Report from the Commission to the Council and the European Parliament on the application of the Postal Directive (Directive 97/67/EC as amended by Directive 2002/39/EC) {SEC(2008) 3076}
Date: 2008-12-22
Institutions: European Commission
Subjects: application of EU law, competition, liberalisation of the market, market supervision, national implementing measure, postal service

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 22.12.2008 
COM(2008) 884 final 

REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN 
PARLIAMENT 

on the application of the Postal Directive 
(Directive 97/67/EC as amended by Directive 2002/39/EC) 

{SEC(2008) 3076} 

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REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN 
PARLIAMENT 

on the application of the Postal Directive 
(Directive 97/67/EC as amended by Directive 2002/39/EC) 

1. 

Background and purpose of this report  

The  Community  framework  for  EU  postal  services  is  set  out  in  Directive  97/67/EC  as 
amended by Directive 2002/39/EC (hereafter referred as “the Postal Directive”)1. Article 23 
of  the  Postal  Directive  requires  the  Commission  to  report  on  the  application  of  the  Postal 
Directive to the European Parliament and Council “every two years”. It also requires that this 
report should include “appropriate information” on market developments including technical, 
social, employment and quality of service aspects. 

Regular market monitoring and reporting is an important element for the full accomplishment 
of  a  postal  Internal  Market  in  order  to  identify  any  shortcomings  and  problems  in  due  time 
and  to  be  able  to  take  appropriate  (legal)  actions  when  necessary  and  implement  corrective 
measures. Market monitoring has also been essential to be able to proceed with the EU Postal 
Reform  in  a  transparent  manner  and  to  establish  if  it  has  generated  the  desired  effects  and 
benefits. It should be recalled that the previous Application Reports played an important role 
in the legislative process of Directive 2008/6/EC. 
The  Commission  provided  its  first  Application  Report  in  November  20022,  its  second 
Application  Report  in  March  20053  and  a  third  Application  Report  in  October  20064.  As  in 
the case of previous Application Reports, this Report provides a comprehensive assessment of 
the overall transposition of the Postal Directive in Member States, including the application of 
key elements of the Postal Directive and regulatory developments as well as detailed market 
trends (including economic, technical, social, employment and quality of service aspects). The 
Report describes the main developments since the last Application Report adopted in October 
2006 and covers the reporting period 2006 – 2008. 

The Report is accompanied by a Commission Staff Working Paper containing more detailed 
information on regulatory and market developments. The Report from the Commission to the 
Council and the European Parliament on the Application of the Postal Directive presents the 
conclusions of the Commission Staff Working Paper in a concise form. The Report and the 

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Directive 97/67/EC of the European Parliament and the Council of 15 December 1997 on common rules 
for  the  development  of  the  internal  market  of  Community  postal  services  and  the  improvement  of 
quality of service, OJ L 15, 21.01.1998, p. 14; Directive 2002/39/EC of the European Parliament and of 
the  Council  of  10  June  2002  amending  Directive  97/67/EC  with  regard  to  the  further  opening  to 
competition of Community postal services, OJ L 176, 5.7.2002, p. 21. 
Report  from  the  Commission  to  the  European  Parliament  and  the  Council  on  the  Application  of  the 
Postal Directive (97/67/EC), COM (2002) 632 final. 
Report  from  the  Commission  to  the  European  Parliament  and  the  Council  on  the  Application  of  the 
Postal  Directive  (97/67/EC  as  amended  by  Directive  2002/39/EC),  COM  (2005)  102  final  and  SEC 
(2005) 388. 
Report  from  the  Commission  to  the  European  Parliament  and  the  Council  on  the  Application  of  the 
Postal  Directive  (97/67/EC  as  amended  by  Directive  2002/39/EC),  COM  (2006)  595  final  and  SEC 
(2006) 1293. 

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detailed analysis contained in this Commission Staff Working Paper both draw on the recent 
study by ECORYS on the Main Developments in the Postal Sector (2006-2008)5. 

