Select Committee on European Scrutiny Ninth Report



Amended Proposal amending Directive 97/67/EC with regard to the further opening to competition of Community postal services.
Legal base: Articles 47(2), 555 and 95 EC; co-decision; qualified majority voting
Department: Trade and Industry
Basis of consideration: EM of 26 November 2001
Previous Committee Report: None; but see (21503) 10544/00: HC 23-xxviii (1999-2000), paragraph 10 (1 November 2000) and HC 28-iv (2000-01), paragraph 1 (24 January 2001)
Discussed in Council: 22 December 2000
Committee's assessment: Politically important
Committee's decision: Cleared


  24.1  Directive 97/67/EC established a harmonised regulatory framework for the Community postal sector. It also defined the process for further liberalisation of the postal market, including a decision on the next step to apply with effect from 1 January 2003.

  24.2  On 24 January 2001, the previous Committee recommended for debate the Commission's original proposal which set out two stages of liberalisation, in 2003 and 2007. The debate was held on 4 April 2001.

  24.3  On 18 July, we considered the Commission's amended proposal, presented in the light of the 47 amendments proposed by the European Parliament. The Commission had rejected 36 of the proposed amendments, and accepted ten in full and one in part. The accepted amendments mainly related to changes to recitals and drafting and so did not substantively change the Commission's original proposal.

  24.4  Following its consultations, the Belgian Presidency decided that there was a willingness by Member States to reach an early decision on an amended proposal before the current Directive lapsed in 2004. On 12 October the Minister for E-Commerce and Competitiveness (Mr Douglas Alexander) informed us that a political agreement was likely to be reached at the Telecommunications Council on 15 October on a revised draft on postal services liberalisation. The Minister enclosed an exchange of correspondence with the UK postal regulator (PostComm), in which PostComm broadly agreed that the revised draft would be consistent with the UK's policy objective of maintaining the universal service at a uniform tariff and the UK's licensing regime.

  24.5  The Belgian Presidency is currently preparing the text of the revised draft Directive. The Explanatory Memorandum summarises the main elements of the common position and compares it with the Commission's original proposal and that proposed by the European Parliament by reference to:

  • the maximum weight/price limits for services that may be reserved;

  • whether a final date should be set for full market opening;

  • the definition of specialised services and whether these should be excluded from the reserved services; and

  • whether out-going cross-border mail can be reserved.

The document

  24.6  In his Explanatory Memorandum of 26 November 2001, the Minister says:

"The final form of the Presidency proposal was not received until the working day before the Council but various options emerged from the working level debate. DTI sought PostComm's views on those options. PostComm supported the overall government aim of progressively opening the European market whilst making provision to safeguard the universal service. Its advice was that for the UK, provided the European Directive continued to make provision for authorisations/licensing regimes, a phasing out of price/weight limits according to a pre­determined timetable remained the most legally certain way to achieve this; the size of the individual steps was not a critical issue but PostComm noted that a reduction to 100 grams in 2003 represented a relatively limited share of the market. It expressed concerns that an overly complicated formulation on special services would reduce legal certainty. PostComm was in favour of a review to focus on how to safeguard the universal [service].

"At the Council, Member States (with the exception of the Netherlands who dissented and Finland who abstained) and the Commission reached political agreement on a compromise framework with the following elements:

       —  reserved service limits to reduce from 350 grams (5x basic tariff) to 100 grams (3x basic tariff) in 2003 and to 50 grams (2.5x basic tariff) in 2006;

  • that there will be a review in 2006 focussing on the impact on the universal service of completing the internal postal market in 2009 leading to proposals either confirming the last step or making other proposals in the light of the study;

  • to maintain the status quo for specialised services and not to make new provisions to define and exclude them from reserved services;

  • to make limited provision to exclude overseas cross­border mail from reserved services."

The Government's view

  24.7  The Minister says:

"At the Council the UK pressed and it was agreed that the review in 2006 and the subsequent proposals from the European Commission should focus on the continued provision of the universal service. Agreement was also secured that if the sunset clause in the Directive were to be invoked then existing authorisation procedures would not be affected.

"The Government believes that this political agreement provides a good basis for a more legally certain framework to progressively liberalise the European postal market whilst maintaining the commitment to ensure the continued provision of the universal service and as such meets UK objectives. The proposal is consistent with domestic policy to introduce more competition into the market and does not conflict with the UK regulatory regime. The resulting opening of other European markets will provide opportunities for UK companies."

  24.8  The Minister describes a number of changes that have occurred in the UK postal market, including the new licensing regime and the conversion of Consignia into a public limited company. Under the new licensing regime, Consignia's statutory monopoly is replaced by a licence from the postal regulator to operate in a similar area of the market (known as the licensed area). A condition of Consignia's licence is that it will provide a universal service. The Minister informs us that, to date, PostComm has issued six other interim licences of limited scope to operate in the same area as the licensed area. The Minister also tells us that early in the New Year, PostComm is expected to issue a report with recommendations following its consultation on the best way to introduce more competition into the market.


  24.9  Although we have not yet received the official text of the revised draft Directive, we have nevertheless decided to report substantively on it before it is formally tabled for Council agreement at the Telecommunications Council on 6 December.

  24.10  When the previous Committee considered the Commission's original proposal on liberalising postal services, it noted the wide division of opinion that the proposal generated. Not surprisingly, the proposal from the European Parliament favoured a slower pace of liberalisation. The revised draft has elements of a compromise. For example, in terms of the price/weight threshold that will define the reserved area in 2003, the revised draft proposes 100 grams and three times the standard first class price, which is fairly close to the mid-point between the Commission's original position of 50 grams and two and half times the standard first class price and the European Parliament's proposal of 150 grams and four times the standard first class price.

  24.11  The revised draft also maintains the present rules on "special services", which prevents other operators from providing so-called "special services" that are effectively indistinguishable from those provided by the universal provider. The revised draft also provides for a review before the next stage of liberalisation takes place. The review in 2006 will focus on the effect on the universal service of completing the internal market in postal services in 2009. This reflects the tension that exists between the drive towards further liberalisation of postal services and the need to maintain a universal service.

  24.12  After the Telecommunications Council on 6 December the revised draft Directive will still need to have its second reading in the European Parliament. Some members of the European Parliament may question further whether an affordable universal service is sustainable under the terms of the revised draft.

  24.13  Given that the liberalisation of postal services was debated earlier this year, that the UK regulator considers the proposal consistent with maintaining the universal service at a uniform price, and that political agreement has already been reached on the revised draft Directive, we clear the document.

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Prepared 18 December 2001