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Post Danmark - Abuse of dominant position

29. september 2004

3/1120-0100-0974/ISA/chj/lbr The Council meeting 29 September 2004

On 29th September 2004, the Danish Competition Council adopted a decision concerning the alleged abuse by Post Danmark A/S of its dominant position on the market for distribution of unaddressed items and local weeklies. The case was initiated by a complaint submitted by the competing distributor, Forbruger-Kontakt, as the undertaking in 2003 lost three significant retail chains as customers to Post Danmark.

Forbruger-Kontakt had alleged that Post Danmark was abusing its dominant position on the market for distribution of unaddressed items and local weeklies. The complaint by Forbruger-Kontakt consisted of the following four allegations.

  • discriminating prices and loyalty rebates
  • predatory pricing
  • agreements of unreasonable long duration
  • cross subsidies restricting competition and state aid

The relevant marked in the current case is defined as the market for distribution of unaddressed items and local weeklies in Denmark. The two largest players are Post Denmark and Forbruger-Kontakt respectively. The rest of the market players are small local distributors.

Discriminating prices

The Competition Council concludes in the decision that Post Danmark has infringed Article 82 of the Treaty and section 11(1) in the Danish Competition Act by using of discriminating prices.

Post Danmark had used discriminating prices towards its own customers and towards the customers of its only competitor, Forbruger-Kontakt. In some incidents Post Denmark has used lower prices towards the customers of its competitor than towards its own customers under somewhat similar conditions. Post Danmark has also used discriminating prices amongst its own customers.

Finally, Post Danmark had in its yearly contracts for 2003 with six customers used loyalty rebates schemes (target rebates), whereby the customers obtain higher rebates if their actual yearly number of local weeklies exceeds the target number of local weeklies agreed bilateral between the customer and Post Danmark. These rebates schemes do not reflect the underlying costs of Post Denmark but has been used with the purpose to obtain market shares from the competitor, Forbruger-Kontakt.

The draft decision issues an order requiring Post Danmark A/S to:

  • amend the undertakings prices and rebates so the undertaking does not use loyalty rebate schemes or use prices/rebates with an excluding effect
  • amend the undertakings prices and rebates so the undertaking does not use prices/rebates which treats customers in similar conditions differently

Post Danmark has to cease its infringements and fulfil the order by 1st January 2005.

The Competition Authority has up to the adoption of this decision been in a constructive dialogue with Post Danmark and it is expected that an agreement concerning the future prices and rebates of Post Danmark will be assessed by the Competition Council as soon as possible.

Assessment of predatory pricing postponed

The Competition Council also decided to postpone the assessment of the question whether Post Danmark has abused its dominant position by predatory pricing as this question proved to be complicated and needed further analysis. The Competition Council will assess this question as soon as possible on one of its coming meetings.

Cross subsidies

Finally, the Competition Council rejected to further assess the allegation about cross subsidies by Forbruger-Kontakt. Forbruger-Kontakt had alleged that Post Danmark were restricting competition by cross subsidising its activities for unaddressed items and local weeklies with funds from other activities covered by universal service obligation. The Competition Council found that the information available did not indicate that funds had been transferred to the business area for unaddressed items and local weeklies. Therefore, the Competition Council concluded that there was no basis for a more in-depth assessment of this topic.

State aid

As Forbruger-Kontakt has submitted a complaint concerning illegal state aid at the European Commission the Competition Council found that the European Commission has the jurisdiction concerning this topic in the current case.

Agreements of unreasonable long duration

With regard to Forbruger-Kontakts allegation that the agreements of Post Danmark were agreements of unreasonable long duration the Competition Council rejected this allegation as unfounded.

The decision can be found in Danish language on the Web page of the Competition Authority www.ks.dk under “konkurrence/afgørelser”.

Further questions should be directed to Head of Unit, Mr. Niels Rytter (+45 72 26 80 97) or Special Advisor Carina Hilt Jørgensen (+45 72 26 81 30).