The German government has agreed to change the so-called Postal Fee Regulation, which gives Deutsche Post greater scope for price increases and could lead to a significant rise in stamp prices this year, prompting criticism from competitors.
The expected price increase for standard letters will initially affect small businesses and private customers. The implications for Deutsche Post's major customers are unclear. The new postage rates are expected to come into effect from the summer onwards.
The Federal Ministry of Economics, which is responsible for the Postal Fee Regulation, had announced the amendment of the regulation in mid-February and declared at that time that an increase from the current letter postage of €0.70 to €0.90 is not to be expected this year. According to the ministry, it is not yet possible to predict how high the future increase in postage will be. According to media reports, the stamp price could rise to more than €0.80.
The reason for the amendment to the regulation, according to media reports, is that now only comparable postal companies in Europe will be used as a basis for orientation. This eliminates many companies with extremely low postage rates, such as in Eastern Europe, and state-owned operators.
The Federal Network Agency (Bundesnetzagentur) has now to decide on the new price framework. Based on this decision, Deutsche Post determines the exact postage for the standard letter and other letter types. This will take a few more weeks. The change decided this week, however, has significantly expanded the scope within which the new prices can be set.
But the German Parcel and Express Logistics Association (BIEK), whose members include DPD, GLS, Hermes and UPS, was quick to criticise the government’s move.
BIEK chairman Marten Bosselmann said: "It is very regrettable that the Federal Government, contrary to better knowledge, prefers Deutsche Post's particular interests to a reasonable market development. With the decision to approve the amendment to the Postal Fee Regulation, the Federal Cabinet has ensured that competitive imbalances will not simply be prolonged but exacerbated even further in the coming years. We therefore expect all the more urgently that the Federal Government will at least update the outdated, anti-competitive Postal Act to competition-friendly standards before the end of this legislative period.”
In January, Deutsche Post said that it had received a draft decision from Bundesnetzagentur that would allow a 4.8% price increase from 1 April 2019 for mail products of up to 1,000 grams that are subject to the price-cap regime. The postal operator warned it could be forced into more cost-cutting if the regulator only approves a ‘low’ 4.8% mail price increase for 2019.
Deutsche Post is in the midst of a cost-saving restructuring programme in its mail business, designed to reduce costs in the face of falling volumes, and thus stabilise its mail profits. But it is also aiming for higher revenues by increasing both unregulated parcel prices along with regulated mail prices.
But last November, the postal regulator decided to delay a decision on new prices until it had received additional detailed information about the mail business restructuring that would affect its cost calculations as part of the price-cap process.