The reporting period is of a particular relevance for the postal sector in the EU, as a number of 
decisive  developments  took  place  in  the  short  timeframe  this  Report  is  covering:  First, 
Germany – by far the biggest single (national) postal market in the EU – fully liberalised its 
postal market on 1 January 2008. Second, an evaluation of the full market opening in the UK, 
which took place on 1 January 2006, seems now possible and is in fact being undertaken by 
independent  experts  in  the  UK.  Third,  the  effects  of  the  reduction  of  the  threshold  for  the 
reserved  area  to  50  grams  by  1  January  2006  throughout  the  EU  –  which  is  the  last 
intermediate step before the full market opening – can now be assessed. 

Last but not least it should be recalled that in February 2008 the Council and the European 
Parliament  adopted  Directive  2008/6/EC  further  amending  the  Postal  Directive  (hereafter 
referred to as "the Third Postal Directive")6. The Third Postal Directive sets a deadline for the 
full market opening by 31st December 2010 for the majority of Member States (in fact, 95% 
of the EU postal markets in terms of volumes) and by 31st December 2012 for the remaining 
Member  States.  The  Third  Postal  Directive  thus  provides  the  legal  basis  for  the 
accomplishment of the  internal  market for postal services. This important decision taken by 
broad consensus by the European Parliament and Council is not only concluding the reference 
period of this report but also adding an essential perspective to it. More modestly the purpose 
and scope of this Report  is  not to provide an outlook on the application of the  Third Postal 
Directive – that will require a substantial effort of all stakeholders to be put into full effect – 
but  to  report  on  the  application  of  the  current  Postal  Directive  over  the  reference  period. 
Where appropriate, an outlook and trends will nevertheless be provided. 

2. 

The importance of postal services and their changing role 

Postal services are a significant industry in the EU economy. In 2004, postal services in the 
EU  earned  about  90  billion  EUR  or  approximately  1%  of  EU  GDP7.  The  postal  services 
sector  is  also  an  important  employer  with  around  1.6  million  people  employed  directly  by 
operators in 20068. 

At  the  crossroads  between  communications,  advertising  and  transport,  postal  services  are, 
together with other transport, logistics and communication services, a key industry for the EU 
economy. In addition, postal services provide along social benefits which cannot be quantified 
in economic terms. They are an important means by which individuals can communicate with 
each  other  and  receive  information.  Postal  services  are  considered  a  service  of  general 
economic interest.  

The  postal  sector  is  evolving  substantially.  At  the  end  of  the  first  decade  of  the  new 
millennium,  postal  operators  are  facing  fierce  competition  from  electronic  means  of 
communication. This is forcing them to adapt their businesses to better respond to customers 
needs and to improve efficiency. Moreover, with the continuous opening of the postal services 
markets,  the  incumbent  postal  operators  are  also  facing  increasing  competition  from  new 

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The study will be available on the following website: 
http://ec.europa.eu/internal_market/post/studies_en.htm.  
Directive  2008/6/EC  of  the  European  Parliament  and  of  the  Council  of  20  February  2008  amending 
Directive 97/67/EC with regard to the full accomplishment of the internal market of Community postal 
services, OJ L 52, 27.2.2008, p. 3. 
"Main developments in the European postal sector (2004-2006)", WIK-Consult, May 2006. 
"Main developments in the European postal sector (2006-2008)", ECORYS, 2008. 

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entrants.  In  response  to  these  developments,  postal  operators  have  substantially  improved 
their  efficiency  by  restructuring  their  operations  thus  resulting  in  costs  control  and  better 
quality  of  service.  Restructuring  of  mail  handling  processes  in  turn  has  often  resulted  in  or 
was induced by the development of new products and concepts.  

Physical mail is increasingly being supplemented by multi-channel delivery and tailor-made 
solutions  for  customers.  One  example  of  this  is  the  development  of  hybrid  mail  services 
which are now offered by most postal operators. Some postal operators even go a step further 
and  are  entering  adjacent  markets  through  developing  IT  services  for  their  customers.  The 
development of new and value-added services is a reaction to the threat of e-substitution and 
the opportunities arising from the development of technology.  

