DHL 2010 Annual Report Download - page 214

 Litigation
As Deutsche Post  is the market leader, a large number of
its services are subject to sector-speci c regulation under the Post-
gesetz (German postal act).  e regulatory authority approves or
reviews prices in particular, formulates the terms of downstream
access and conducts general checks for market abuse. Any resulting
proceedings could lead to a decline in revenue and earnings.
Legal risks arise, for example, from appeals by an asso-
ciation and a competitor against the price approvals under the
price cap procedure for ,  and , and by the asso-
ciation against the price approvals under the price cap procedure
for . Although the appeals by the association against price
approvals for the years  to  were  nally dismissed by the
Münster Higher Administrative Court, the association has lodged
a constitutional complaint against this decision with the Federal
Constitutional Court. Should the constitutional complaint be up-
held, the proceedings at the Münster Higher Administrative Court
will be resumed.
Legal risks also result from appeals by Deutsche Post against
other price approvals granted by the regulatory authority.
European Commission competition proceedings were initi-
ated on the basis of a complaint made by the Deutscher Verband
für Post und Telekommunikation (German association for posts and
telecommunications) about allegedly excessive mail prices. In these
proceedings, Deutsche Post  has presented detailed evidence to
support its argument that the prices are reasonable.
Deutsche Post  increased its discounts for downstream
access on  July . Deutsche Post’s competitors and their asso-
ciations  led complaints against these discount increases with the
Bundesnetzagentur (German federal network agency).  ey claim
that the increased discounts con ict, in particular, with regulatory
requirements. However, the Bundesnetzagentur discontinued its
review proceedings by way of a noti cation of  September 
a er having found no violation of the applicable regulations. It
remains to be seen whether the plainti s will attempt to pursue
their complaints via other legal means. Deutsche Post  considers
its charges for downstream access and the discount increases to be
in compliance with the regulatory and other legal requirements.
However, no assurance can be given that government authorities
or the courts will not come to a di erent conclusion that would
have negative e ects on Deutsche Post ’s revenue and earnings.
In response to a complaint by a third party, the European
Commission issued requests for information to the German
government concerning an allegation by the Monopolkommis-
sion (German monopoly commission).  e allegation is that
Deutsche Post  contravenes the prohibition of state aid under the
 Treaty by allowing Deutsche Postbank  to use Deutsche Post
outlets at below-market rates. In the opinion of Deutsche Post 
and Deutsche Postbank , this allegation is incorrect and the fee
paid by Deutsche Postbank  complies with the provisions on
competition and state aid stipulated in European law.  e European
Commission also asked the Federal Republic of Germany to com-
ment on the sale of its entire interest in Deutsche Postbank  to
Deutsche Post  in . However, the European Commission
has already investigated the acquisition of Deutsche Postbank 
as part of state aid proceedings that were closed with the ruling
dated  June . At the time, it explicitly concluded that the
acquisi tion of Postbank involved “no grant of state aid”.
 e German federal government has already argued before
the European Commission that the allegations are unfounded in
its opinion. Nevertheless, no assurance can be given with regard
to the two allegations relating to the requests for information that
the European Commission will not  nd that the facts of the case
constitute state aid.
On  September , the European Commission initi-
ated a formal investigation against the Federal Republic of Ger-
many concerning possible subsidies.  e investigation focused on
whether the Federal Republic of Germany, using state resources,
overcompensated Deutsche Post  or its legal predecessor
Deutsche Bundespost  for the cost of providing uni-
versal services between  and  and whether the company
was thereby granted state aid incompatible with  law. Accord-
ing to the decision opening the investigation, the Commission
intends to examine all public transfers, public guarantees, statuto-
rily granted exclusive rights, the price regulation of letter services
and the public funding of civil servants’ pensions during the period
in question. Also to be investigated is the cost allocation within
Deutsche Post  and its predecessor between the regulated letter
service, the universal service and competitive services.  is also
relates to co-operation agreements between Deutsche Post  and
Deutsche Postbank  as well as between Deutsche Post  and
the business parcel service marketed by  Vertriebs GmbH.
Deutsche Post  and Deutsche Postbank  hold that
the new investigation lacks any factual basis. All public transfers
associated with the privatisation of Deutsche Bundespost, the
public guarantees and the funding of pension obligations formed
part of the subject matter of the state aid proceedings closed by the
decision of  June .  at decision did not identify the meas-
ures concerned as incompatible state aid. Deutsche Post  and
Deutsche Postbank  are further of the opinion that the statuto-
rily granted exclusive rights and the regulated letter prices do not
ful l the legal criteria to be considered a form of state aid in the
 rst place. Deutsche Post  also considers the internal allocation
of costs with its subsidiaries to be consistent with  state aid rules
and the case law of the European Court of Justice. Nonetheless,
based on an overall appraisal, the possibility of the Commission
 nding a case of incompatible state aid cannot be ruled out.
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