Court overrules Commission on illegal postal aid

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A European court has dealt a blow to the EU executive by overturning its 2002 decision to confiscate “illegal” state aid received by the German postal operator. The ruling took place just one week after Brussels announced tougher action against mail operators attempting to shield their remaining monopolies. 

The European Court of First Instance ruled yesterday (1 July) that Commission findings that Deutsche Post had used €572 million in state aid to cover business losses, rather than to help it fulfil its public obligation to provide basic mail services for all, were flawed. 

The case dates back to a 1994 complaint by the American parcel delivery service UPS, which accused Deutsche Post of using government grants to finance an aggressive pricing policy and undercut competitors in the business parcel segment. 

Under EU rules, member states are only allowed to provide financial support to state-owned postal operators if the money is loaned on commercial terms – except if the money is intended to bolster the Universal Service. 

Deutsche Post had consistently argued that the Commission had no factual evidence proving that the aid had been used for cross-subsidisation – an argument which found backing from the Court. 

The Court decision would allow Deutsche Post to reclaim €1 billion from the German government, the company said in a statement. 

Commission spokesman Jonathan Todd however said the EU executive would study the ruling carefully. It has two months to decide whether to appeal to the European Court of Justice. 

After pushing through legislation requiring member states to fully open up their postal markets by 2011, EU Internal Market Commissioner Charlie McCreevy has been warning governments not to introduce what he calls “creative market barriers” under the pretext of safeguarding the universal service. 

Speaking last week at a special conference on postal liberalisation, McCreevy and Competition Commissioner Neelie Kroes said they would “not hesitate to use all means at our disposal” – including infringement procedures – “to make a competitive and sustainable postal market a reality”. 

The ruling could however influence the way Brussels proceeds in similar cases, and most notably on its handling of a separate probe, initiated last September, into whether Deutsche Post has been over-compensated for carrying out its universal service obligation. 

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