Summary of EFTA Surveillance Authority Decision No 322/10/COL of 14 July 2010 relating to a proceeding under Article 54 of the EEA Agreement against Posten Norge AS (Case No 34250 Posten Norge/Privpak)
Date: 2010-07-14
Institutions: International Civil Aviation Organization
Subjects: Norway, competition, dominant position, fine, postal service








C_2011190EN.01001801.xml










30.6.2011   


EN


Official Journal of the European Union


C 190/18








            SUMMARY OF EFTA SURVEILLANCE AUTHORITY DECISION
         
No 322/10/COL
of 14 July 2010
         
relating to a proceeding under Article 54 of the EEA Agreement against Posten Norge AS
(Case No 34250 Posten Norge/Privpak)
(Only the English and Norwegian texts are authentic)
(2011/C 190/05)


On 14 July 2010, the EFTA Surveillance Authority (the Authority) adopted a decision relating to a proceeding pursuant to Article 54 of the EEA Agreement. In accordance with the provisions of Article 30 of Chapter II of Protocol 4 to the Surveillance and Court Agreement, the Authority herewith publishes the names of the parties and the main content of the decision, having regard to the legitimate interest of undertakings in the protection of their business secrets. A non-confidential version of the full text of the decision can be found in the authentic languages of the case on the Authority’s website at:


http://www.eftasurv.int/competition/competition-cases/


SUMMARY OF THE INFRINGEMENT

1.   Introduction









(1)


The Decision was addressed to Posten Norge AS. Posten Norge operates the national postal service in Norway. Posten Norge had a worldwide group turnover of 23 668 million Norwegian Kroner (MNOK) in 2006. Turnover outside Norway represented around 17,5 % of the total group turnover in 2006. The Norwegian State is the sole owner of Posten Norge.












(2)


The complainant was Schenker Privpak AB (Privpak), a company incorporated in Sweden in 1992. Privpak delivers parcels from distance selling companies to consumers in Finland, Norway and Sweden. Schenker Privpak AB is part of the DB Schenker group of companies. DB Schenker combines all transport and logistic activities of Deutsche Bahn AG. Ultimately, Deutsche Bahn AG is 100 % owned by the German State. In Norway, Privpak has operated through Schenker Privpak AS, a limited liability company incorporated under Norwegian law.




2.   Procedure









(3)


On 24 June 2002, the Authority received a complaint from Privpak. Privpak submitted additional information by letters dated 9 December 2002, 14 January 2003, 15 August 2003 and 5 March 2004. Posten Norge replied to requests for information on 16 and 23 June 2003. Inspections were carried out at the premises of Posten Norge in Oslo from 21 to 24 June 2004. Following a number of requests for information addressed to Privpak, Posten Norge and third parties, the Authority adopted a Statement of Objections against Posten Norge on 17 December 2008. Posten Norge responded to the Statement of Objections on 3 April 2009. An oral hearing was held on 16 June 2009.




3.   The conduct of Posten Norge









(4)


In 1999, Posten Norge concluded that its existing distribution network did not sufficiently meet the market demands for accessibility and service. In addition, income from the network had been significantly reduced in recent years and its network was too costly to operate. Posten Norge therefore decided to reorganise its distribution network and to reduce the number of post offices to between 300 and 450 and to establish at least 1 100‘Post-in-Shops’. Thereby, Posten Norge would increase the accessibility of postal and financial services by increasing the total number of delivery outlets by at least 200 and improve its profitability by reducing its operating costs.












(5)


Post-in-Shop is a concept developed and owned by Posten Norge for the provision of a range of postal and financial services in retail outlets such as supermarkets, grocery stores, kiosks and petrol stations. Each Post-in-Shop must offer at least the minimum basic postal and banking services which Posten Norge is required to provide in order to fulfil the requirements of the licence under which it operates. Additional products and services can be incorporated depending on the customer base of the individual Post-in-Shop. Posten Norge bears the main responsibility for the day-to-day monitoring of the Post-in-Shop, and has the right to control all aspects of the operation of the concept. The Post-in-Shop is integrated into a retail outlet and has the same opening hours as the outlet itself. The Post-in-Shop has a uniform profile and is branded in accordance with Posten Norge’s general strategy.












