Deutsche Post Faces Red-Letter Days
February 16, 2005
It's shaping up to be a particularly hard week for Deutsche Post. It began on Monday when the German postal service, Europe's biggest mail carrier, received an order from the Federal Cartel Office which stated it should immediately cease actions that hinder competitors from entering the pre-sorting business.
While the mail and logistics giant prepares to go to court over accusations that it abused its monopoly by barring small and midsize companies from receiving discounts for collecting and pre-sorting business mail, another red-letter day looms at the end of the week.
That Monday feeling lasts all week
On Friday the Bundesrat, the German parliament's lower house, will rule on an initiative that will ultimately remove Deutsche Post's monopoly of delivering letters less than 100 grams (3.5 oz) in weight by the end of the year.
Before that hearing, Deutsche Post must address the claims against its discount practice. According to the Federal Cartel Office, Deutsche Post's discount practice "prevented competitors' entry into the market to collect, pre-sort and deposit mail" at its delivery centers.
Deutsche Post reserves the discounts for big customers that want to pre-sort bulk mail such as advertising or statements, the watchdog claimed in a statement. The discounts vary between 3 percent and 21 percent on normal rates.
The watchdog, which said Deutsche Post violated German and European cartel law by discriminating against smaller rivals, said in the statement that complaints from medium-sized companies, such as Berlin-based PIN, had led it to its decision. Deutsche Post denied any violation and claimed the company was acting in accordance with German postal law and European Union rules.
Deutsche Post prepares for court battle
Deutsche Post says it makes savings of as much as €200 million ($257 million) every year by restricting discounts to larger clients, such as banks, which in turns helps to pay for the nationwide universal postal service that it must provide under the terms of its monopoly. Until this issue is resolved -- Deutsche Post will try to overturn the antitrust ruling at a court in Düsseldorf according to a spokesperson -- the company insisted that it would not suspend its discount practice.
As well as riling the Federal Cartel Office, Deutsche Post has challenged the European Commission which said in October that the company infringed EU competition law by barring small to medium sized companies from earning discounts.
Letter monopoly on life support
While the arguments continue, Deutsche Post faces the prospect of its monopoly on letters being cut by a decision in the Bundesrat on Friday. The carrier's monopoly on letters was officially due to expire at the end of 2007 but after intervention by the states of Lower Saxony and Hessen, which claimed that postal services would be improved by open competition, Germany's politicians will now decide on whether to bring the monopoly to an end by December this year.
It is another blow for Deutsche Post in its battle to hang onto all parts of its empire. Back in 2002, Germany bowed to EU pressure by agreeing to scale down Post's monopoly in stages reducing exclusive delivery rights to an upper weight limit of 100 grams from 2003 and to 50 grams from 2006. Now it seems there could be a chance that it could all be thrown open to tender by the close of 2005.
Open competition bad for Germany, say experts
Some experts claim that taking away Deutsche Post's last bastion of monopoly will lead to ill-effects for the company, its workforce and the community as a whole as areas of the business are closed down or relocated. "Taking branches and letter boxes from Deutsche Post undermines its financial standing," Social Democrat Klaus Barthel told reporters.
"This crossroads for the entire abolition of the letter monopoly is a welcome step," Elmar Müller, a director of the German Federation for Post and Telecommunications (DVPT) told DW-WORLD. Müller rejects fears that Deutsche Post and Germany at large will suffer from such competition. Using the example of Scandinavia where letter monopolies have been absent for some years, Müller said there had been, in general, no problems.
Companies like the French carrier La Post and the Dutch Postal Service are expected to show interest in an open German market but according to Ola Hellgren, an expert at the Landesbank Rheinland-Pfalz, believes that Deutsche Post will still have an advantage. "The mass market will remain with Deutsche Post because everyone knows them and knows it works," Hellgren told DW-WORLD.