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Brussels, 10 May 2011

State aid: Commission extends formal investigation against Germany concerning aid to Deutsche Post

The European Commission has extended a formal investigation under EU state aid rules into the compensation by the German State of the universal service obligations of Deutsche Post AG (DPAG). The extension concerns the subsidies paid by the State to cover the costs of the pensions of those employees, past and present, who have a civil servant status. Germany claims that pension subsidies compensate 'legacy costs' from the time when Deutsche Post was a postal administration and ought to be compatible with EU State aid rules. However, Germany also allowed an increase in regulated letter prices specifically to cover DPAG's pension costs. The Commission is concerned that this translates into overcompensation of those 'legacy' pension costs for Deutsche Post to the detriment of competitors. The extension of the investigation procedure does not prejudge the final outcome of the investigation and gives the German Government and other interested parties the opportunity to comment. This is part of a long-running case, opened in 2007 which involves complaints by rival UPS and several cases at the European courts. Moreover, the Commission has not always been able to get the information it needs to come to a thorough final conclusion.

Vice-President Joaquin Almunia, responsible for competition policy, said: "The liberalisation of the postal services sector brought many benefits in terms of more business opportunities as well as more and better services for the economy at large. Nearly 20 years after the start of liberalisation we are still saddled with claims of overcompensation to the former monopolies which, if proven, distorts fair and healthy competition. I hope we will be able to conclude the investigation rapidly now and clarify the issue of compensation for pension 'legacy' costs as this is not the only case we have."

The Commission has extended the scope of its 2007 in-depth investigation into public support to Deutsche Post, to look more closely into the compensation paid for the pension costs inherited from the public postal administration.

Following complaints from competitors, alleging that DPAG has disproportionally benefited from public transfers and pension subsidies between 1990 and 2007, the Commission opened an in-depth investigation in September 2007 (see IP/07/1312). The investigation focused on whether DPAG had been overcompensated for its universal service obligations. During the investigation, Germany claimed that the pension subsidy should be assessed separately as compensation for 'legacy' costs that resulted from the take-over of civil servants from the former postal administrations. Germany contends that the pension subsidies are compatible with EU state aid rules, arguing DPAG faces higher pension costs for civil servants than competitors have had to pay for their private employees.

In its decision to extend the investigation, the Commission says it is concerned Deutsche Post may be over compensated for the 'legacy' pension costs as it is getting not only a pension subsidy from the State but also an increase in regulated letter prices specifically to cover pension costs.

An assessment, that takes into account both sources of compensation, appears to indicate that Deutsche Post effectively benefited from social contribution rates that were 10 to 15 percent below the rates which competitors had to pay.

The Commission will be publishing in the EU's Official Journal and on its website a non-confidential version of the letter concerning the extension of the investigation that it is sending to Germany. This gives interested parties an opportunity to comment before the Commission takes a final decision on the overall case regarding compensation for public service obligations and for 'legacy' costs.

EU State aid rules allow Member States to compensate companies entrusted with public service obligations for the extra cost, plus a reasonable profit, of carrying out the service, such as ensuring a minimum number of post offices across the nation and the number of delivery days per week (see recent decision on UK Post Office - IP/11/346).

The Commission accepts that it may also be justified that the postal incumbent receives aid to pay for 'legacy' pension costs that are related to the civil servant status of employees that were hired during the monopoly period. But the incumbent should be faced with the same effective social contribution rates as competitors.

The Commission in 2007 approved under EU state aid rules a French reform regarding the financing of the current and future pensions of the employees of La Poste with a civil servant status. However, the authorisation was formulated in such a way to ensure that La Poste's effective social security costs were comparable to those of competitors (see IP/07/1465).

A summary of this decision will be available under the case number C 36/2007 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

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