Regulatory and Competition Law Remedies in the Postal Sector

European Community law has played a pivotal role in opening to competition economic sectors previously under the control of public monopolies. As with other sectors such as telecommunications, air transport, electricity, gas, and rail, the postal sector has succumbed to the wave of liberalisation. Liberalisation in the postal sector has forced stagnant state-owned monopolies to modernise themselves in order to compete with new entrants which are nibbling at the fringes with innovative business strategies. As is the case in network industries, the postal sector is subject to market failures. It finds itself in a position whereby the postal incumbents for letter mail usually remain protected by exclusive rights while the same entities are increasingly competing on the international mail, parcel and logistics markets. This situation has the potential to have a detrimental effect on consumer welfare. In order to prevent the postal incumbents using their market power, remedial action is necessary to allay such fears. Another market failure requiring intervention relates to universal service. There are indeed areas in which postal services will not be provided by the market because they are not profitable. Hence, universal services need to be defined and mechanisms have to be developed to fund these obligations without, however, distorting competition. In this paper, we will focus on the first category of market failures, i.e. the bottlenecks that may prevent competition in the postal sector. There are two regulatory instruments to impose remedies in network industries, sector-specific regulation and competition law. In this paper, we explore how these two approaches have been used to facilitate the arrival of competition in the postal sector. Until recently, the Community institutions have been reluctant to use regulatory intervention and competition law to challenge the public monopoly models. Regulatory requirements have, however, been imposed through Directive 97/67 and, over the last few years, competition rules have been applied much more rigorously in the postal sector, with the result that there is an increasing corpus of case law