BONN (dpa-AFX) - Smaller competitors of Deutsche Post are receiving support in the letter market from the Monopoly Commission. The federal government's advisory panel has published an expert report warning against a "VAT privilege" for the Bonn-based logistics giant in its letter business. While Deutsche Post is exempt from value-added tax (VAT) on letter services, its competitors are only partially exempt--some companies benefit, others do not. Such an exemption is crucial for business mail, particularly for contracts with authorities, banks, and insurance companies.

If Deutsche Post were granted exclusive VAT exemption, competition would be stifled, warns Monopoly Commission chairman Tomaso Duso. "That would spell the end for most alternative letter services."

Deutsche Post's letter market competitors include Citipost from Hanover, Pin Mail GmbH operating in Brandenburg, and Xendis from North Rhine-Westphalia. Economics professor Duso points out that these rivals hold only a 15 percent market share, while the former state monopoly commands 85 percent. He criticizes the federal government for granting Deutsche Post high profit margins, thereby distorting competition.

"We want Christmas cards to still be delivered far into the future, even if Deutsche Post should one day abandon the letter business," says Duso. Functional alternatives are therefore needed.

Letter Volumes Declining

For global logistics provider DHL, known on the stock market as Deutsche Post, its core business--domestic letter delivery--has become less significant as mail volumes have been declining for years in the digital age. Parcel and express shipments, as well as other business sectors, are now more lucrative. Nevertheless, Deutsche Post has consistently emphasized its commitment to letter delivery in the future. As a so-called universal service provider, the company is required to maintain a network of branches and mailboxes.

Reactions to the Monopoly Commission

Walther Otremba from the Federal Association of Letter Services, which brings together Deutsche Post's competitors, welcomes the Monopoly Commission's initiative. He criticizes the Federal Ministry of Finance for refusing to issue certificates for tax exemptions--a situation that needs to change. "If swift action is not taken, for the first time in the history of the Federal Republic of Germany, competition will be doomed by the combined actions of the government and the former monopoly holder."

A spokesperson for Deutsche Post emphasizes that the company, as the only universal service provider, delivers letters everywhere in Germany. "According to EU regulations, VAT exemption is intended exclusively for providers who fulfill the universal service in this legally defined triad: nationwide coverage, regulated quality standards, and their own infrastructure."

Deutsche Post considers it unlawful for letter competitors who do not meet these criteria to operate VAT-exempt. For this reason, the company is taking legal action against the Federal Central Tax Office, which issues such certificates./wdw/DP/mis