Dispatch of newspapers and magazines- Deutsche Post AG exits rebate system

Factual “exclusive purchase obligation”

Dispatch services offered by DPAG are particularly demanded by publishers of newspapers and magazines but also to organizations such as health insurances and associations which provide magazines to their members. During its assessment the FCO found that a part of the dispatch agreements between DPAG and its customers included certain rebate quotes under the condition that the individual customer’s dispatch volume should be entirely demanded from DPAG. Due to the fact that demanding dispatch volumes from DPAG’s competitors bore the risk of losing the DPAG rebates the German antitrust authority considered the respective clauses as a factual “exclusive purchase obligations” imposed by DPAG on dispatch service demanders.

Furthermore, in other (older) contracts so called soft “total print run clauses” (“weiche Gesamtauflagenklauseln”) were found which granted extraordinary high rebates to customers only if their entire demand of dispatch volumes was demanded from DPAG and which should be lost in the case that parts of their volumes were demanded from DPAG’s competitors.

The FCO, therefore, held that the DPAG’s rebate clauses bore the risk of a market foreclosure by impeding the market entry of competing dispatch service providers, which in view of DPAG’s dominant market position would be an inacceptable form a competition law point perspective.

Problematic pull effect

Although, DPAG denied being addressee of the abuse control regime under German competition law it first revised the objected rebate system to resolve the concerns raised by the FCO. However, the amended rebate system did not convince the German competition authority, in particular because it still included a discount practice which depended on the customers’ demanded total dispatch volumes bearing the risk of retroactive reductions in the case the concerned customers would involve competitors of the DPAG for the dispatch of their newspapers and magazines. In this regard, the German competition authority held that the new proposed rebate system could, as the one before, not exclude a problematic pull effect by inciting dispatch customers not to demand services from alternative dispatch service providers.

Discrimination by deviating conditions

The FCO, furthermore, found that DPAG was also operating an inconsistent rebate system by offering conditions to some customers significantly deviating from those offered to others. As the FCO, after analysing further, did not find a justification for the different treatment it held that DPAG’s rebate system was not sufficiently transparent and comprehensive, therefore, concluding that DPAG’s was discriminating some of its customers inadmissibly under German competition law.

End of the rebate system

In view of the FCO’s persisting concerns the DPAG finally decided to withdraw its practiced discount system which will result in fixed unit prices for the dispatch of newspapers and magazines equally offered to all customers. The DPAG’s decision to end its objected discount practice was taken, although, Germany’s incumbent post company is of the opinion that it is not dominant in the area of the dispatch of newspapers and magazines and, thus, consequently not being addressee of the prohibition on the abuse of a market dominant position under German competition law.

Nevertheless, the DPAG committed itself to consider the relevant competition law principles related to abusive behaviour in their future contract practice. The FCO closed the proceeding without making final conclusions, neither on the market position of the DPAG nor on the antitrust classification of the stopped rebate system.

Please find the FCO’s respective press release (available in English and German) here.

For more information please contact Marcio da Silva Lima.