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Last Updated: Wednesday, 12 September 2007, 15:48 GMT 16:48 UK
EU launches German postal probe
Sign outside Deutsche Post's headquarters
Deutsche Post has a market share of nearly 90%
European regulators are to investigate whether German postal firm Deutsche Post received illegal state aid.

It will examine all public funding paid to the firm since 1989 to see if it was "overcompensated" for the cost of providing a universal postal service.

Rivals claim Deutsche Post used public funding to subsidise the growth of its commercial activities but the firm said such claims were "incomprehensible".

Deutsche Post controls nearly 90% of Germany's standard deliveries market.

Previous probe

The European Commission probe is similar to those already taking place into the funding of monopoly providers in France, Italy and Poland as well as the UK, where Royal Mail's monopoly was ended last year.

Following a previous investigation in 2002, Deutsche Post was ordered to pay back 572m euros (391m; $794m) in "incompatible state aid" to the German government.

No universal service provider may earn excessive profits or use the compensation to cross-subsidise commercial activities
European Commission

The firm was found to have used state funding - designed to ensure the cost to customers of the universal service was kept low - to support its parcel business DHL.

The new investigation was triggered by allegations from rival operators that Deutsche Post was using state funds to expand commercially and reduce the cost of services sold to its two main subsidiaries - DHL and banking firm Postbank.

"According to EU state aid rules, public compensation of universal services can only be compatible with the EC Treaty if it is both necessary and proportional," the Commission said in a statement.

"No universal service provider may earn excessive profits or use the compensation to cross-subsidise commercial activities."

The Commission stressed that it was not prejudging the outcome of the probe but Deutsche Post said regulators had examined its accounts on numerous occasions before.

It described the allegations as "surprising and completely incomprehensible".

Germany is due to open its postal market to full competition next year.

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