The European Commission announced on 29 July this year that it has opened an in-depth investigation to determine whether the United Kingdom's plans to restructure Royal Mail, the incumbent postal operator, by relieving it of its "pension deficit" and consolidating its balance sheet are in line with EU state aid rules.
Following the full market opening as of 31 December 2010 for the majority of Member States (by virtue of Directive 2008/06/EC), the European Commission announced on 29 July 2011 that it has opened an in-depth investigation to determine whether the UK government’s plans to restructure Royal Mail comply with European Union state aid rules.
As part of the postal operator’s privatization, the United Kingdom intends to relieve Royal Mail of its “pension deficit” (estimated to be £8 billion) and consolidate its balance sheet, including restructuring the company’s £1.7 billion debt and the provision of a revolving credit facility. These measures were notified to the Commission in June 2011.
The UK government claims that the notified measures are in line with EU Guidelines on state aid for rescuing and restructuring firms in difficulty.
At this stage, the Commission has doubts that Royal Mail’s restructuring plan has adequate measures in place for mitigating any distortions of competition brought about by the state intervention and for guaranteeing a sufficient amount of its own contribution to the cost of restructuring. According to the Commission, the restructuring plan could give Royal Mail an unfair advantage, which would have a distorting effect on competition among postal operators in the Internal Market.
It should be noted that the United Kingdom is not the only Member State which finances its postal sector. The Commission is currently also examining measures in favour of the Belgian post incumbent bpost and the German postal incumbent Deutsche Post. The scope of the investigation into Deutsche Post has recently been extended to cover the financing of certain pension costs.