This Decision shall be enforceable pursuant to Article 256 of the EC Treaty.
Done at Brussels, 20 March 2001.
For the Commission
Mario Monti
Member of the Commission
(1) OJ 13, 21.2.1962, p. 204/62.
(2) OJ L 148, 15.6.1999, p. 5.
(3) OJ L 354, 30.12.1998, p. 18.
(4) Section 51 of the Postal Services Act (Postgesetz) states that until 31 December 2002 Deutsche Post AG is to enjoy the exclusive right to carry by way of trade letters and addressed catalogues weighing less than 200 g per item at a price per item anything up to five times the price applying on 31 December 1997 for similar items in the lowest class of weight (statutory exclusive licence).
(5) Business secret.
(6) DPAG letter of 23.12.1999. Annex 1.
(7) Annex 2 to the DPAG letter of 6 December 1999.
(8) The incremental costs solely comprise costs incurred in providing a specific parcel service. They do not include the fixed costs not incurred only as a result of providing a specific service (the common fixed costs). Common fixed costs are not related solely to a specific parcel service and are eliminated only when the company ceases to perform all its services.
(9) This means that the revenue from the reserved area as a whole is greater than all costs generated there. Therefore the revenue exceeds not only the product-related incremental costs but also the common costs that cannot be attributed solely to the area.
(10) Pursuant to point 2 of Section 1(1) of the Postal Universal Service Ordinance, DPAG must by reason of its universal service obligation to deliver parcels within a certain time limit (Section 3(2) of the Ordinance: at least 80 % must be delivered within two working days). Before the Ordinance entered into force retroactively as of 1 January 1988, the universal service obligation flowed from Section 8 of the Postal Services Act of 28 June 1969. Under that Act, every person had the right to use the Post Office's facilities. The conditions governing the use of the Post Office's facilities were laid down by regulation. Before the Postal Universal Service Ordinance entered into force, the time-limit was set by Section 20(3) of the Customer Protection Regulations (BGBl. 1995 I, p. 2016 (80 % on the second working day after the working day of posting).
(11) See in particular William J. Baumol and J. Gregory Sidak, Toward competition in local telephony (MIT Press 1994), pp. 108 to 109.
(12) See, in particular, William J. Baumol and J. Gregory Sidak, Toward competition in local telephony (MIT Press 1994), pp. 108 to 109: "These obligations are appropriately treated as sources of common fixed costs for the firm ..."
(13) DPAG repeatedly stresses this additional burden, the "cost of providing the universal service", see. e.g., letter of 15 May 1997, pp. 4 and 5 and DPAG letter of 6 October 2000, pp. 8 to 10.
(14) The costs of providing a universal service (a comprehensive network of branches, nationwide deliveries at a standard rate) would only be attributed to mail order parcels in full proportion to their volume, if a "fully distributed cost" analysis were undertaken. See to DPAG letter of 6 October 2000, pp 4 and 5 to 8 and 11. The aim of covering at least the service-specific incremental costs, however, prevents this apportioning of costs arising as a result of the statutory obligation for non-over-the-counter parcel services.
(15) Mail-order parcels consist primarily of postal packages and mail order catalogues.
(16) DPAG letter of 7 April 2000, p. 3; DPAG letter of 6 December 1999, p.11; DPAG letter of 22 December 1999, p.2.
(17) Source Ctcon GmbH, Segmentserfolgsrechnung 1990-1999 Frachtpost ohne Katalogue yon 200g bis 1000g, ohne Postgut Klein und -leicht sowie ohne Post Express, Stand 23. Juni 2000.
(18) By way of exception, in rural areas parcels and letters are delivered jointly by the same person. See DPAG letter of 9 March 2000, p. 10. According to information provided by DPAG in 1999 this applied to approximately [...] % of the mail-order parcels delivered. For previous years, the situation was as follows: from 1990 through 1995 mail-order parcels were delivered jointly with letter post, from 1995 through 1998 there were almost no more joint deliveries. Joint deliveries create economies of scope that exist between the reserved product and the competitive product. Due to the reserved area these economies of scope are not available to competitors. As joint deliveries played no role from 1995 through 1998, the result, coverage of incremental costs in this time period, would remain unchanged. As of 1998 the coverage in mail-order deliveries significantly exceeds incremental costs, thus, even a separate calculation for the joint deliveries would not have an impact on the final result.
(19) DPAG letter of 9 March 2000. pp. 9 and 10.