Postal  services  are  a  crucial  element  of  the  EU's  single  market  policy  and  had  also  been 
included  in  the  Lisbon  Strategy  for  growth  and  jobs  that  was  fundamentally  re-launched  in 
20059.  The  Commission's  Communication  on  a  single  market  in  the  21st  century  Europe10 
emphasises that initiatives on network industries, such as postal services, are showing results 
on  the  ground  once  they  are  fully  implemented.  Yet  more  can  be  done.  There  is  broad 
consensus that the sustainable provision of services of general economic interest, especially in 
a relation to the postal sector and other liberalized network industries, can best be ensured in a 
competitive market and with the development of the European single market.  

3. 

The application of the postal directive and regulatory developments 

All Member States have transposed Directive 97/67/EC as amended by Directive 2002/39/EC 
through a series of primary and secondary postal law. Compared to the situation described in 
the 2006 Application Report, Estonia, where transposition had been underway, has now also 
transposed both Directives.  

However,  formal  transposition  is  merely  the  first  step  in  the  full  implementation  of  the 
Community framework. The practical application of the provisions of the Postal Directive and 
its impact on postal service operators and the sector are of equal importance. 

The following main regulatory developments can be observed during the reporting period.  

–  Germany fully opened its postal market as of 1 January 2008. To date four Member States 
have  thus  abolished  the  reserved  area  before  the  date  foreseen  in  the  Postal  Directive 
(Germany,  Finland,  Sweden,  UK).  The  liberalisation  of  the  German  postal  market 
coincided  with  the  introduction  of  a  statutory  minimum  wage  in  the  postal  sector  in 
Germany.  According  to  ECORYS  the  minimum  wage  is  significantly  higher  than  the 
wages currently paid by alternative postal operator(s) and its introduction could well have 
an adverse effect on the development of competition. 

–  However,  there  seems  to  be  a  certain  slowdown  as  far  as  further  market  openings  are 
concerned. The Netherlands, where full market opening was envisaged has now postponed 
liberalisation  without  setting  any  concrete  date  for  full  market  opening.  A  number  of 
arguments  have  been  put  forward  by  the  Netherlands  government  for  this  indefinite 
postponement. These  include the  labour conditions  of  the  main  competitors  of  the  Dutch 
postal incumbent operator, the absence of a level playing field for postal operators due to 

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Presidency Conclusions, Brussels European Council, 22/23 March 2005.  
Communication from the Commission to the European Parliament, the Council, the European 
Economic and Social Committee and the Committee of the regions, A single market for the 21st century 
Europe, COM(2007) 724 final: 
http://eur-lex.europa.eu/LexUriServ/site/en/com/2007/com2007_0724en01.pdf 

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VAT  exemptions11  for  the  incumbent  postal  operators  in  Germany  and  the  UK  and  the 
introduction  of  a  minimum  wage  in  the  postal  sector  in  Germany  raising  costs  of  new 
entrants  in  the  postal  market.  While  these  arguments  may  be  persuasive  from  a  political 
perspective, any legal evaluation has to look at their compatibility with the existing acquis 
and, in particular, Article 7 of the Postal Directive. This Article states that Member States 
may  continue  to  reserve  services  to  the  universal  service  provider(s)  only  to  the  extent 
necessary to ensure the maintenance of the universal service. This provision, thus, does not 
refer to reciprocity situations or other elements present in the national legislative or factual 
context. 

–  As  regards  the  development  of  competition  in  the  postal  sector,  there  is  now  a  trend 
towards  (mandatory  or  negotiated)  access  to  the  delivery  network  by  competitors.  In  the 
majority  of  Member  States,  the  incumbent  postal  operator  has  the  obligation  to  provide 
access  subject  to  appropriate  terms  and  conditions,  where  these  are,  in  the  first  instance 
determined through negotiations and, if these fail, they can (or have to) be determined by 
the National Regulatory Authority.  

