Deutsche Post: Inquiry to check aid

Commission officials have shifted the emphasis of their probe into alleged unfair competition by the German post office Deutsche Post AG by deciding to focus on complaints that the company has received billions of ecu in government subsidies.

Officials have chosen to prioritise investigations into alleged state aid by the German government instead of more complicated complaints about unfair competition and abuse of a dominant position, in order to get a fast result, according to insiders following the cases.

A full statement of the Commission's initial worries - the equivalent of a statement of objections in competition cases - is expected to be sent shortly, in the hope that the decision to push forward the subsidies case will mean an outcome by the end of the year.

A verdict against Germany would probably result in Deutsche Post being forced to repay at least some of the enormous sums which have been sunk into it over the years.

Private courier company UPS and the German Express Carriers' Association, which are behind the competition complaints, say subsidies to the German post office's express activities add up to billions of ecu every year. They claim the parcels operation alone has been losing around half a billion ecu a year for the last few years.

In particular, they point to the post office's decision to build 33 sorting offices at a cost of just over two billion ecu for the parcels operation as evidence that the express business has been existing on a subsidy lifeline with no real reference to likely profits.

Complainants say that the German post office cut its charges in a bid to push more business through its gleaming new facilities, forcing private companies to match its tariffs and resulting in a cut-throat market which has severely hit their profits.

'The German market has become extremely competitive compared with its neighbours,' said Anton van der Lande, secretary-general of the European Express Organisation (EEO).

The German post office is already under attack on other fronts, with a draft law expected to go to parliament next month suggesting the shrinking of its monopoly to letters under 100 grams and a free-for-all in direct mail.

At the same time, however, there are plans for up to 25% of Deutsche Post - which is entirely owned by the state at present - to be sold off by the year 2000.