State aid: EU Commission approves State financing granted by Spain for Correos’s universal postal service obligation
The European Commission has found the compensation granted by Spain to Correos to fulfil its public service mission (so-called “universal service obligation” or USO) during the 2011-2020 period to be compatible aid under EU State aid rules. State-owned Correos is the biggest postal operator in Spain.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Easy access to postal services is vital for all EU citizens. Today’s decision enables Correos, to continue deliver basic postal services in all of Spain at affordable prices, without unduly distorting competition.”
In January 2020, Spain notified the Commission of its plan to compensate Correos with €1,280 million for carrying out its universal postal service obligation during the 2011-2020 period. This includes the provision of basic postal services throughout the country at affordable prices and at certain minimum quality requirements. Of this €1,280 million, €1,219 million was already paid to Correos prior to the notification. The Commission has therefore found that Correos had benefited from illegal (non-notified) aid.
The Commission examined the measure under EU State aid rules on public service compensation. According to these rules, companies can be compensated by Member States for the extra cost of providing a public service mission, subject to certain criteria. This enables Member States to grant State aid for the provision of public services while at the same time making sure that companies entrusted with such services are not overcompensated. Avoidance of overcompensation minimises distortions of competition and guarantees an efficient use of public resources.
In order to comply with EU State aid rules, Spain developed a detailed and comprehensive model to calculate the net avoided cost of the universal postal service, which has allowed the Commission to exclude any risk of overcompensation.
In particular, the Spanish model ensures that discounts granted to certain customers, do not unduly increase the net cost.
The Commission considers it very important that losses generated by discounts on USO tariffs are not compensated by the State as they do not result from the obligations imposed on the universal service provider.
The Commission’s assessment showed that the compensation granted by Spain to Correos will not exceed the net cost of the public service mission, meaning there is no overcompensation. On this basis, the Commission concluded that the measure is in line with EU State aid rules.
In its decision, the Commission also rejects a complaint lodged in March 2019 by two industry organisations, who alleged that Correos received incompatible State aid through several measures, including the universal service obligation. The complainants notably referred to the necessity to avoid that excessive discounts granted by Correos are compensated by the Spanish State.
Finally, the decision takes into account a specific commitment of the Spanish authorities regarding the timely notification, in the course of 2020, of USO compensations foreseen for the period 2021-2025.
Correos is the largest provider of postal services in Spain and has been entrusted with the universal service obligation since 1998. It has more than 50,000 employees and annual revenues of around €2 billion. It is owned by the Sociedad Estatal de Participaciones Industriales (“SEPI”), a public-law entity which holds shareholdings in various companies on behalf of the State.
The Spanish postal service market has been liberalised since 2011 in accordance with the Postal Directive, and while Correos emanates from the public administration, it now operates in full competition with other relevant postal service providers. In essence, the USO concerns the delivery of letters and parcels (up to a certain weight), across the whole territory of Spain, at least 5 days per week, at affordable prices.
In July 2018, the Commission adopted a negative decision regarding USO compensations granted to Correos over the 2004-2010 period. It found that Correos had been overcompensated and Spain had to recover €167 million.
The Commission has also started an existing aid cooperation procedure in September 2017 regarding the non-payment by Correos of pension contributions for its civil servants. This procedure is still ongoing.