CONTEXT

Amongst regulatory issues, public procurement is of high relevance for postal operators. PostEurop Members welcome the Commission consultation on the revision of three legislative acts that regulate public procurement in the EU (‘how to buy’): Directives 2014/23/EU (the Concessions Directive), 2014/24/EU (the Public Procurement Directive) and 2014/25/EU (the Utilities Directive). The application and the development of the EU public procurement are indeed of much importance to PostEurop Members.

PostEurop Members, many of which are public undertakings, are primarily affected by the Utilities Directive, which applies to various segments of the postal market. Consequently, PostEurop will focus its input mainly on that piece of legislation. 

Background of the Utility Directive

As part of the legislation relating to public procurement – which is applicable to the public undertakings – a special regime was introduced by the Utilities Directive out of the need to accommodate the specific nature of the activities of seven utility activities in the Member States, for which markets were often (or still can be) closed and not yet (fully) liberalized. Since government influence was often highly present in these sectors, the aim was to prevent a distortion of competition as a result of this government influence affecting the procurement policy of the entities providing these specific services. However, to meet the large differences that existed in the Member States regarding the degree of government influence or liberalization on these markets, it was decided to introduce a more flexible regime as compared to the regime in the “classic public procurement sector”.

Besides, this special regime is also considered to be a transitional regime pending the overall liberalization of these sectors in the Member States. The telecommunications sector can serve as an example for this purpose. It used to be included as one of the relevant activities in the utilities sector to which the special Utilities regime applied. Considering that effective competition was introduced (de jure and de facto) in this telecommunications sector, this sector was removed from the material scope of application of this special regime (utilities). Furthermore, the EU legislator also introduced in the “classic regime” a specific exclusion ground in the field of electronic communications/telecommunications to ensure that these activities would not be subject to the public procurement rules of the “classic regime” neither.

The postal market has been subject to competition both in practice and in law for many years.

The Utilities Directive applies to activities relating to the provision of “postal services”, which consist of the clearance, sorting, routing and delivery of “postal items”. In addition, the Utilities Directive also covers “other services than postal services”, in particular (i) mail service management services and (ii) services concerning postal items such as unaddressed mail. 

With regard to the postal services that are still subject to the Utilities Directive, PostEurop Members would like to stress that these services are provided in markets which are de jure open to competition and de facto very competitive.

The process of postal liberalisation began in the early 1990s with some front runners Member States opening to competition entire segments of the postal market such as international mail or bulk mail. The Postal Services Directive (97/67/EC) was amended twice in 2002 and 2008. The latest revision confirmed that the market would be fully open to competition from 1 January 2011. The Commission has recognised on several occasions in its reports on the implementation of the Directive that the Directive have been effectively transposed in all Member States.

The irreversible decline in mail volumes across Europe due to digitalisation started at the same time. For over 15 years now, incumbents are facing a dual competition, due to digital substitution and the arising of newcomers. Alternative operators may be active in the entire mail market, or they may develop selected business models, which is less challenging in a context of continuously declining mail volumes. Competition can therefore be global or targeted, involving various aspects and elements:

• Some providers specialise in certain market segments, such as bulk addressed mail, registered letters or international mail. Thanks to their specialisation, they can offer low-cost services. This focus on targeted products can also be reinforced by concentrating on specific geographical areas where they established local collection and distribution networks. The number of licences issued by national regulators clearly reflects this.

• Some providers offer services only on some parts of the value chain (e.g. consolidators, upstream and downstream operators) and use the incumbent operator for part of the transport and / or final distribution. In this way, they capture parts of the mail's value chain, especially the most lucrative ones.

• Other service providers focus on high-value niche markets, such as heavy document exchanges, on-demand deliveries, and courier services.

• Finally, operators that have built last-mile distribution networks for related activities, such as newspaper delivery or unaddressed mail, can operate on an ad hoc basis — for example, for the distribution of election materials.

Market assessment must also consider market dynamics. The decline in postal volumes raises questions about the usefulness of regulating purchases in an industry that is ultimately disappearing.

On the other hand, there has never been a monopoly in the parcel market, which has always been open to competition. The growth of ecommerce has led to an unprecedented increase in volumes and fierce competition between operators, whose numbers have multiplied. Innovative out-of-home delivery solutions are developing thanks to low of barriers to entry. Major e-commerce platforms are adopting vertical integration strategies and providing their own delivery services. There are also other forms of competition: for example, for international parcel flows, airlines, liner shippers or road transport can also capture traffic directly from senders without having to go through public procurement procedures. For the consumers, competition in the parcel market guarantees low prices, a wider range of offers and innovation.

It is high time to reassess the level of competition in the postal sector at European level

It is worth reminding that the Utilities Directive has already evolved over time and that the following services offered by postal operators were removed from its scope of application: added-value services linked to and provided entirely by electronic means, financial services, philatelic services and logistics services (services combining physical delivery and/or warehousing with other non-postal functions).

