EU’s postal plans run into teething troubles

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Germany’s Deutsche Post yesterday (11 June) filed an official complaint with the European Commission against the Dutch government’s decision to delay the opening of its mail market. The move comes amid increasing concern over the difficulties linked to the practical implementation of new EU rules.

According to the statement from Deutsche Post, the Dutch government’s decision not to end the existing mail monopoly as planned on 1 July, but to extend it “indefinitely” creates a “competitive advantage for Post TNT of the Netherlands”. 

A violation of EU law? 

Deutsche Post is arguing that the Dutch government is “in clear violation” of EU law. 

The allegation is rather surprising as under the EU’s freshly adopted Third Postal Directive, countries are only required to carry out full liberalisation as of 1 January 2011. 

But Deutsche Post argues that “under the European law, a member state may reserve the national postal market exclusively for one provider only if this approach plays an essential role in financing the universal service” – i.e. the obligation for postal operators to provide each and every citizen with mail collection and delivery services at least once a day, five days a week. 

It points out that in the Netherlands, the Universal Service Obligation is not causing TNT to run a loss and that “the statements of the Dutch government clearly show that the renewed delay only serves the interests of TNT”. “The Dutch government’s activities are, therefore, a clear violation of European legislation,” it concludes. 

The company further adds that it had already made “extensive investments” in anticipation of liberalisation, and therefore calls on the Commission to “act promptly and to eliminate the unacceptable distortion of competition”. 

Commission spokesman Oliver Drewes said the Commission would study the complaint and decide whether further action was necessary.

An un-level playing field? 

But Dutch Junior Economy Minister Frank Heemskerk insists that he cannot go ahead with full market opening until “a fair playing field” exists in both Germany and the United Kingdom. 

He cites the “high” minimum salary imposed by the German government – over which TNT has also filed a formal complaint with the European Commission – and the fact that, contrary to its competitors, Deutsche Post enjoys a VAT exemption on 40% of its operations as proof that the German postal market is still far from offering a level playing field. 

He also says he needs more assurances on the working and pay conditions for postmen in his own country before going ahead with the liberalisation plans. But under pressure from MPs to set a date, he promised to “undertake maximum efforts” to completely open the postal market by 1 January 2009.

EU drive for free mail markets 

Last March, EU Commissioner Charlie McCreevy wrote to the German government asking it not to “hinder competition in the German market” with the introduction of “unsuitably high minimum wages and the retention of different sales tax rates”. 

While exempting postal services is allowed under existing EU legislation, the Commission believes that Germany is failing to apply this rule in “a way that minimises distortions of competition between former monopolies and market entrants”. 

Last July, it sent ‘reasoned opinions’ to Germany and the UK asking both to amend their legislation and threatening to refer the cases to the European Court of Justice unless they comply. 

A Commission proposal for a Directive abolishing the VAT exemption right for public postal services, which dates back to an era when most operators were in state hands, has been blocked in the Council since 2003. 

Teething problems 

The dispute highlights the difficulties linked to the practical implementation of new EU rules on the opening up of European postal markets to competition. 

In the UK – one of the few countries where full liberalisation has already taken place – a recent report commissioned by the government found that the liberalisation of the UK postal service has produced “no significant benefits” for either households or small businesses. 

The report, carried out by an independent panel and published in May, further warns that the current situation poses a “substantial threat” to Royal Mail’s financial security, and thus, to the continued provision of the universal service. 

Royal Mail Chief Executive Adam Crozier said he “wholeheartedly” agreed with the report’s finding that ” the status quo is not tenable,” pointing to estimates that show that the Universal Service is “now in the red for the first time, having made an estimated loss last year (2007) of around £100 million”. 

A final report is due to come up with ideas for measures to provide Royal Mail with a “stable financial future” later this year. 

The UK postal regulator Postcomm has suggested that Britain should follow Sweden’s lead in allowing the partial privatisation of Royal Mail, but trade unions point to the “massive” job losses and “destruction of working conditions” that took place in Sweden when it liberalised. 

Sweden’s Posten AB Senior Vice-President Viveca Bergstedt Sten, whose country fully liberalised as early as 14 years ago, nevertheless remains optimistic that it is “perfectly possible” to operate the USO without any additional financing mechanisms. 

The German Government decided last December to accompany the full liberalisation of its postal sector on 1 January 2008 with the introduction of a minimum hourly wage of €9.80 – some 20-30% higher than the Dutch postal operator TNT currently pays its German workers. 

The move was immediately branded as protectionist by Dutch Junior Economy Minister Frank Heemskerk, who subsequently took the decision not to go ahead with his country's own planned 1 January 2008 liberalisation until a "more level playing field" was established in Germany (EURACTIV 07/12/07). 

TNT also lodged a lawsuit with a Berlin commercial court against the German government's decision and, on 7 March 2008, the court sided with the Dutch operator, ruling that the application of a minimum wage to all companies in the postal sector is illegal (EURACTIV 10/03/08). The German government has however appealed the decision, with a higher court expected to rule in September. 

The row comes just months after the EU pushed through plans to open up postal markets across the continent by 2011 by abolishing lingering monopolies (EURACTIV 01/02/08). 

Up till now, only Sweden, Finland, Germany and the UK have fully liberalised. 

  • 24 Jun. 2008: Commissioners McCreevy (internal market) and Kroes (competition) to host conference on postal liberalisation.

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