(20) One large customer delivers parcels direct to the inward freight centre.
(21) DPAG letter of 25 January 2001.
(22) Section 3(2) of the Postal Universal Service Ordinance (Post-Universaldienstverordnung, PUDLV) states that on average over the year at least 80 % of parcels handed in on a working day must be delivered by the second following working day. Every freight centre functions both as an inbound and as an outbound centre. To provide a countrywide service at least one trip per day between each centre is necessary, that is to say 32 trips from each outbound centre to the other inbound centres, or at least (32 x 33 =) 1056 trips.
(23) All 33 freight centres are built and equipped to the same design. They all have a dual function, serving as inbound and outbound freight centres concurrently.
(24) Even if mail-order parcels were to be discontinued and the volume of parcels were to fall accordingly, individual delivery rounds could be reduced to a significant extent only if substantially fewer addresses had to be called at on the round. Only if there were substantial reduction in the number on addressees on a round could that round be amalgamated with another (DPAG letter of 25 January 2001). Investigations revealed that a route attributable to a particular service only exists for courier services, which seek out individual addresses for delivery.
(25) If several deliveries are made on the same stop, the stop will still have to be made, even when fewer parcels have to be delivered.
(26) See Sidak/Spulber Protecting Competition from the Postal Monopoly, pages 109 to 124.
(27) In the present case the structural separation of the reserved area from the areas which are open to competition requires appropriate account to be taken of the public utility mission. The infrastructure necessary to fulfil this mission must remain with the company which is under an obligation to fulfil it.
(28) DPAG letter of 1 February 2001.
(29) Access to the self labelling of parcels is conditional on the customer carrying out certain postal preparations itself (weighing, pricing, labelling, drawing up lists) and every year submitting to DPAG at least 10000 self-labelled non-bulky items, or until 1995 10000 Postgut parcels. In consideration of the preparaton work done, which otherwise has to be performed at the counter. DPAG reduces the price. The method of calculating the reduced price for self labelled items is described in point 3.3.2 of the General terms of business for inland freight services (Allgemeine Geschäftsbedingungen fur den Frachtdienst Inland - AGB FrD Inl, "the General Terms" 1992, at section 3.3 "Special services". The AGB FrD Inl was submitted by DPAG as Annex 4 to its letter of 24 November 1994.
(30) The method of cooperation in respect of heavy Infopost is described in the new point 3.3.4.2 of the General terms which was announced in August 1995 by measure (Verfügung) P 777/1993: Senders of large volumes of heavy Infopost may in respect of such consignments by contract agree to take over from the postal service certain sorting functions going beyond the requirements of section 4.2, or the loading of dedicated transport units, or both. In return the postal service will reduce the basic charge for heavy Infopost.
(31) The basis for cooperation in connection with parcel dispatch is laid down in point 3.3.4 of the General terms: "3.3.4 Cooperation with senders: parcel cooperation is cooperation between the sender and Deutsche Bundespost Postdienst extending beyond self labelling. Deutsche Bundespost Postdienst concludes a contract transferring sorting, loading and transport functions for packets and parcels to the sender, and stipulating a financial benefit to compensate the sender for carrying out this work". Under point 3.3.4 of the General terms, cooperation was tied to two requirements: "1. Participation in the self-labelling arrangements and 2. The customer must be prepared to entrust all mail-order items suitable for package and parcel post to Deutsche Bundespost Postdienst." See Allgemeine (Geschäftsbedingungen der Deutschen Bundespost Postdienst für den Frachtdienst Inland, Stand 30. März 1992, Abschnitt 3.3 Besondere Leistungsangebote, submitted by DPAG as Annex 4 to its letter of 24 November 1994. According to DPAG's submission, point 3.3.4 was in force until 28 December 1994, see DPAG letter of 6 October 2000, p. 16.
(32) See the second requirement in point 3.3.4 of the General terms.
(33) "Bulky" parcels are defined in section 25(3) of the Postal Services Regulations. see footnote 35.
(34) Since 1994 this customer has sent [...] 1 of its parcels via DPAG, see [...] letter of 4 October 2000 and DPAG letter of 14 July 2000.
(35) Section 25(3) of the Postal Services Regulations (Postordnung) of 16 May 1963, as last amended by the 11th amendment of the Postal Services Regulations; 10 August 1988 (published in BGBl.I.S. 1573, Amtsbl. S. 1613), states that a parcel is a "bulky" parcel if it is 1. longer than 120 cm, broader than 60 cm, or deeper than 60 cm; and 2. requires special handling (that is to say that it cannot be stacked or placed on a conveyor belt, or contains live animals).