(6)


During 1999–2000 when the Post-in-Shop concept was established, Posten Norge’s intention was to conclude strategic alliances with the leading grocery store, kiosk and petrol station chains/groups for the provision of postal services in shops. At the beginning of 2000, Posten Norge negotiated agreements of intent with leading retail groups and chains in that regard. Subsequently, it concluded the following agreements concerning the Post-in-Shop concept:






—


a business agreement in September 2000 with NorgesGruppen/Shell, which made the NorgesGruppen/Shell group Posten Norge’s preferred partner: in return, Posten Norge was granted exclusive access to all outlets within the group (group exclusivity);










—


a framework agreement in January 2001 with COOP under which COOP was granted second priority status; and










—


a protocol in January 2001 with ICA.
















(7)


Under the latter two agreements, Posten Norge was granted exclusive access to the outlets in which a Post-in-Shop was established. Standard operating agreements to be concluded with the individual outlets which hosted a Post-in-Shop were also negotiated with each group.












(8)


From the beginning of 2004, Posten Norge conducted, on its own initiative, parallel negotiations with NorgesGruppen, COOP and ICA with a view to concluding new framework agreements for Post-in-Shop. These agreements aimed at replacing the existing agreements from 1 January 2006. It was proposed internally in Posten Norge that all groups be informed that Posten Norge wished (i) to conclude new framework agreements regarding Post-in-Shop; and (ii) to adjust the provisions regarding preference, but without informing the retail groups whether, and if so to whom, priority would be given, before the end of the negotiations. Posten Norge followed the proposed strategy and kept the issue of preferred partner status open during the negotiations.












(9)


In the course of 2006, all clauses regarding exclusivity and preferred partner status were removed from the agreements of Posten Norge.




4.   Article 54 of the EEA Agreement

4.1.   The relevant market









(10)


During the period at issue, Posten Norge provided B-to-C parcel services with over-the-counter delivery and home delivery. It also offered B-to-C parcel services for delivery abroad.












(11)


Posten Norge’s network for the delivery of B-to-C parcel services consisted of its post offices and Post-in-Shop outlets. This network could be supplemented by postmen in the most rural areas if needed. Posten Norge was the only supplier of B-to-C parcel services with a delivery network covering the whole of Norway.




4.1.1.   The relevant product market









(12)


The case concerns the provision of B-to-C parcel services with over-the-counter delivery. Over-the-counter delivery has been the predominant mode of delivery for B-to-C parcels in Norway to which consumers have been accustomed. Posten Norge has been the leading provider of B-to-C parcel delivery services; home delivery has only been a small fraction of its total volume of B-to-C parcels. The evidence did not indicate that distance selling companies regarded home delivery services as substitutes to Posten Norge’s B-to-C service with over-the-counter delivery. Home delivery of B-to-C parcels requires a transport infrastructure capable of delivering parcels to each recipient’s doorstep. Home delivery services and over-the-counter delivery services could only have been regarded as substitutable or interchangeable if it had been possible to switch a considerable amount of parcels from over-the-counter delivery to home delivery in the short term. The available evidence showed that this was not a realistic scenario during the relevant period. B-to-C parcel services with home delivery were therefore not included in the relevant product market.












(13)


B-to-B parcel delivery services are used by business customers that require door-to-door delivery to other businesses within working hours. Such business customers are time sensitive and are prepared to pay a significantly higher price for such services. Due to the difference in price between the two services, which is likely to reflect the difference in the cost of providing those services, it would not be economical for distance selling companies to replace B-to-C parcel services with over-the-counter delivery with B-to-B parcel services. The latter services were therefore not a competitive constraint on the provision of B-to-C parcel services. Furthermore, it was not practically feasible for distance selling companies to switch to B-to-B parcel services because providers of the latter services normally required that the recipient of the parcel be a business entity and not a private person.












(14)


The Authority was not aware of any supplier that offered delivery of B-to-C parcels to consumers at work to any significant extent during the period under review. Differences in characteristics, price and intended use meant that for distance selling companies, C-to-C parcel delivery was not a substitute to B-to-C parcel services with over-the-counter delivery.












(15)


The Authority concluded that during the period at issue, the market for B-to-C parcels services with over-the-counter delivery was distinct from B-to-C parcel services with home delivery or delivery at work, B-to-B parcel delivery services and C-to-C parcel delivery services.




4.1.2.   The relevant geographic market









(16)


The geographical scope of the market for B-to-C parcels services with over-the-counter delivery was confined to Norway.




4.2.   Dominant position









(17)


Since their launch in 1997, Posten Norge has been the leading provider of B-to-C parcel services with over-the-counter delivery in Norway and has faced very little competition. Privpak was, until Tollpost’s entry on the market, Posten Norge’s only challenger. No distance selling companies mentioned any other competitors which provided B-to-C parcel services with over-the-counter delivery prior to autumn 2006. Tollpost decided to enter the market in autumn 2005 but became operative only in autumn 2006 and on a very small scale.