Moreover, the Utilities Directive is not applicable to activities that fall under the scope of a relevant utility activity (such as "postal services" or "other services than postal services") if a Member State or a public undertaking having introduced a request to the Commission can demonstrate that the activity in question that is performed in said Member State is directly exposed to competition on markets to which access is not restricted.

Numerous exemptions have been granted recently and in the past years illustrating the need for reform of the regime with respect to the postal industry. If the exception tends to become the rule, the rule needs to be adapted to the changed reality.

For the vast majority of postal services (e.g. express mail delivery, domestic or international parcels delivery services (standard or express), domestic or international courier services, unaddressed mail, mailroom services, …) for which an exemption was requested, the Commission – acknowledging there was sufficient competition – granted an exemption from the Utilities Directive to the requesting Member States.

However, national exemption procedures are lengthy and costly to undertake, and they fragment the internal market. They are also difficult to implement in practice, as exemptions must be interpreted strictly. It is therefore necessary to recognise that the postal activity has been facing dramatic changes for 20 years and to draw the necessary legislative conclusions for the postal sector as a whole.

Operators subject to the Utilities Directive face a significant competitive disadvantage

Apart from the fact that the level of competition reached in the various postal markets generally no longer justifies the postal sector being subject to the Utilities Directive, other elements argue in favour of a total exemption for the postal sector (from the Utilities Directive and the Classic Sector Directive).

• The postal operators fall under the Utilities Directive only insofar as they are provided by a “public undertaking”. This creates a situation in which, in respect of the same service, some incumbents are subject to public procurement rules and others – including (mainly) non-European large platforms – are not, which can be considered as discriminatory and undermines the objective of developing a single European market.

• The Utilities Directive creates an unreasonable excessive administrative burden, extra costs and lengthens procurement deadlines for the entities subject to it. Postal operators can attest that the application of public tender rules by no means guarantees a sourcing at competitive conditions but more often than not just increases costs by leading to a suboptimum outcome (e.g., potential bidders refrain from bidding due to the cumbersome process and costs linked to the bid preparation). Therefore, the automatic application of public tender law already increased (and is going in future) the cost of the universal postal obligation and (the need for) a financing by State aids. This context explains the numerous requests for exemption of postal operators in the last years. If operators were satisfied with the current legal framework, they would not undertake the administrative burden and cost to request such an exemption.

• It also creates a confidentiality problem for the operators concerned, whose strategic purchasing plans are made publicly visible, sometimes even to competitors' bids. This creation of an artificial transparency on highly competitive markets potentially has the effect of distorting competition by making tacit collusion easier. This also potentially leads to unfair competition between operators who are subject to public procurement rules and those who are not.

Conclusion

As a result of the full liberalization process in the postal sector and the evolution of the market which has become very competitive, PostEurop Members submit that it is no longer justified to regulate purchases by entities operating in the postal sector. In sum, the postal operators are exposed to a level of competition which ensures that, also in case of a full exemption of the Procurement Directive, for the pursuit of the activity concerned will be carried out in a transparent and non-discriminatory manner to choose the economically most advantageous solution.

As previously expressed, PostEurop members plead for the full exclusion of postal activities from the scope of the public procurement Directives. For consistency reasons, they also ask the Commission to provide a specific exclusion for postal services in the classical regime in order to avoid that some postal operators would have to apply the more stringent classical regime for their postal services, after being exempted from the application of the Utilities Directive. Indeed, this cannot be the purpose. Lastly, if postal operators should no longer be subject to the special and classical sectors regime, there is also no longer any reason to subject them to the scope of the 2014/23 Directive on concessions. Consequently, postal operators should also be exempted from this directive.

PostEurop members are looking forward to following and contributing to the Commission's analyses regarding the postal sector's exemption from the Procurement Directives and engaging in dialogue with the relevant stakeholders throughout this process.

 

ABOUT POSTEUROP

POSTEUROP is the association which represents European postal operators since 1993 and is officially recognised as a Restricted Union of the Universal Postal Union (UPU). It is committed to supporting and developing a sustainable and competitive European postal communication market accessible to all citizens and ensuring a modern and affordable universal service. Its Members employ 1.6 million people and deliver billions of items annually to over 295 million homes and 48 million companies across Europe.

For more information, please contact: Ms Christelle Defaye-Geneste Chair of PostEurop European Union Affairs Committee La Poste Groupe E: christelle.geneste@laposte.fr [1] T: +33 155 440 181

POSTEUROP contact: Association of European Public Postal Operators AISBL Boulevard Brand Whitlock 114 1200 Brussels Belgium E: info@posteurop.org [2] T: + 32 2 761 9650

Click ⁠here [3] to download the position paper.