Distortion of Competition in the Postal Sector: The EC Case Law on Abuse of Market Power and State Aid

Abstract

The failure of the Community legislature to agree until very recently to the additional liberalization and deregulation of the postal services sector, which had been envisaged by the 1997 Postal Directive, has meant that the competition rules of the Treaty have retained a central role in this field. It is probable that the solutions which these rules offer for resolving what seems to be an increasing number of disputes in an industry which has undergone major changes, in economic, technological and regulatory terms, are less nuanced than those that have emerged from the legislative process. However, until the current logjam is broken, it is clear that EC competition law and the Community courts will be the final resort where incumbents and new entrants come into conflict. The establishment of a truly competitive environment in the postal sector, allowing users to benefit from better quality of service and cheaper prices, depends crucially, in the present phase of gradual and controlled market opening, on the need to avoid re-monopolization of liberalized markets by incumbent public operators indulging in unlawful market behavior (abuse of market power restricting the competitors' activities, extension of dominance into neighboring non-dominated markets, distortion of competition through the grant of State aid or illegal cross-subsidization). As to the Luxembourg courts' role in the application of EC competition rules, the Author submits that, on the one hand, the Court of Justice and the Court of First Instance have refused to become involved as a driving force behind the liberalization of postal services; on the other hand, they have sought to strike a delicate balance between the creation a more competitive and integrated internal market in the postal industry and the objective of securing the viability of public service activities through preservation of existing exclusive rights, which had formerly been justified on the basis of national sovereignty and of universal service obligations.