Following complaints from Royal Mail’s competitors in the newly liberalised UK postal market, the Commission has launched an in-depth investigation under the state aid rules into the series of funding measures taken by the UK in favour of Royal Mail. The Commission will examine the terms of each of the funding measures to determine whether they constitute state subsidies or meet the market investor criteria.

The Commission has announced it will look at four different measures:

# a €740 million loan granted in 2001 at a fixed interest rate for a 20 year period to finance Royal Mail’s overseas acquisitions;

# a €1.48 billion of loan facilities made available to Royal Mail in 2003 of which €1.34 billion is to be extended after 2007. Although the original loan facilities were not drawn down, their availability may represent an option value to the company which puts it at an advantage over its competitors;

# a placement of €1.26 billion in an escrow account which will reduce pensions contributions which Royal Mail needs to make to address the current deficit in its pension fund;

# a further loan of €450 million that was announced on 8 February 2007.

The UK authorities claimed that all measures in favour of Royal Mail are granted on commercial terms, which would be acceptable to a private investor operating in a market economy. None of these measures have been notified to the Commission. [21 February 2007]