Deutsche Post has decided to close its small low-cost mail business First Mail after a court ruledthat its prices were too low and should be increased.
The German postal operator will shut down the loss-making Düsseldorf-based company at the endof the year, and about 1,100 of its 1,600 employees will transfer to the parent company. Thecontracts of some 500 short-term workers will not be renewed.
The move follows the verdict of a German court last week confirming the German postalregulator’s decision that First Mail was ‘price-dumping’ to win business since its prices did notcover its costs. The North Rhine Westphalia supreme court ordered the Deutsche Post subsidiary toincrease its prices.
First Mail, which has been in business for about ten years, undercut the prices of DeutschePost and competitors for deliveries of bulk mail in North Rhine Westphalia and Berlin.
In response to the court verdict, Deutsche Post has now judged that the business would not beviable with higher prices and decided to shut it down instead.
The decision was welcomed by private postal operators. PostNL, parent of TNT Post Germany,the main private competitor, already said last week that the court verdict would stop “thedestructive negative price spiral and is an important step on the path to break even of TNT PostGermany in 2013”.
Harry Koorstra, CEO of PostNL, stated: “As the main challenger to the postal incumbent, TNTPost Germany wants to lead the development of the German market for business mail. Free and faircompetition is necessary condition for this development.”
