden Post

IRS (International Remail System);

Finland

France

2 258

[...] (*)

1. DHL; 2. TNT; 3. UPS

31 900

[...] (*)

Germany

25 997

[...] (*)

1. TNT; 2. UPS; 3. FedEx; 4. Logitrans; 5. Post Office Inter-
national Services; 6. Swiss Post

Greece

Iceland

Ireland

3 102

[...] (*)

None

3 310

[...] (*)

DHL

6 110

[...] (*)

1. Royal Mail plc; 2. Deutsche Post World Net; 3. DHL; 4. TNT;
5. Transnet Ltd

Italy

11 092

[...] (*)

1. Swiss Post; 2. TNT; 3. DHL; 4. UPS; 5. Royal Mail

Luxembourg

4 821

[...] (*)

N/A

Norway

Portugal

Spain

Sweden

2 523

[...] (*)

1. DHL; 2. TNT

3 979

[...] (*)

1. DHL; 2. TNT; 3. SEUR; 4. Chronopost

11 940

[...] (*)

1. DHL; 2. TNT; 3. SEUR; 4. Royal Mail; 5. IFCC

6 361

[...] (*)

Switzerland

17 032

[...] (*)

N/A

United Kingdom

45 271

[...] (*)

1. Deutsche Post; 2. La Poste Fr.; 3. Swiss Post; 4. Mercury
International; 5. Pharos International Ltd

(*) Business secrets.

(1) The data contained in the table are contained in the business secrets Annex to the notification and relate to the year 2000.
(2) From REIMS II countries.

L 56/100

EN

Official Journal of the European Union

24.2.2004

ANNEX IV

Structure of the incoming cross-border mail markets (1)

Market
volume
(× 1 000) (2)

USP’s share

Main competitors

Austria

Belgium

109 235

[...] (*)

119 478

[...] (*)

BD (Belgique Diffusion) Direct

Denmark

80 658

[...] (*)

1. DHL; 2. TNT; 3. Forbruger Kontaky; 4. Dansk Total
Distribution; 5. Dansk Distributionscenter

Finland

France

34 536

[...] (*)

1. DHL; 2. TNT; 3. UPS

272 000

[...] (*)

Germany

482 492

[...] (*)

1. Royal Mail; 2. TNT; 3. La Poste Fr.; 4. Swiss Post; 5. Mercury
Post

Greece

Iceland

Ireland

Italy

22 085

[...] (*)

None

1 870

[...] (*)

DHL

124 700

[...] (*)

1. DHL; 2. TNT; 3. Erin Swiftpost Ltd 4. Transnet Ltd

168 491

[...] (*)

None

Luxembourg

26 912

[...] (*)

N/A

Norway

Portugal

Spain

Sweden

53 847

[...] (*)

None

33 382

[...] (*)

1. DHL; 2. TNT; 3. SEUR; 4. Chronopost

134 196

[...] (*)

1. DHL; 2. SEUR; 3. UPS; 4. MRW; 5. TNT

75 661

[...] (*)

Switzerland

192 418

[...] (*)

N/A

United Kingdom

198 997

[...] (*)

1. DHL; 2. TNT 3. FedEx; 4. UPS; 5. Deutsche Post AG

(*) Business secrets.

(1) The data contained in the table are contained in the business secrets Annex to the notification and relate to the year 2000.
(2) From REIMS II countries.

24.2.2004

EN

Official Journal of the European Union

L 56/101

ANNEX V

Non-discriminatory third-party access

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 that:

i)

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 transited;

ii)

are competitors of the REIMS II Parties for the provision of these services; and

iii)

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),

— 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,

— pay the delivering REIMS II Party’s domestic rates for mail items tendered under this obligation that fall

under the exception set out below,

— upon request, post adequate security for such payments,

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

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

by the REIMS II Party.

This obligation does not apply to domestic mail. Furthermore, 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.

The same conditions regarding third-party access apply to any other special arrangements on tariffs and rates
to be applied between REIMS II Parties contained in the Agreement. This is in particular true as regards
conditions of access to Level 3 rates and for delivery of cross-border direct mail in accordance with the REIMS
II IDM Agreement. Such rates must be made available to third-party operators competing with REIMS II Parties
for the provision of outgoing cross-border mail services in any other REIMS II country, on conditions which
are non-discriminatory as compared to those that the delivering REIMS II Party offers to the REIMS II Party in
the sender’s country.

(1) Currently UNEX and Diagnostic.