(36) Some [...] of [...] parcels are sent via the [...] main depot, see [...] letter of 26 september 2000. Altogether all parcels dispatched by [...] from [...] are sent via DPAG, see DPAG letter of 14 July 2000.
(37) DPAG (Nuremberg Regional Postal Directorate) letter of 17 February 1987 to [...].
(38) This customer sent [...] of its parcels via DPAG: see [...] letter of 4. October 2000 and DPAG letter of 14 July 2000.
(39) Annex to DPAG letters of 7 July 2000 and 14 July 2000.
(40) In general the contracts applied to all parcels suitable for handling by machine, within the maximum dimensions laid down in the Postal Services Regulations: 120 cm long, 60 cm deep and maximum weight 315 kg; see clause 3.1.2 of each of the cooperation agreements.
(41) Infopost Schwer is DPAG's description for catalogues weighing more than 1000 g. Since 1993 lnfopost Schwer has formed part of the infrastructure of Sparte Frachtpost.
(42) Case C-41/90 Höfner and Elser v. Macoton, [ 1991 ] ECR I-1979. at paragraph 21.
(43) In a survey conducted by Verbraucher Analyse 92 West & Ost, in the old Länder 29 % of people over 14 said that they had placed an order with a mail-order company in the last 12 months, while in the new Länder, it was more than 66 %. The Versandhauskäufer study four years later (1996) showed that in the old Länder 30,8 % of the total population (aged over 14) had placed mail orders in the previous year, while the proportion in the new Länder was 51,9 %. See page 33 of the Federal Association of German mail-order companies' information brochure Versandhandel in Deutschland.
(44) In 1999 bulky parcels accounted for less than 1 % of all mail-order parcels. Source: Ctcon. Segmentserfolgsrechnung Sparte Frachtpost, Übersicht Mengen, Stand 13.4.2000, submitted by DPAG by letter dated 20 April 2000.
(45) DPAG estimates its own stop factor, including mail-order parcel services, statistically at approximately [...], while that of competitors who concentrate mainly on "company deliveries" in the B-to-B services field is put at somewhere between 1,8 and 2,1. See the Ctcon report. Ergebnisbelastungen Frachtpost 1995, p. 7, published on 13 May 1997, submitted by DPAG by letter of 15 May 1997.
(46) See most recently the judgment in Case T-228/97 Irish Sugar [1999] ECR II-2969. at paragraph 99.
(47) See Sparte Frachtpost der Deutschen Post AG ( 1996), op. cit., Annex 1, p. 10.
(48) This own delivery (some 140 million parcels in 1999) does not form part of the relevant market.
(49) DPAG does not deny being the only operator of a nationwide infrastructure in Germany.
(50) See Sparte Frachtpost der Deutschen Post AG (1996), op. cit.. Annex 1, p. 10, and p. 17 of the Federal Association of German mail-order companies' information brochure Versandhandel in Deutschland, according to which DPAG carries 92 % of mail-order parcels in Germany.
(51) See the report Eigenzustellung im Versandhandel als Alternative zur Zusammenarbeit mit der Post, 15 September 2000, submitted as Annex 8 to DPAG's letter of 6 October 2000, p. 7.
(52) See the report Eigenzustellung im Versandhandel als Alternative zur Zusammenarbeit mit der Post, 15 September 2000, submitted as Annex 8 to DPAG's letter of 6 October 2000. p. 5: "Countrywide, daily delivey is scarcely feasible in Germany under 100 million parcels a year".
(53) The stand-alone test is used by economists to determine the source of cross-subsidisation. In the present case the reserved area is a guaranteed source of income exceeding stand-alone costs.
(54) The occurrence of cross-subsidies requires that there is a product or group of products whose revenue exceeds their stand-alone costs. On a medium-term basis, cross-subsidy rests on the basis that this product or group of products is of stable nature. In order to be stable, this source of revenues must be protected either by economic or institutional barriers to entry. The reserved area for letter mail conveyance is an institutional barrier to entry.
(55) Case 85/76 [1979] ECR 461.
(56) Hoffmann-La Roche, at paragraph 89.
(57) Hoffmann-La Roche, at paragraphs 95 and 96.
