A.At first glance, it is gourmet food from the depths of the Post-Law. But the decision with the file number BK5-21 / 016 could fuel the competition for letters in this country. The Federal Network Agency takes up allegations that the Deutsche Post competitors are systematically digging the water in the lucrative business customer market.
The yellow giant is said to abuse its pricing for so-called price-cost squeeze, which prevent adequate margins from other providers. Nothing has been proven yet, but there are initial indications. The network agency has therefore initiated an in-depth examination. In a multi-stage process, the data from competitors of the Post would now have to be compiled, said a spokesman for the FAZ
The first material was collected in 2020 in a market survey among 44 alternative letter services. The trigger is a procedure in which the network agency checked the postage for the “E-Postbrief” and approved it with reservations at the end of November. There are “indications that Deutsche Post AG could create a margin squeeze (PKS) that hampers competition on the mail market through its behavior on the market,” the report said.
Decision can upset the market
The dispute enjoys the highest level of attention in the industry because it could shake up the multi-billion dollar market for business customer mail beyond E-Post. “The E-Postbrief method is just one application of the PKS test,” said the network agency.
For the first time, it can rely on the 2020 reformed Postal Act, which is intended to make it possible to take stronger action against obstacles to competition. “We support all official efforts to enforce the prohibition of an anti-competitive margin squeeze, which we believe the Post has been using for years to hinder alternative providers,” says Walter Otremba, Chairman of the Federal Association of Mail Services.
Because of their pricing, the Post has often clashed with the network agency and the cartel office, usually because competitors had complained about hidden discounts and dumping practices. The margin squeeze, which has now been introduced, goes one step further: It is intended to ensure that competitors who work efficiently can generate reasonable profits.
Only Swiss Post has a nationwide delivery network
The instrument has been in use in telecommunications for years. The aim is to ensure a sufficient gap between wholesale and retail prices when competitors rent lines from Deutsche Telekom. The constellation is similar at Swiss Post. Only the former state-owned company has a nationwide delivery network that reaches all German households.
That is why the Cartel Office obliged Swiss Post years ago to also take letters from competitors with it. Their service consists of collecting items from companies, authorities, banks and other large mail order companies, sorting them by postcode and delivering them to a post office center.
According to the Monopolies Commission, Swiss Post carries around 40 percent of the letters sent by its competitors. For the preparatory work (partial services) it grants you discounts, depending on the amount up to 50 percent of the usual postage. The construction has a horse: the same service, called consolidation in industry jargon, is also offered by a Deutsche Post subsidiary, Deutsche Post InHaus Services GmbH (DP IHS).
It’s about a billion dollar market
In doing so, it creates direct competition with external companies that collect and bundle letters in order to obtain higher volume discounts. It’s about a billion dollar market. According to the network agency, sales with partial service broadcasts in 2019 amounted to 4.25 billion euros. Of the 9.3 billion items posted by Swiss Post, only 1.1 billion came from competitors. The rest came either from Group companies of the Post or, to a lesser extent, directly from large mail order companies.
The role of DP IHS at E-Post is now becoming a test case: the letters are electronically transmitted to a printing center. There they are printed out, folded, enveloped and then sent to a mail center with the usual partial service discounts. These tasks are carried out by DP IHS, which is paid for by Deutsche Post E-Post Solutions GmbH.
Swiss Post is allowed to charge 46 cents for physical delivery for a standard letter that takes this route. The network agency only granted the price approval with reservations because of the possible obstacle to competition.
Competition violation was not so far obvious
She has not yet been able to intervene because the competition infringement is “not obvious”. The Post rejected the allegations. “The approved fees … do not lead to a margin squeeze,” said a spokesman. Should competitors not be able to achieve a reasonable profit margin, this is due to a lower efficiency of these companies.
The focus is on the question of whether the remuneration calculated by DP IHS would allow a competitor an adequate margin. The exam is demanding, because the network agency needs an insight into the business agreements. A spokesman said the authority cannot easily get hold of important contracts, especially from tenders, because there is no obligation to submit them.
In the best case scenario, the first results can be expected in the course of the first half of the year. At the same time, the network agency is already insisting on the next reform: it is showing “that the market is still intransparent and that the postal law needs to be modernized”.
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