Business
Postal service accused of misusing state subsidy
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November 26th, 2013
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Delivery firms allege Post Danmark is using taxpayer funds to hold prices of advertisement delivery business artificially low
Privately-owned advertisement distribution firms are accusing Post Danmark of using its state subsidies for postal distribution in order to finance its own advertisement distribution operations, financial daily Børsen reports. The allegations came about as the postal service announced plans to hike the price of postage for a standard letter to 9 kroner, yet charges less than 1 krone for an advertisement weighing the same.
While not ruling out the possibility that Post Denmark was more efficient than they were, the privately owned firms argued it was unlikely the state-owned monopoly's cost were lower.
Post Danmark defended the lower price, saying letter carriers needed to make deliveries to homes anyway, and that the cost of delivering the advertisement reflected the additional cost of logistics.
Falling volume undermines model
Morten O Nielsen, the head of Post Danmark, also pointed to a Supreme Court ruling approving the postal service's price structure. Postage volumes, however, are down 60 percent since 2000, with fewer homes receiving post each day, and distribution firms say that means the argument no longer applies.
They also pointed out that the postal service’s income from advertising distribution had risen in proportion to overall income, and said that was an inidication it was using its postal operations to subsidise its profit-making advertising delivery business.
Martin Nyvang, of Konkurrence- og Forbrugerstyrelsen, the competition authority, said it had received four formal complaints against Post Danmark and that it was “highly conscious” of the situation.
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