Measures to Improve Competitive Conditions in the Postal Market

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• Case number: 8/2017
• Date: 17/2/2017
• Company:
  • Íslandspóstur hf.
• Sectors:
  • Transport and travel affairs
• Policy Area:
  • Abuse of dominance
• Summary

  The decision is based on a bilateral settlement between the Icelandic Competition Authority (ICA) and Iceland Post (IP). The commitments of the settlement are designed to comprehensively and lastingly resolve competition problems that have crystallized in a various formal and informal complaints about the company's conduct that ICA has received in recent years. Most of the complaints are based, directly or indirectly, on competitors‘ suspicion that IP has been using profit from the state reserved area of its business to cross-subsidize its competitive activities. 

  In order to solve the competitive problems that were identified during the investigation of the underlying cases, certain commitments are introduced in the settlement involving the requirement to prepare separate LRAIC-based accounting statements for each of IP‘s significant business areas that are open to competition and a clear criteria is set out for the assessment of potential cross-subsidies from the reserved area to these competing business areas. This criteria is useful both for IP‘s own internal control and for supervisory bodies in their assessment of potential violations of competition law and are suited to prevent cross-subsidization from IP‘s monopoly business.

  The settlement stipulates that IP‘s subsidiaries shall be operationally and administratively independent from IP and that IP‘s express mail service business, TNT, will be moved out of the parent company into a separate entity as a subsidiary.

  In the settlement there are also introduced certain restrictions regarding IP‘s transactions with its subsidiaries. The reason for this is to ensure equal treatment of competitors and IP‘s subsidiaries when they transact with IP. In the settlement, IP‘s ability to finance its subsidiaries is also significantly limited to prevent distortions of competition in the markets where IP‘s subsidiaries operate.

  The settlement includes provisions intended to ensure that competitors of IP in the distribution of unaddressed advertising mail can buy distribution from IP in remote areas at the same cost/transfer price as IP itself. Furthermore, the settlement provides that competitors of IP in the field of postal services should get comparable terms and conditions  when they do business with IP as other customers of the company in comparable situations. Moreover, IP is prohibited (unless there exists an objective justification) to refuse to sell its services competitors in the area of universal service. 

  The settlement stipulates certain structural changes in the internal organization of the parent company. The changes involve a separation of IP‘s sales operations from the division responsible for cost allocation to different business areas. This separation serves i.a. to better guarantee that IP‘s cost allocation between the company‘s reserved area on the one hand and its various competitive activities on the other hand, is implemented in an objective manner and does not distort competition. Generally these organisational changes are conducive to reduce any risk of conflicts of interest. 

  The settlement also stipulates that a monitoring committee shall be established to oversee that the conditions of the settlement are met and will receive complaints and take decisions in accordance with the provisions of the settlement. Two out of three members of the committee must be independent of IP.