–  Progress towards reducing legal barriers to entry and levelling the playing field has been 
mixed.  The  distortive  effect  of  the  VAT  postal  exemptions  on  competition  has  largely 
remained,  even  though  the  Commission  proposed  a  relevant  amendment  of  the  6th  VAT 
Directive12 in 2003.  13 The lack of access to letterboxes by competitor postal operators is 
still  a  crucial  issue  in  some  Member  States.  The  definition  of  the  Universal  Service 
Obligation  and  its  future  financing  could  also  lead  to  uncertainties  for  postal  operators, 
especially if implementing national legislation does not provide a clear legal basis (e.g. in 
relation  to  the  scope  of  the  Universal  Service  Obligation).  Authorisation  and  licensing 
procedures  and  related  conditions  are  not  always  conducive  to  the  development  of 
competition. In some cases conditions attached to an authorisation or license might even be 
considered prohibitive, as for example in Finland where a postal operator wishing to obtain 
a license is obliged to provide a full universal service or to pay a special "tax", which can 
amount from 5 to 20 % of its yearly turnover. As a matter of fact, the licensing regime has 
effectively blocked competition in addressed mail delivery in Finland.  

Other observations and conclusions from the 2006 Application Report remain valid.  

The  level  of  transparency  of  Universal  Service  Providers'  cost  data  and  accounting  is  still 
extremely varied and therefore very inconsistent across Member States. It seems that the main 
requirements of Article 14 of the Postal Directive are being met (separate accounts for each of 
the services within the reserved area on the one hand, and for the non-reserved services on the 
other).  However,  it  is  less  certain  whether  the  requirements  of  Article  12,  in  particular 
ensuring that tariffs for each service under the universal service obligation are geared to cost, 
are being met.  

It has been confirmed by the Community legislator that well-functioning National Regulatory 
Authorities  (NRAs)  are  crucial  for  the  accomplishment  of  an  internal  market  for  postal 

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More  on  the  issue  of  VAT  exemption  below  and  in  point  3.5.3.  of  the  Commission's  Staff  Working 
Paper. 
Sixth Council Directive 77/388/EEC of 17 May 1977 of the harmonization of the laws of the Member 
States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, OJ 
1977 L 145, p.1, which was replaced as from 1 January 2007 by Council Directive 2006/112/EC of 28 
November  2006,  on  the  Common  system  of  value  added  tax,  OJ  L  347,  11.12.2006,  p.  1.  The  latter 
Directive is effectively a recast of the Sixth Council Directive of 1977 as amended over the years. 
Proposal  for  a  Council  Directive  amending  Directive  77/388/EEC  as  regards  value  added  tax  on 
services provided in the postal sector, COM(2003) 234 final, as amended by COM (2004) 468 final. 

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services. Whereas all Member States have established formally independent NRAs, it can be 
observed  that  the  mandate,  resources  and  powers  of  the  NRAs  vary  significantly  among 
Member  States  and  there  are  justified  doubts  whether  all  NRAs  are  adequately  equipped  to 
(efficiently) fulfil their tasks.  

Market trends 

4. 
Addressed  mail  volumes  have  continued  to  grow  in  the  postal  market  from  2004  to  200614. 
Volume  growth  was  more  pronounced  in  the  new  Member  States  which  joined  the  EU  in 
2004  and  2007  than  among  the  old  Member  States.  In  the  period  from  2004  to  2006  mail 
volumes grew by 6.5% on average in the new Member States compared to an average growth 
of 1.5% in the other fifteen Member States. The postal market is continuing to evolve towards 
a one way distribution market with business originating mail accounting on average for 85% 
of total mail volumes. 

It  is  expected  that  Member  States  with  a  less  developed  mail  market  will  continue  to  grow 
substantively, with a marked growth potential in particular relating to direct mail as quality of 
service levels improve. In Member States with mature postal markets the situation is different. 
Some of these Member States can still achieve moderate growth rates whereas other Member 
States such as the UK and the Netherlands have already experienced declining addressed mail 
volumes in recent years.  