(18)


The market share of Posten Norge remained above or close to 98 % throughout the relevant period. There were important barriers to entry and expansion in the relevant market during the period at issue. The possibility of new entry during that period did not constrain the market behaviour of Posten Norge to any significant extent. In the absence of alternative suppliers with significant and stable market shares, any threat by even the largest customers to move all or a very large proportion of their requirements away from Posten Norge was not credible. Posten Norge therefore remained an unavoidable trading partner throughout the relevant period.












(19)


The Authority concluded that Posten Norge, during the relevant period, was in a dominant position within the meaning of Article 54 EEA on the relevant market. The relevant geographic market on which Posten Norge held that dominant position constituted a ‘substantial part’ of the EEA territory.




4.3.   Abuse

4.3.1.   Assessment of Posten Norge’s conduct









(20)


Article 54 EEA prohibits as incompatible with the functioning of the EEA Agreement any abuse by one or more undertakings of a dominant position within the territory covered by the agreement or in a substantial part of it, insofar as it may affect trade between Contracting Parties.












(21)


It is settled case law that the concept of an abuse is:

                              ‘An objective concept relating to the behaviour of an undertaking in a dominant position which is such as to influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition is weakened and which, through recourse to methods different from those governing normal competition in products or services on the basis of transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition’
                               (1)
.











(22)


The effects referred to in the case law cited in the preceding paragraph do not necessarily relate to the concrete or actual effects of the abusive conduct complained of. For the purposes of establishing an infringement of Article 54 EEA, it is sufficient to show that the abusive conduct of the undertaking in a dominant position tends to restrict competition or, in other words, that the conduct is capable of having or liable to have that effect. The ability of the practice in question to restrict competition may be indirect, provided that it is shown to the requisite legal standard that it is actually liable to restrict competition.












(23)


The decision finds that Posten Norge abused its dominant position through the use of group and outlet exclusivity in its contractual arrangements with retail groups and through the strategy it pursued when renegotiating its agreements from 2004 onwards.












(24)


The group exclusivity prevented the competitors of Posten Norge from gaining access to the whole of NorgesGruppen/Shell, which included the largest daily consumer goods retail group, the largest kiosk chain and a leading petrol station chain in Norway. The group and outlet exclusivity tied a large number of outlets in the leading grocery store, kiosk and petrol station chains in Norway to Posten Norge.












(25)


From the conclusion of their agreements with Posten Norge in 2001 and well into 2002, when a large number of new Post-in-Shops were established, both COOP and ICA had an interest in getting as many Post-in-Shops as possible. The fact that Posten Norge required outlet exclusivity ruled out that a Post-in-Shop could be established in any outlet belonging to COOP or ICA to which a competing provider of B-to-C parcel services had been granted access. In other words, each and every outlet used by a competitor of Posten Norge would be excluded from the Post-in-Shop concept. Agreeing to roll out a competing delivery concept, resulting in the establishment of several hundred ‘competing’ outlets in their retail networks would have significantly reduced the likelihood of COOP and ICA being awarded new Post-in-Shop outlets.












(26)


During the renegotiations, Posten Norge kept the question of preferential partner status open, and thereby gave COOP and ICA the impression that they could be allocated such status or at least improve their status from 2006 onwards. This created clear disincentives for both COOP and ICA that were likely to limit their willingness to supply alternative providers of B-to-C parcel services. This was the case for at least as long as the negotiations continued and the contractual relationships with COOP and ICA were unsettled.












(27)


On the basis of the available evidence, the Authority concluded that the fourth leading retail group, Reitangruppen, and the other leading petrol station chains were not prepared to roll out delivery concepts of suppliers of B-to-C parcel services in their chains. They considered that they did not have sufficient space in their outlets to provide parcel delivery services, that a parcel delivery concept would not provide sufficient business opportunities, or they expressed a negative attitude towards projects that might add costs and/or draw focus away from the chain’s main strategy. The other leading grocery store, kiosk and petrol station chains were, therefore, to a large extent unavailable to Posten Norge’s competitors during the relevant period.












(28)


On this basis, the Authority found that Posten Norge’s conduct made it considerably more difficult for new entrants to obtain access to the most sought after distribution channels in Norway. Posten Norge’s conduct therefore created strategic barriers to entry on the relevant market for the provision of B-to-C parcel services with over-the-counter delivery. Consequently, the limitation of access to leading grocery store, kiosk and petrol station chains resulting from Posten Norge’s conduct was liable to reduce the ability and/or incentives of rivals of Posten Norge to compete on the market for the provision of B-to-C parcel services with over-the-counter delivery.












