The European Commission has approved, under EU State aid rules, Czechia’s plans to compensate Czech Post for its universal postal service obligation over the period 2018-2022.

In January 2020, Czechia notified the Commission of its intention to compensate Czech Post for a maximum amount of approximately €302.9 million (CZK 7.5 billion) for discharging its public service obligations over the period 2018-2022. This includes the universal postal service obligation, as well as the provision of Postal Money Orders whereby cash money can be safely delivered. The notification followed two complaints filed with the Commission by competitors of Czech Post in 2019, alleging that the compensation to be granted by Czechia constituted incompatible State aid.

In June 2020, the Commission opened an in-depth investigation because it had doubts about the compliance of the measure with EU State aid rules, in particular with respect to (i) the scope of the universal service obligation (‘USO’), which appeared to be too wide as it also included the Postal Money Order service; (ii) the compliance with public procurement rules insofar as it concerns the Postal Money Order service; and (iii) the calculation of the net losses incurred by Czech Post in discharging the public service.

The Commission’s assessment

The Commission has assessed the Czech measure under EU State aid rules, and in particular under Article 106(2) of the Treaty on the Functioning of the European Union, as well as the rules on public service compensation, under the Service of General Economic Interest (‘SGEI’) Framework and the Postal Services Directive.

The Commission has examined whether the amount of compensation to be paid to Czech Post may exceed what is necessary to cover the net cost of discharging the public service obligation. The Commission concluded that:

  • The scope of the USO is in line with the definition set out in the Postal Services Directive. In addition, while the Postal Money Order service falls outside of the definition of the USO set out in the Postal Services Directive, it is a genuine SGEI that can be compensated under the rules on public service compensation.
  • The direct entrustment of the USO for the provision of postal services to Czech Post is in line with the rules on public service compensation and the Postal Services Directive, which allows the State to designate directly the universal service provider without conducting a tender. Furthermore, the Postal Money Order service could also be awarded to Czech Post directly without prior tender procedure, notably as there is no other operator on the market that would provide Postal Money Order services on a commercial basis throughout the territory of Czechia.
  • The compensation, as shown by Czechia in the course of the investigation, is based on a robust and conservative methodology, which ensures that it will not exceed the cost of the public service entrusted to Czech Post.

On this basis, the Commission approved the Czech measure under EU State aid rules.

Background

Czech Post is the national postal operator in Czechia and delivers universal postal services throughout the country. The Czech postal market has been liberalised since 2013 in accordance with the Postal Services Directive, and Czech Post operates now in full competition with other relevant postal service providers.

Under EU State aid rules on public service compensation, adopted in 2011, companies can be compensated for the extra cost of providing a public service under certain conditions. This enables Member States to grant State aid for the provision of public services, whilst at the same time making sure that companies entrusted with such services are not overcompensated, which minimises distortions of competition and guarantees an efficient use of public resources.