Competition  in  the  letter  post  market  is  emerging  but  is  still  developing  slowly,  and 
meaningful  competition  still  has  to  emerge.  Market  shares  of  competitors,  although 
increasing, remain at a low level even in Member States that have fully liberalised their postal 
markets.  End-to-end  competition  is  further  developed  than  average  in  Spain,  Sweden, 
Germany  and  the  Netherlands.  Estimated  markets  shares  of  competitors  in  these  Member 
States  range  from  around  8%  in  Spain  to  9%  in  Sweden,  10%  in  Germany  and  14%  in  the 
Netherlands  in  2007.  In  the  new  Member  States  developing  end-to-end  competition  can  be 
observed in Bulgaria, the Czech Republic, Estonia and Romania. In the majority of the other 
Member States market shares of competitors remain, with some exceptions, below 2%.  

In the UK, which fully liberalised its postal market in 2006, end-to-end competition remains 
almost  insignificant,  but  competition  has  developed in the upstream part of the market with 
competitors having a market share of around 20% of the total volume of addressed mail. The 
UK  NRA  Postcomm  has  been  particularly  active  on  access  arrangements  and  developing  a 
licensing  regime  for  new  entrants.  A  number  of  aspects  of  the  access  regime  and  access 
regulation have been conducive to the development of access competition rather than end-to-
end competition in the UK.  

Reducing the reserved area from 100 grams to 50 grams as from 1 January 2006, accounting 
for  the  opening  up  of  an  additional  7%  of  the  addressed  mail  market,  seems  to  have  made 
little  impact  on  the  development  of  competition  as  it  only  opened  up  a  small  share  of  the 
postal market in terms of volume. The opening up of distinct segments of the addressed mail 
market  in  some  Member  States  seems  to  have  been  more  important  for  the  development  of 
competition  as  it  opened  up  bigger  shares  of  the  postal  market  to  competitors,  for  example, 
the  liberalization  of  direct  mail  in  the  Netherlands,  the  so  called  "D  licence"  in  Germany 
(allowing  competitors  to  provide  value-added  next  day  delivery  services  until  full  market 
opening) and the liberalization of hybrid mail in Bulgaria. 

14 

Latest data available; ECORYS, 2008.  

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The generally slow development of competition can be attributed to legal barriers, i.e. the fact 
that in most Member State the reserved areas still count for the majority of postal volumes. As 
economies of scale play an important role in postal activities, the reservation of services to the 
incumbent postal operators makes it difficult for new entrants to achieve sufficient volume to 
also benefit from economies of scale and to efficiently compete on the postal market.  

Apart from the reserved area and further legal barriers already mentioned above such as the 
VAT postal exemption, access to letterboxes or other elements of the postal infrastructure in 
some Member States and authorisation and licensing procedures, there may also be strategic 
barriers  which  hinder  the  development  of  competition.  Strategic  barriers  could  arise  in 
particular from (alleged) abusive behaviour of the market dominant postal services provider 
as for example exclusivity contracts, price discrimination, loyalty bonuses and "bundling and 
tying".  

5. 

The market impact of the Postal Directive 

EU  postal  reform  which  started  in  1992  with  the  publication  of  the  Green  Paper  on  the 
development of the single market for postal services has had a very significant impact on the 
provision of postal services and the postal sector. The Postal Directive and its application by 
the Member States have led to an improved quality of service and have secured the provision 
of a universal service accessible to all customers. Provision of a high quality and affordable 
universal postal service is being provided throughout the European Union at least five times a 
week, with only limited exceptions due to geographical conditions.  

Due to the regulatory and market impact of the provisions of the Postal Directive and gradual 
market  opening,  competition  is  developing  in  the  letter  mail  market.  Market  shares  of 
competitors in the addressed mail segment increased considerably in several Member States 
from  2004  to  2007.  Market  opening  and  the  introduction  of  competition  are  the  key 
instruments  for  creating  jobs  and  achieving  better  services  for  consumers.  However, 
meaningful competition still has to emerge, and identified (or emerging) barriers to entry have 
to be addressed efficiently.  

