Due to our market leadership position, a large number of the services we offer are subject to sector-specific regulation in accordance with the Postgesetz. The regulation framework implemented by the regulatory authorities covers in particular price review and approval procedures, the formulation of terms of downstream access and general checks for market abuse. The resulting proceedings may lead to a decline in revenue and earnings.
Legal risks arise, for example, from the appeals pending before the administrative courts against the regulatory authority’s July 2002 ruling concerning the conditions for the
price-cap procedure, as well as from two appeals respectively against price approvals granted under the price-cap procedure for the years 2003, 2004 and 2005.
European Commission competition proceedings were initiated on the basis of accusations about excessive mail prices made by the Deutscher Verband für Post und Telekommunikation (German Association for Posts and Telecommunications). In these proceedings, we have presented detailed evidence to support our argument that the prices are reasonable.
Conditions determined by the regulator oblige us to allow customers and competitors downstream access to our network. Proceedings are pending before the administrative or civil courts and the Court of First Instance of the European Communities against the relevant rulings by the regulatory authority, the Bundeskartellamt (German Federal Antitrust Authority) and the European Commission. Depending on the outcome of the proceedings, we could be faced with further losses of revenue and earnings. We would like to highlight the following cases:
In a ruling on October 20, 2004 relating to downstream access to Deutsche Post’s network by mail consolidators, the European Commission found against the Federal Republic of Germany, ruling that the relevant provisions of the Postgesetz are not consistent with EU law. The Federal Republic of Germany was obliged to inform the European Commission within two months of the measures it had taken to satisfy EU law. In December 2004, it appealed against the European Commission’s ruling.
By way of a ruling dated February 11, 2005 in corresponding proceedings, the Bundeskartellamt prohibited Deutsche Post AG from refusing downstream access by mail consolidators to its network. In our view, the Postgesetz and the scope of the exclusive license comply with Community and competition law, notably with the EU Postal Services Directive and the competition rules of the EC Treaty. For this reason, we filed an appeal against the rulings by the European Commission and the Bundeskartellamt. Until a decision is reached in these proceedings, we are obliged to allow consolidators downstream access. The conditions of access are, in turn, the subject of regulatory authority decisions, as well as of appeals against these decisions and civil cases. If the rulings by the European Commission, the Bundeskartellamt or the regulation authorities result in an obligation to grant mail consolidators downstream access to our network, this could lead to double to three-digit million revenue losses per year.
An allegation by the Monopolkommission (German Monopoly Commission) is the subject of requests for information made by the European Commission to the German federal government in response to a complaint by a third party. The allegation is that Deutsche Post AG contravenes the prohibition on state aid enshrined in the EU Treaty by allowing Deutsche Postbank AG to use Deutsche Post outlets at below-market rates. In our opinion, the fee paid by Postbank complies with the provisions on competition and state aid stipulated in European law.
The European Commission is also asking the Federal Republic of Germany to comment on the sale of its entire interest in Deutsche Postbank AG to Deutsche Post AG in 1999. However, the European Commission has already investigated the acquisition of Postbank as part of the state aid proceedings that were concluded with the ruling dated June 19, 2002. At the time, it explicitly concluded that “the acquisition of Postbank involved no grant of state aid”.
The German federal government has already argued before the European Commission that the allegations are unfounded in its opinion. Nevertheless, no assurance can be given with regard to the two allegations relating to the requests for information that the European Commission will not find that the facts of the case constitute state aid.
On January 21, 2004, the European Commission issued a state aid ruling on the assumption by the Belgian government of pension obligations owed by the Belgian telecommunications company Belgacom to employees. Some press statements reported that the European Commission would consider applying the state aid principles of this decision to Deutsche Post AG if the European courts grant Deutsche Post AG’s appeal against the European Commission’s state aid ruling dated June 19, 2002. According to these press reports, this could result in a substantial financial burden for Deutsche Post AG.
However, the European Commission has not confirmed these reports. In addition, it is our opinion that the facts of the case governing the ruling of January 21, 2004, differ from the statutory regulation of Deutsche Post AG’s pension obligations. We believe that the arrangements for financing pension obligations do not constitute state aid by the Federal Republic of Germany, based on the European Commission’s previous decisions. Furthermore, the European Commission has already examined in detail the contributions by the Federal Republic to finance pensions within the scope of the state aid proceedings that have already been concluded, and did not establish any illegal aid in its decision of June 19, 2002. In this respect, Deutsche Post AG therefore claims protection under the principle of legitimate expectations. Nevertheless, no assurance can be given that the European Commission will not find that the facts of the case constitute state aid.