Re-regulation of Europe’s postal sector must be stopped, warns a new study from the Institut économique Molinari

Paris, March 23, 2010 – In keeping with an EU reform, the entire postal sector is supposed to become competitive in a majority of member countries by January 1st, 2011.

A new study from the Institut économique Molinari (IEM) shows, however, that this reform does not go far enough in liberalising the postal sector. Governments in most member countries maintain almost total control over national postal operators, which benefit from capital injections and financial assistance that inevitably distort competition.

But national governments have also begun a parallel process of re-regulation that endangers the opening to competition and its potential economic benefits.

“On paper, there won’t be a prohibition on competing with traditional postal operators,” says Valentin Petkantchin, IEM research director and author of the study. “In reality, however, new regulatory obstacles are being imposed on competitors that are trying to get into the market.”

A whole array of new barriers to entry

• In Finland, one of the first EU countries to open its postal market in 1991, the entry of new operators is accompanied by the obligation to provide mail delivery every working day and to pay the government a “tax” of 5% to 20% of revenues if service is limited to certain regions. The result is that the only competitor to the Finnish national postal system to have obtained a licence let it expire in 2003 without even using it! Other countries, such as Estonia and Belgium, are following the same course.
• In Italy, new competitors must pay into a « compensation fund » aimed at financing the national operator, their main rival, even though they will not be making use of its postal network.
• In France, a new law also sets out mandatory contributions and the creation of a similar “fund”. Moreover, the government plans to pump 2.7 billion euros into La Poste, the national operator. This financial assistance will hurt postal competition.
• In Germany, a new minimum wage law specific to the postal sector caused the wage costs of Deutsche Post competitors to soar nearly 12%, according to estimates. The number of employees plummeted almost 40%, with about 19,000 jobs eliminated. PIN Group, one of the main competitors, was pushed into bankruptcy.
• VAT exemptions that cover only national postal operators, as is the case with Royal Mail in the United Kingdom, also distort competition.

Whatever the political justification, this re-regulation protects the postal monopolies of the past, prevents competition from playing its role and risks annihilating the benefits expected from the EU reform, the IEM study concludes.

Titled The re-regulation of the postal sector in the European Union, the study is available on the Institute’s website.

Information and interviews requests:

Valentin Petkantchin, PhD

Research Director

Institut économique Molinari

GSM: +33 6 50 54 97 95

valentin@institutmolinari.org