Driven by gradual market opening as provided for by the Postal Directive and the challenge of 
competition, incumbent postal operators continued during the reporting period to modernize 
their  operations  and  to  undertake  major  restructuring  efforts  to  increase  efficiency.  Postal 
operators are  increasingly  moving towards a market-driven and customer-oriented provision 
of postal services. 

On  average,  quality  of  service  –  measured  in  delivery  time  –  remained  high  during  the 
reporting  period  and  far  exceeds  the  performance  objectives  set  by  the  Postal  Directive  for 
delivery of 85% of cross-border intra-EU mail within three days and 97% within five days. In 
2007,  94%  of  cross-border  intra-EU  mail  was  delivered  within  three  days,  virtually 
unchanged from 2006. 

6. 

Conclusions 

During  the  reporting  period  gradual  market  opening  of  the  postal  sector  continued  and 
Germany fully liberalized its postal market. Competition has continued to evolve. However, 
the  development  of  competition  with  its  benefits  for  businesses  and  consumers  –  although 
emerging – remains slower than expected. This, on the one hand, is due to the fact that a large 
part of the postal market is still reserved for the incumbent postal operators. The adoption of 
the Third Postal Directive must be seen as being the decisive step in this respect as it provides 
for the abolishment of the last legal monopolies and represents a unique opportunity for the 

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postal  sector  and  for  the  whole  economy.  Emerging  competition,  as  already  identified  in 
Member  States  that  fully  opened  their  market,  leads  to  higher  quality  and  more  customer 
oriented postal services.  

But apart from the reserved area, other (legal and strategic) market entry barriers still persist. 
If the vision of an internal market with sustainable and efficient postal services is to become a 
reality, these market barriers have to be dealt with efficiently and removed. This is the joint 
responsibility  of  the  Commission  and  the  Member  States  as  well  as  all  stakeholders.  It  is 
essential  that  a  system  of  efficient  regulation  is  put  in  place  in  all  Member  States  and  that 
national postal legislation does not provide a burden for the emergence of competition and its 
positive impact on customers' needs. 

In this context, it should be recalled that in 2003 the Commission submitted to the Council a 
proposal removing the VAT postal exemption and providing for taxation of all postal service 
providers. The Council has however not yet been able to agree on this proposal and it has not 
been discussed since 2004. The adoption of this proposal is now even more pressing since the 
Third  Postal  Directive  sets  a  definitive  date  for  the  full  liberalization  of  the  national  postal 
markets.  It  might  be  of  interest  to  add  that  a  referral  for  a  preliminary  ruling  regarding  the 
scope of the VAT exemption for postal services is currently pending before the ECJ (Case C-
357/07). 

It has been established that NRAs play an essential role in realising the goal of accomplishing 
the Internal Market and in a multi-operator environment. The main challenges ahead for the 
NRAs  will  be,  among  others,  to  arrange  interoperability  in  a  multi-operator  market,  take 
action  against  strategic  barriers  to  entry  and  ensure  that  tariffs  are  more  geared  to  costs.  In 
order to allow NRAs to successfully fulfil their tasks, the expertise and staffing of the NRAs 
should  be  increased  in  most  of  the  Member  States.  This  is  also  an  element  that  has  been 
emphasised in Directive 2008/6/EC. 

The focus of the postal sector in the coming years is very clear. It cannot exclusively lie on 
the transposition process for the Third Postal Directive. Market monitoring and the critically 
evaluating of the application of the current Postal Directive are of key importance. Member 
States, especially their NRAs, have to devote their full attention to an efficient transposition 
of the Third Postal Directive, while at the same time ensuring efficient regulation under the 
currently applicable Postal Directive. This phase ahead is – as it concerns the transition from 
several legal regimes to only one – of crucial importance. 

On  the  basis  of  the  commitments  by  the  Community  legislator  and  its  obligations,  the 
Commission will actively participate in these processes by providing Member States with the 
opportunity  to  establish  best  regulatory  practices  and  at  the  same  time  continue  with  active 
and  transparent  market  monitoring  in  order  to  safeguard  the  objectives  of  the  EU  postal 
reform. 

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