A new Postal Services Act to boost competition in the letter market

To strengthen competition in the letter market, the Monopolies Commission has repeatedly recommended a reform of the Postal Services Act, which has remained largely unchanged since 1997.

As a result of the legislative amendment, profit margins on postal service charges that exceed those customary in a competitive market are now eligible for approval.

A draft from the Federal Ministry for Economic Affairs for a ‘major’ amendment to the Postal Services Act has been available since May 2020. This draft provides a sound basis for a comprehensive reform that would strengthen competition in the postal markets. Key points for a necessary ‘major’ amendment to the Postal Services Act include, amongst others:

• The fee criteria set out in Section 20 of the Postal Services Act should be revised. Among other things, these lead to excessive fees in the private customer sector and give Deutsche Post AG an advantage over its competitors.
• Access to partial services for letters should be extended to include parcel deliveries and press mail. Access to partial services at Deutsche Post AG’s letter sorting centres enables competitors to access its letter network. As no competitor currently has a Germany-wide letter network, they require this access in order to be able to offer their own customers nationwide delivery. For parcels and press mail, which are frequently delivered alongside letters, no such access currently exists. Extending this access would remove existing competitive disadvantages for alternative postal service providers. Their postal networks would be utilised more fully, and through parcel post – which usually contains small, low-cost items – they could benefit from the growth in online retail.
• The obligation for Deutsche Post AG to submit contracts should be extended. The Postal Services Act stipulates that Deutsche Post AG must submit so-called ‘partial service contracts’ to the Federal Network Agency. These are contracts under which business customers carry out activities such as sorting or franking their letters themselves. If, on the other hand, business customers do not carry out such activities themselves but have their letters sorted and franked by Deutsche Post AG, there is no obligation to submit the contracts. This results in a significant information gap in price regulation.

Amazon is injecting new momentum into competition in the parcel market, but should be monitored due to its ability to exert market power as a platform operator

Amazon’s importance to the parcel market is growing. As Germany’s largest online retailer, the company is a major consumer of parcel services and, since 2020, has been one of the six largest parcel service providers thanks to its own parcel delivery network. Its high standards for parcel delivery quality drive innovation, and its parcel delivery network stimulates competition in the market. Furthermore, its position in online retail and logistics enables Amazon to channel significant volumes of demand in the parcel sector towards its own parcel delivery network. Amazon thus possesses structural competitive advantages which it can use to increase its market share in the parcel market. Although this initially further intensifies competition in the parcel market, there is a concern that Amazon, as a platform operator with significant market power, may offer other online retailers advantages on its online marketplace if they use its parcel services.

Amazon’s future conduct as a platform operator should therefore be monitored.