Post Office to sue EC

SLOVAKIA’S state-owned postal operator is not giving up part of its monopoly without a struggle. With the full backing of the Robert Fico government, Slovenská Pošta has announced it will take the European Commission (EC) to court in order to overturn an October 7 ruling that delivery of hybrid mail consignments in Slovakia must be re-opened to competition.

SLOVAKIA’S state-owned postal operator is not giving up part of its monopoly without a struggle. With the full backing of the Robert Fico government, Slovenská Pošta has announced it will take the European Commission (EC) to court in order to overturn an October 7 ruling that delivery of hybrid mail consignments in Slovakia must be re-opened to competition.

The prime minister has claimed that the commission was pressured into making the ruling by private postal companies.

Part of the reason that hybrid mail is being fought over so fiercely is that it is one of the most accessible and lucrative segments of the postal market, in which alternative operators can readily take on the state-owned incumbent. Hybrid mail is generated when customers transmit content electronically to a postal operator which then prints and envelopes items, and delivers them to the addressees.

The service is mainly used by customers such as banks, insurance and telecommunication companies, which regularly send out large amounts of mail, for example invoices, to their customers.

This area of the postal services market had been open to competition in Slovakia for several years until this February, when the Fico government changed the law to grant Slovenská Pošta the exclusive right to deliver such mail.

But on October 7, the European Commission ruled that the amendments to Slovakia's postal legislation infringe EC Treaty rules on dominant market positions, and instructed the country to re-open hybrid mail to competition.

In a statement at the time, the EC was unequivocal: “[The] decision is directly legally binding on Slovakia.”

An official release by the Representation of the European Commission in Slovakia on November 24, noted that “Slovakia’s obligation was to inform the commission within one month about the measures taken to secure open economic competition in the hybrid mail service.” It went on to note that Slovak state bodies had not confirmed the adoption of measures in line with the decision by the deadline, which was November 7.

When the government responded to the EC ruling, it did so by stating that the commission had been pressured into making it by alternative postal service providers. The government added that removing Slovenská Pošta’s hybrid mail monopoly will threaten its ability to perform some of its roles as defined by law, in particular the provision of a universal service across the whole country.

Cherry picking

Prime Minister Robert Fico said he fully supported the state-run postal operator.

“The European Commission in my opinion yielded to the pressure of private postal operators,” Fico said, as quoted by the SITA newswire.

In its October judgement the European Commission had stated: “Private operators are prevented from exercising their activity in this field and, as a consequence, incur losses that endanger their viability.”

According to European Competition Commissioner Neelie Kroes, Slovakia’s decision to re-monopolise a business activity that had already been successfully liberalised was a step in the wrong direction.

“Such attempts to benefit incumbent operators by re-monopolising liberalised services harm consumers and businesses, who depend on efficient postal services, and will not be tolerated by the Commission,” Kroes said in October.

Fico however said that the state postal operator would enjoy the full support of the government as far as its legal representation or the preparation of materials is concerned.

“We have to defend ourselves from such cherry picking of state property,” Fico said.

He suggested that his government could quickly adopt measures that would guarantee Slovenská Pošta’s pre–eminence in the hybrid mail segment. Private providers would be denied access to this part of the postal services market, Fico said.

Fico and Slovenská Pošta have argued that the public postal operator has to offer services that are not profitable.

EC ruling still binding

“All member states are justified in challenging the decisions of the commission at the Court of Justice,” said Roman Schoenwiesner, head of the press and media section of the EC representation in Slovakia. “However, an appeal being filed with the court does not put on hold Slovakia’s obligation to comply with the commission’s decision. The decision of the European Commission is directly legally binding for Slovakia.”

Slovenská Pošta said it hopes that the court will decide in its favour and modify the EC decision allowing alternative operators to deliver hybrid mail.

“The decision of the cabinet provides proof that our approach has been correct from the very beginning,” said Slovenská Pošta’s general director, Libor Chrást, as quoted by SITA.

Chrást said that by appealing the EC decision Slovenská Pošta is not questioning the principle of market liberalisation, but is “rather an effort to protect small customers and their comfort in the area of universal postal services”.

Slovenská Pošta also argues that liberalisation would not bring lower prices for all but it would mostly benefit larger firms, while small customers would pay more.

Back in business

Private operators deny putting any pressure on the EC and say that the decision only restores justice and fair market conditions. They claim that they simply want to run their businesses.

Maroš Horňáček, managing director of Slovak Mail Services said that the government’s decision to join the lawsuit being brought by Slovenská Pošta only confirms that the two want to present alternative operators as trying to strip the state postal operator of billions of Slovak crowns.

“Unfortunately they do not realise that parliament, by amending the law to increase Slovenská Pošta’s monopoly, in fact pushed us to the verge of bankruptcy,” Horňáček told The Slovak Spectator.

Horňáček noted that though Slovakia does have the right to sue the commission, the Competition Commissioner’s spokes-man Jonathan Todd has already pointed out that the nature of the EC decision means that its effect is not suspended while an appeal proceeds.

Todd also said that the EC should have already received a response from Slovak state bodies about the steps being taken in order to comply with the decision, which is directly binding for Slovakia and has a direct legal effect, Horňáček explained.

Horňáček said that private postal operators now intend to renew their activities in the hybrid post segment. They had stopped all business in the segment after the revision of the law came into force.

“Of course this was negatively reflected not only in our economic results but also the state of our infrastructure,” said Horňáček. “After next month we should be back in the same condition as we were before the revision was adopted.”

Alternative postal service providers insist that Slovenská Pošta is not losing anything from its business since its strong position on the market has not really changed.

“It generates profits of hundreds of millions of crowns and its ability to finance the universal postal service is in no way threatened,” Horňáček said. “After all, it still has the exclusive right to deliver general correspondence, which will last until full liberalisation in 2013.”

EC unconvinced

However, Slovenská Pošta says that it maintains about 1,600 post offices throughout Slovakia, often located in small villages and municipalities, and spends extra money on their operation. Its representatives argue that the decision opens an avenue for private companies to take Slovenská Pošta’s most lucrative business.

According to Chrást, the hybrid mail market segment accounts for around Sk2 billion (€66.39 million) annually. However, he added that estimating the potential losses of the company would be rather difficult.

The European Union allows new member states to keep their markets protected from wide-ranging competition until 2013.

According to Slovenská Pošta, the EC decision makes Slovakia an exemption.

“Since in Slovakia almost 80 percent of consignments within [our monopoly] can be created through hybrid mail, freeing this part of the market will affect [our] exclusive right to deliver,” Slovenská Pošta concluded.

However, the EC said that when government and the post office were asked by the commission in June to explain why Slovenská Pošta’s monopoly needed to be widened, their replies failed to dispel doubts that the action had contravened EU competition law.

“In particular, neither the Slovak Republic nor Slovenská Pošta has been able to demonstrate that the reservation of hybrid mail services to the benefit of Slovenská Pošta is necessary to finance the universal postal service,” the EC said in its October statement.

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