(58) Hoffmann-La-Roche, at paragraph 98, in which the Court describes the linkage to an estimated annual requirement and the giving of a rebate which increases in line with the extent to which that requirement is met as a "specially worked-out form of fidelity rebate".
(59) Bulky parcels (see the above commentary on Section 25(3) of the Postal Services Regulations) arc used for items of clothing or such things as furniture and kitchen fittings. As a rule they weigh over 20 kg and quantity-wise they play a negligible role. (In 1999 bulky parcels accounted for 0,06 % of the total volume of mail-order parcels. Source: Ctcon, Segmentserfolgsrechnung Sparte Frachtpost, Übersicht Mengen, Stand 13.4.2000, submitted by DPAG by letter of 20 April 2000).
(60) The "volume bonus" agreed in addition to the fidelity obligation has no other binding effect beyond the existing obligation to send all requirements by DPAG.
(61) Case C-62/86 AKZO v Commission [1991] ECR I-3359 and Case T-65/89 BPB Industries and British Cypsum [1993] ECR II-389.
(62) Paragraph 71 of the judgment.
(63) Sec William J. Baumol and J. Gregory Sidak, Toward competition in Local telephony, page 66: "... the result will be that more resources than the minimum necessary will be expended in bringing [product] X to consumers, which clearly violates economic efficiency."
(64) See the overiew of turnover, sales and net revenue per item achieved between 1996 and 1999 with the eight biggest mail-order customers, submitted by DPAG on 14 July 2000.
(65) This may be illustrated by the example, cited by DPAG, of Otto-Versand. Hermes Versand Service, a subsidiary of Otto-Versand active in the parcel delivery sector, is now, with 141,6 million parcels delivered in 2000 (the firm's own data), the sixth largest courier, express mail and parcels operator in Germany (turnover in 1999: EUR 337 million). This example shows that alternative facilities created originally for the mail-order trade's own use may, once they have started to deliver a certain volume of items, develop into a competitor of DPAG which, the better to exploit its capacity, will also convey parcels for third parties.
(66) In 2000 Hermes Versand Service opened, according to its own data, its 3000th "PaketShop". These parcel acceptance points have been installed as "shops within a shop" in other commercial premises such as newsagents, tobacconists. copy shops, off licences and dry-cleaners. Hermes Versand thus provides a comprehensive service to the mail-order trade, including the carriage of items returned by customers.
(67) See the judgment of the Court of First Instance in Case T-228/97 Irish Sugar [1999] ECR II-2969, at paragraph 213; Hoffmann-La Roche, at paragraph 90; and the judgment of the Court of Justice in Case 322/81 Michelin, [1983] ECR, 3461, at paragraph 85.
(68) Judgment of the Court of First Instance in Case T-65/89 BPB Industries and British Gypsum [1993] ECR II 389, at paragraph 70.
(69) Hoffmann-La Roche, at paragraph 89.
(70) DPAG letter of 9 March 2000, pp. 5 to 7.
(71) Pursuant to Section 2 of the Act, the Act's purpose is to "ensure equality of opportunity between rural areas and built-up areas in postal services having regard to tariff unity in respect of monopoly and public service tasks."
(72) In the official explanatory memorandum the Federal Government explains the purpose of this provision as follows: "Paragraph 2 contains the important principle, applicable, inter alia, to the level of charges, that the individual services should as a rule earn enough to cover the full costs and generate a reasonable profit. This is not always possible. In the case of universal services, for example, market conditions may, owing to infrastructure constraints, exceptionally allow only part of the costs to be covered. In that event, at least the variable costs should be covered". (German Parliament, lower house, 11th legislative period, circular 11/2854).
(73) Section 6(4) of the Order on the protection of postal customers (Post- Kundenschutzverordnung), cited by DPAG in its letters of 6 June 2000 (pp. 4 to 6 ) and of 6 October 2000 (pp. 7 and 16) refers only to payments for monopoly services and does not apply to non-reserved parcel services. This provision also requires prices to be set in proper accordance with cost levels and structure.
(74) See Case T-62/98 Volkswagen AG, judgment of 6 July 2000, paragraph 199, not yet reported.
(75) See Case 7/82 Gesellschaft zur Verwertung von Leistungsschutzrechten mbH (GVL) [1983] ECR 483.
(76) See the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17, (OJ C 9, 14. 1.1998, point A).
(77) On the part played by cost-efficient alternative delivery infrastructures as a source of competition desirable for the economy as a whole, see above at recitals 37 and 38.
