BRUSSELS, Belgium: EU regulators said they would investigate how Britain funds its postal service, Royal Mail PLC, to check if the government offered loans on favorable terms.
The European Commission said the investigation — which also covers a 300 million pound (€450 million; US$591 million) state loan announced Feb. 8 — was triggered by complaints from Royal Mail's rivals that the state-owned company receives unfair state subsidies.
Royal Mail lost its 350-year legal monopoly over delivering letters at the end of 2005, opening up the market to new entrants.
"I take the complaints received very seriously," said EU Competition Commissioner Neelie Kroes. "The postal sector is increasingly open to competition, and it is important to reassure competitors that the advantages of that opening are not neutralized by illegal state subsidies."
EU governments are only allowed to give public service companies exactly what they need to operate services such as broadcasting or transport in the public interest and cannot loan money on terms and conditions that are better than what the company would get from the private sector.
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If regulators find that the Royal Mail was effectively given extra money in the form of cut-price loans, it may be ordered to pay the difference back to the state.
As well as the February loan, the EU executive is to examine a 500 million pound (€740 million; US$973 million) state loan to fund Royal Mail's overseas acquisitions, saying it will investigate if the fixed interest rate was commercial when the 20-year loan was granted in 2001.
It will look into a 1 billion pound (€1.48 billion; US$1.95 billion) loan facility offered to Royal Mail from government resources in 2003, that the company never used. Most of that — 900 million pounds (€1.34 billion; US$1.76 billion) — will be extended after 2007. Regulators said they needed to check if the availability of these funds gave Royal Mail an advantage over rivals.
Also under the microscope is the British government's move to put 850 million pounds (€1.26 billion; US$1.66 billion) aside in an escrow account to reduce the pensions contributions Royal Mail needs to make to cover the current shortfall in its pension funds. The money comes from the company's past profits, which are under state control.
The Commission said it had received complaints against Royal Mail in August and October last year and was also looking at a British government package announced in February to see if funding was offered on terms acceptable to a private investor — which would not violate EU subsidy rules.
The Royal Mail's group turnover was 9 billion pounds (€13.5 billion; US$17.75 billion) in the financial year 2005-2006 when it generated a profit of 395 million pounds (€570 million; US$749 million).
It employs some 193,000 people in Britain where its retail subsidiary, the Post Office, is the largest European retail network by number of outlets. As well as stamps, it offers over-the-counter access to government and payment services, particularly important for old people and welfare recipients.
EU regulators ruled in February 2006 that Britain could pay the Post Office 150 million pounds (€219 million; US$261.86 million) a year to keep rural branches open.
* A £500m loan granted in 2001 at a fixed interest rate to fund overseas acquisitions
* A £1bn loan offered in 2003, the bulk of which has been extended beyond 2007
* A payment of £850m - drawn from the firm's cash reserves - placed in an "escrow account" to address the firm's pension deficit
* A £300m loan announced last month
I Wrote-During Covid-Which is still relevant now
It's good to get these types of threads, the ridiculous my manager said bollox, so we can reassure ourselves that while the world is falling apart, Royal Mail managers are still being the low-life C***S they have always been. My BFF Clash The daily grind of having to argue your case with an intellectual pigmy of a line manager is physically and emotionally draining.
Welcome to Blairs britain where the EU can overule what the government thinks is in the Countrys' best interest.
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The complaint against Royal Mail, came from the Mail Competition Forum which includes most of its 17 competitors.
David Sibbick, the forum's secretary, said the rivals' aim was not to "screw" Royal Mail as its failure would "kill mail" and enhance electronic substitutes.
Well f**k off then
Guy Buswell, Business Post chief executive, said the forum was simply seeking a level playing field. "Our wish is absolutely not to see a severely weakened Royal Mail. They are the only providers of a comprehensive, nationwide 'final mile' delivery network and their stability is important to the overall UK mail industry and the maintenance of a truly competitive marketplace."
Competitors were struggling because of Royal Mail's huge economies of scale and VAT advantage -it pays none, they pay 17.5% - while the state was "shovelling" money towards it and its 193,000 employees. The pension fund top-up enabled it to keep its prices lower by spreading the liabilities over a longer period.
Tough,f**k off again
The state-owned corporation is understood to be incensed that Ms Kroes has ordered the investigation when Britain opened its postal market to the complainants in January last year, more than three years ahead of the EU schedule, and when its rivals enjoy protection in their own domestic markets.
See,it aint all one way,now again,f**k off
Deutsche Post, which operates as DHL in the UK, tabled the first complaint last August. The German company has itself been investigated by the Commission which, in 2002, ruled that it had received illegal state subsidies. The company is currently challenging the decision before the European Court of First Instance.
2 Faced or what
Or is that 2 WW and 1 WC
I Wrote-During Covid-Which is still relevant now
It's good to get these types of threads, the ridiculous my manager said bollox, so we can reassure ourselves that while the world is falling apart, Royal Mail managers are still being the low-life C***S they have always been. My BFF Clash The daily grind of having to argue your case with an intellectual pigmy of a line manager is physically and emotionally draining.