(29)


In addition, the Authority considered that Posten Norge’s conduct had likely resulted in actual anticompetitive effects to the detriment of consumers. Based on the available evidence it was considered likely that, in absence of the conduct of Posten Norge, its competitors could have had access to leading grocery store and kiosk chains. That would have facilitated their entry and expansion on the relevant market, resulted in more significant competitive pressure on Posten Norge and thereby limited the market power of Posten Norge to the benefit of distance selling companies and ultimately consumers.




4.3.2.   Objective justification









(30)


Exclusionary conduct can fall outside the prohibition of Article 54 EEA if the dominant company can demonstrate that its conduct is objectively necessary or produces efficiencies which outweigh the negative effects on competition (2). The dominant undertaking has the burden of proving any such objective necessity or efficiencies (3).












(31)


Posten Norge argued that the group exclusivity was necessary to achieve efficiency gains by facilitating rapid implementation of the Post-in-Shop network, to ensure that none of the outlets needed for Post-in-Shops were taken by competitors, to eliminate the risk that NorgesGruppen/Shell would not contribute sufficiently to the roll-out of the Post-in-Shop concept, and to secure sufficient space for its activities in the outlets. The Authority concluded, after a detailed assessment, that Posten Norge had not shown that the group exclusivity, insofar as it applied to parcel distribution services, was necessary for any of those reasons. Further, even if it were to be accepted that the group exclusivity brought about some efficiency gains in that respect, its scope and duration were in any event excessive and therefore disproportionate.












(32)


Posten Norge further argued that it paid substantial amounts to NorgesGruppen/Shell annually for the costs that the group incurred as a result of its involvement in the Post-in-Shop concept. It claimed that it could not have ensured that those amounts were used to its benefit without the group exclusivity, and that the group exclusivity was necessary to prevent competitors from free-riding on that investment. However, the Authority found that no significant risk had been demonstrated that the payments made by Posten Norge to NorgesGruppen/Shell would benefit competing distributors of B-to-C parcels and no risk of underinvestment shown.












(33)


Posten Norge argued that the outlet exclusivity was necessary to protect its promotional efforts and investments in training, to protect its intellectual property rights, to safeguard the identity and reputation of the Post-in-Shop concept, to ensure that every Post-in-Shop outlet focused on Posten Norge’s concept and needs, and to protect investments in counters and physical equipment. After a detailed assessment of the arguments and information submitted by Posten Norge in that regard, the Authority found that it had not been demonstrated that there was a significant risk of free-riding on Posten Norge’s promotional efforts or investments in training insofar as competing distributors of parcels were concerned. Nor could the outlet exclusivity, insofar as it applied to competing parcel distributors, be regarded as indispensible for the protection of Posten Norge’s intellectual property rights or the common identity and reputation of its Post-in-Shop network. The Authority also found that the need to impose outlet exclusivity for the purpose of ensuring that the Post-in-Shop outlets focused on Posten Norge’s concept had to be regarded as limited. The outlet exclusivity could not, in any event, be regarded as indispensible for the whole duration of the agreements that Posten Norge concluded at outlet level.












(34)


With regard to its renegotiation strategy, Posten Norge claimed that parallel negotiations with several suppliers enhanced competition because that was the most efficient way to negotiate new agreements. Posten Norge also maintained that it did not pursue an exclusionary strategy. The Authority found, however, that Posten Norge had not demonstrated that its renegotiating strategy brought about efficiency gains, was a necessary and proportionate means to achieve such gains, and that the alleged gains outweighed the anti-competitive effects resulting from the renegotiation strategy.












(35)


The Authority therefore concluded that Posten Norge had not demonstrated that its conduct was objectively justified.




4.3.3.   Conclusion on abuse









(36)


The Authority concluded that the conduct of Posten Norge — that is, its use of group and outlet exclusivity in its agreements with NorgesGruppen/Shell, its use of outlet exclusivity in its agreements with COOP and ICA, and the strategy it pursued when renegotiating its agreements with NorgesGruppen, COOP and ICA from 2004 onwards — constituted an abuse within the meaning of Article 54 EEA.




4.4   Effect on trade









(37)


The abusive conduct of Posten Norge was capable of affecting trade between Contracting Parties to an appreciable extent as required by Article 54 of the EEA Agreement.




