German Letter Monopoly

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In 2005–2007 Germany changed the law to give Deutsche Post an exclusive license to carry letters and small catalogs up to 50 grams in part of the market. Before this, up to 100 grams could be handled under the monopoly. The change created a monopoly for a large part of the mail market, even though about 1,000 other postal providers were active. Some people said the monopoly was needed to guarantee universal service, while others in several cities wanted it ended.

Since 1998, the federal regulator (BNetzA) allowed professional letter transport without weight limits, but those providers had to offer “higher-valued” services such as same-day delivery or pickup by the post by the end of 2007. These extra requirements often made it hard for private firms to compete with Deutsche Post in normal delivery.

The monopoly ended on 1 January 2008, and the obligation to provide higher-valued services also fell away for the competitors. After the change, Deutsche Post faced a mix of advantages and complaints: it could be exempt from value-added tax (VAT) while its competitors could not, and it reportedly did not have to pay accident insurance for its employees. These issues led to complaints in Germany’s courts. Hermes asked for VAT exemption to start from 1 January 2008, but a decision was still pending.

There are many companies in Germany that deliver letters, including smaller firms that could be threatened by the new rules. In the long run, Deutsche Post could keep a dominant market share, potentially over 90%, raising concerns about a closed oligopoly with only a few large players.

In September 2007, there was a heated wage debate. The union ver.di reached a collective agreement with the postal employers for a minimum wage of 8.00–9.80 euros per hour. Private mail firms criticized this, saying Deutsche Post used its influence to push higher wages and make it harder for them to compete. Private companies formed their own association, NBZ, to offer lower wages of about 6.00–7.50 euros per hour. The government chose not to intervene.