Citicorp Loses to German Post Before European Court

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BRUSSELS - The European Court of Justice has ruled against Citicorp in a case involving non-physical remailing of credit card billing from the Netherlands into Germany.

The case dates to 1995 when Citicorp's various European branches began sending data electronically to a data center the company had built in Holland where data was printed out and mailed back to card holders.

The German Post went to court first in Germany, charging the American multinational with illegal remailing because it cost much less to mail into Germany from the Netherlands than to pay domestic German postal rates.

The Germans demanded that the American company pay the full domestic postal rate for card holder data, but then settled for the difference between terminal dues and the full domestic rate.

Superior court in Frankfurt flipped the case to Brussels with a question: Did German Post demands for reimbursement violate European law?

The European court ducked the central issue of whether non-physical remailing is legal under European law. Instead it ruled that the large number of mailings Citicorp send to Germany from the Netherlands justified paying the smaller difference, not the full domestic rate.

When the case first went to court the Germans claimed reimbursements of 3.6 million Deutschmarks ($1.8 million at today's rate but closer to $2.5 million at the time) for five months.

A spokesman for the European Court of Justice last month, however, said the Germans could now ask for the difference for a much longer period of time. Neither side has as yet mentioned a specific dollar or DM figure.

European cross-border mailers are "in deep depression" about the court ruling and its possible implications, one official said, while another called the judgment "a hindrance to the development of a competitive and open market for postal services in Europe."

What worries mailers most is that the ruling will reinforce the ability of postal operators to protect national markets even though the EU is engaged in several initiatives to liberalize postal markets.

The ruling, said David Robottom, director of postal affairs at the British DMA, would be "an additional way for operators to defend their monopoly, whereas direct mailers need a transparent and open market. This gives again a wrong signal for direct mailers."

Although the Germans claimed the European Court ruling justified their actions under European law, the court did not say exactly that.

Instead it argued that paying more than the difference between terminal dues and domestic rates would allow postal authorities "to abuse their dominant position within the meaning of EU Competition Law."

In a statement Citicorp Germany issued after the ruling, it said the decision "had not settled the dispute" and had instead thrown up a "a number of other questions the German courts would now have to decide.

"Citibank will - in the interest of its clients - use all legal means at its disposal to fight against this punishing surcharge," the statement said.

Deutsche Post issued a statement of its own claiming victory and expressing confidence it would win the right to demand "millions" in damages from Citicorp.

Analysts, however, do not expect an early settlement of the case that now goes back to Superior Court in Frankfurt.

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