4.5.   Duration









(38)


The abusive conduct was a single and continuous infringement, and existed at least as long as NorgesGruppen was bound by the group exclusivity and was Posten Norge’s preferred partner, that is from 20 September 2000 until 31 March 2006.




5.   Fine

5.1.   Basic amount









(39)


As a general rule, the basic amount of the fine is to be set at a level up to 30 % of the value of sales of the products the infringement directly or indirectly relates to in the relevant geographic area within the EEA. The Authority normally takes the sales made by the undertaking during the last full business year of its participation in the infringement. Posten Norge’s turnover in 2005 from the distribution of B-to-C parcels with over-the-counter delivery amounted to NOK 674,16 million. That is equivalent to EUR 84,17 million (4).












(40)


The basic amount of the fine is related to a proportion of the value of sales, depending on the degree of gravity of the infringement, multiplied by the number of years of the infringement.












(41)


In order to decide whether the proportion of the value of sales to be considered in a given case should be at the lower end or at the higher end of that scale, the Authority carries out a case-by-case analysis, taking account of all the relevant circumstances of the case. The Authority has regard to a number of factors, such as the nature of the infringement, the market share of the undertaking concerned and the geographic scope of the infringement.












(42)


The nature of the infringement in question related to exclusionary practices which affected the structure of the relevant market. Posten Norge had a very high market share in the relevant market for the whole duration of the infringement. The abuse covered the whole territory of Norway and jeopardised, contrary to the objectives of the EEA Agreement, the proper functioning of the internal market by raising barriers to effective entry to the relevant parcel distribution market in Norway, thus impeding the establishment of transnational markets.












(43)


In light of the circumstances of the present case, the initial amount of the fine was set at EUR 2 525 100. That amount was multiplied by 5,5 to take account of the duration of the infringement (five and a half years). The basic amount of the fine was therefore set at EUR 13,89 million.




5.2.   Aggravating and mitigating circumstances









(44)


There were no aggravating or mitigating circumstances.




5.3.   Other circumstances









(45)


The Authority acknowledged that the duration of the administrative proceedings in the present case had been considerable and considered that, in the particular circumstances of the present case, a reduction of the basic amount of the fine by EUR 1 million was justified.




5.4.   Amount of the fine









(46)


The final amount of the fine was therefore set at EUR 12,89 million.




6.   Decision









(47)


Posten Norge AS committed a single and continuous infringement of Article 54 of the EEA Agreement from 20 September 2000 until 31 March 2006 in the market for B-to-C parcel services with over-the-counter delivery in Norway, by pursuing an exclusivity strategy with preferential treatment when establishing and maintaining its Post-in-Shop network. The infringement consisted of the following elements:






—


concluding and maintaining agreements with NorgesGruppen/Shell and with individual outlets within this group providing group and outlet exclusivity in favour of Posten Norge;










—


concluding and maintaining agreements with COOP and with individual outlets within COOP providing outlet exclusivity in favour of Posten Norge;










—


concluding and maintaining agreements with ICA and with individual outlets within ICA providing outlet exclusivity in favour of Posten Norge; and










—


pursuing a renegotiation strategy which was likely to limit the willingness of COOP and ICA to negotiate and conclude agreements with competitors of Posten Norge for the provision of over-the-counter delivery of B-to-C parcels.
















(48)


For the infringement referred to above, a fine of EUR 12,89 million was imposed on Posten Norge AS.












(49)


Insofar as it has not already done so, Posten Norge AS was required to bring the infringement to an end and to refrain from any conduct which might have the same or equivalent object or effect as long as it holds a dominant position on the relevant market.






(1)  Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461, paragraph 91; Case 322/81 Michelin v Commission (Michelin I) [1983] ECR-3461, paragraph 70; Case C-62/86 AKZO v Commission [1991] ECR I-3359, paragraph 69; Case T-228/97 Irish Sugar v Commission [1999] ECR II-2969, paragraph 111; Case T-219/99 British Airways v Commission [2003] ECR II-5917, paragraph 241; Case T-271/03 Deutsche Telekom v Commission, [2008] ECR II-477, paragraph 233.

(2)  Case 27/76 United Brands v Commission [1978] ECR 207, paragraph 184; Case T-83/91 Tetra Pak v Commission (Tetra Pak II) [1994] ECR-II 755, paragraph 136; Case C-95/04 P British Airways v Commission [2007] ECR I-2331, paragraphs 69 and 86.

(3)  See Article 2 of Chapter II, Protocol 4 to the Surveillance and Court Agreement.

(4)  The average exchange rate for 2005 was 8,0092 according to the European Central Bank’s historical Euro foreign exchange reference rates.