Bundesnetzagentur rejects application of Deutsche Post AG for premature postage increase
Klaus Müller: "An increase in costs per letter item not proven"
Year of issue 2023
Date of issue 2023.08.07
The Bundesnetzagentur has today turned down Deutsche Post AG's application for an early increase in the cost of letter postage.
"Deutsche Post could not sufficiently prove an increase in costs per item for letters. We see the challenging environment in the letters and parcels business but, according to the data submitted, the letter prices are sufficient to cover the costs per letter item. The regulated letters sector is still making a profit,"
says Klaus Müller, President of the Bundesnetzagentur.
Reasons for the rejection
The Bundesnetzagentur's duty was to check whether there had been or will be significant increases in the cost per letter item compared with Deutsche Post's forecast in the last price cap procedure in 2021 and therefore whether it had to allow the possibility of increasing letter postage early.
Deutsche Post was not able to prove with the data it submitted that a reduction in volume had led to an increase in costs per letter item. In fact the average cost per item was even slightly below the forecast in the price cap procedure of 2021.
Neither did the higher rate of inflation put forward by Deutsche Post make it necessary to adjust the postage charge. The increase in the general rate of inflation does not have a significant effect on the related costs in the letter sector.
Nor did the increase in the collective wage agreement put forward by Deutsche Post result in it being necessary to adjust letter postage. These cost increases, according to figures submitted by Deutsche Post, are offset by cost-reduction factors.
Letter postage prices cannot be used to counteract the challenges in other business areas. Around 85% of revenues are generated in other segments, such as parcels and business mail. The cost increases incurred in these segments must be passed on to the customer in the prices charged.
Deutsche Post's application
In May 2023, Deutsche Post submitted an application to increase letter postage. The Bundesnetzagentur's task was to check if it was necessary to initiate a new price cap procedure earlier than scheduled and revoke the price cap decision from 2021.
In the last procedure in 2021 the Bundesnetzagentur allowed Deutsche Post a price increase leeway of 4.6% for letter-post items. The current postage charge has applied since the beginning of 2022. At that time the postage charge for a domestic letter rose from 80 to 85 cents. The current postage charges for letters applies up to the end of 2024.
Background information
The Bundesnetzagentur has to approve Deutsche Post AG's charges for letter products for private customers. For this purpose, the Bundesnetzagentur determines the scope for price increases in what is known as a price cap procedure. As a rule this takes place every three years. The scope of any price increase is determined by, but not limited to, inflation rate forecasts, the costs trends for price cap products and developments in the number of letter items sent. It is then at Deutsche Post's discretion to decide commercially how the scope for price increases will be distributed across the various services.