UPS Wins Small Victory Over German Post

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BONN/BRUSSELS --- UPS won a small victory over longtime opponent Deutsche Post last month when a German regulatory authority ordered the German Post Office to deliver UPS' and other competitors' mail that is more than 200 grams and to do it at a discount.

The amount of mail covered is small -- only 1 percent of the total letters Deutsche Post delivers -- but the principle the ruling establishes could be far-reaching, especially if the weight level is lowered.

It also could impact a case that UPS brought before the European Commission in 1994 and which the EC decided to reinvestigate in August. UPS charged Deutsche Post with cross-subsidizing its money-losing parcel division with profits from monopoly mail deliveries.

The EC said it was investigating a raft of other charges as well, including "predatory pricing" by selling services below cost and collecting the highest letter mail rate in Europe. A ruling should come down by year-end.

"We are happy with this decision," said UPS Brussels spokesman Anton van der Lande, "but we don't think the discount is based on the right processes. They gave us a discount on a price that is too high to begin with.

"We're still paying too much. The regulators should have calculated what it cost the post office to do the work, get a reasonable margin of profit, and charge us that amount."

The German regulators based the discount on the consolidating work that private mailers do in delivering mail to German Post's 83 sorting centers. Consolidators would get 23 percent off.

Van der Lande said UPS expects a ruling in the near future from the German regulatory body -- which replaced the ministry of post and telecom several years ago when both entities were heading toward privatization -- about discounts for mail less than 200 grams.

UPS had demanded that Deutsche Post deliver the mail it consolidates and brings to the sorting centers. The Post Office has refused, arguing that UPS has a delivery system of its own and did not need to use its services.

Deutsche Post said it had not decided yet whether to appeal the ruling but said it views the decision as "neutral" in terms of the IPO it plans for Nov. 20.

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