EU extends probe on state aid to Germany's Deutsche Post

May 10, 2011, 13:47 GMT

Strasbourg, France - The European Union's executive said Tuesday it was extending a probe on state aid Germany granted to its former postal monopolist Deutsche Post, indicating that it suspected that preferential treatment was given to the company.

The decision, announced after a European Commission meeting in Strasbourg, France, widened the scope of an investigation started in 2007 after EU authorities received a complaint from Deutsche Post rival UPS.

The probe is to focus on the subsidies Deutsche Post received from 1990 to 2007 to cover the pension costs of employees it hired when it was a state monopoly. This is legal under EU rules, as long as aid amounts are not exaggerated.

In a statement, the commission said 'it is concerned Deutsche Post may be over compensated for the 'legacy' pension costs as it is getting not only a pension subsidy from the state but also an increase in regulated letter prices specifically to cover pension costs.'

As a result, the company 'effectively benefited from social contribution rates that were 10 to 15 percent below the rates which competitors had to pay,' the commission charged.

Tuesday's announcement gives Deutsche Post and other interested parties the chance to comment on the case. If the commission finds that its suspicions are justified, it can order the company to pay back the subsidies.

In a similar case dating back to 2002, Deutsche Post was asked to give back 572 million euros after the EU executive judged that the money was used to finance a parcel service at below-cost rates.

But after a long legal battle, that decision was overturned last year by EU court of justice, allowing the company to keep the money.

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