Deutsche Post Victorious in EU Challenge Over German Aid

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Deutsche Post Victorious in EU Challenge Over German Aid to Parcel Unit

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Deutsche Post AG won’t have to repay German state aid and interest totaling more than 1.15 billion euros ($1.5 billion) after it defeated a regulator’s challenge to the subsidy at the European Union’s highest court.

Deutsche Post can keep the money which the EU’s executive agency said was granted unlawfully, the European Court of Justice ruled today. The court in Luxembourg dismissed the European Commission’s appeal and confirmed a lower court’s decision that the regulator had used a “defective” method in its 2002 finding that Deutsche Post had misused the subsidy.

The dispute goes back to 1994, when United Parcel Service Inc. complained that Bonn, Germany-based Deutsche Post offered anti-competitive rebates to customers in its door-to-door package service, undercutting private businesses like UPS.

The Brussels-based commission appealed the lower court ruling from 2008 that annulled its finding six years earlier that the aid to Europe’s largest mail service was unlawful. The commission failed to rebut Deutsche Post’s argument it had used the aid for proper purposes, the EU’s second highest court said at the time.

Deutsche Post lawyer Alexander Kirschall said in an interview after the ruling that the original amount of 572 million euros in state aid had increased to 1.15 billion euros by 2008 with the addition of interest.

Deutsche Post advanced as much as 1.1 percent to 13.39 euros after the announcement. The shares rose 1 percent to 13.385 euros at 12:16 p.m. in Frankfurt.

Separate Probe

A win for the EU regulator, which checks that grants don’t distort competition in the 27-nation EU, could have forced Deutsche Post to repay the aid and interest.

The commission will “study carefully” the ruling, Amelia Torres, a commission spokeswoman, said in an e-mail. The regulator opened another probe in 2007 over German subsidies to the postal operator, Torres said. The aim of this investigation is “to comprehensively address all potential distortions of competition resulting from the total amount of state resources granted to Deutsche Post.”

The 2007 probe will determine “to which extent the granted state resources are to be regarded as state aid and, if so, the compatibility” with EU rules, Torres said.

The commission in its 2002 decision said Deutsche Post used the subsidies to cover losses on its parcel-delivery business between 1994 and 1998.