COMPETITION AUTHORITY
Competition Authority Decision of 20 March 2001 relating to a proceeding under
Section 4 of the Competition Act, 1991.
Notification No CA/10/00 - An Post/Standard Postal Franking Machine Licence
Agreement
Decision No. 585
Price £0.50, ( €0.63 )
£0.90, ( €1.14 ) including postage.Competition Authority decision of 20 March, 2001 relating to a proceeding under Section
4 of the Competition Act, 1991.
Notification No. CA/10/00 - An Post/Standard Postal Franking Machine Licence
Agreement
Decision No. 585
Introduction
1. This decision concerns a standard licence agreement issued by An Post to businesses and
institutions for the use of a postal franking machine. The licence agreement was notified to the
Competition Authority on 30 November 2000 with a request for a certificate under Section 4(4)
of the Competition Act, 1991. The notified agreement is an amended version of notification
CA/15/95 which was issued a certificate by the Competition Authority in 1995 (Decision No.
450).
The Facts
(a) The Subject of the Notification
2. The notification concerns a `Licence for the use of a Postal Franking Machine for
denoting Prepayment of Postage'. Under the terms of the agreement, An Post authorises large
numbers of business customers to use postal franking machines as a means of payment for
postage services. There are approximately 12,500 holders of such licences in Ireland at present.
(b) The Parties
3. An Post is the State owned national postal authority and has a statutory monopoly in
respect of the provision of postal services for items weighing not more than 350 grams and
costing not more than five times the basic letter rate of 30p. It also operates money transmission
services and provides agency services for Government Departments, An Post National Lottery
Company, Eircom and other bodies. The company's turnover in 1999 was £424m and it
recorded a profit of £101.1m. Most of the approximately 12,500 postal franking licence holders
would be industrial and commercial companies engaged in various types of business.
(c) The Product and the Market
4. Under the terms of the licence, An Post grants the licensee the right to use a postal
franking machine. The machine is then used to affix postage marks on envelopes, parcels and
packages denoting payment of postage. An Post is the major provider of national and
international postal services in the State. Parties wishing to use such services pay for them by
purchasing postage stamps to the necessary value and fixing them to the letter or package to be
posted. Alternatively, they may post bulk amounts of post under the Ceadunas system - which
allows for postings of up to 2,000 letters, 500 letter packets or 100 parcels at a time, chargeable
at a uniform rate – or they may use postal franking machines. Postal franking machines print
franking impressions on envelopes and labels which can be used instead of postage stamps. The
machines have meters and users pay An Post for postal services in advance at a specified post
office, where the meter is then set so as to allow the user to produce postage labels on the
machine up to the pre-paid amount. An Post is the only body in Ireland which can issue licences.to use postal franking machines, since such machines are used as a means of paying for postal
services over which it has a statutory monopoly (as well as larger items).
5. The market concerned is that for postal services. Postal franking machines allow firms
which send large volumes of material through the post to pay for such services in a convenient
manner. An Post has a statutory monopoly in respect of postal services for items weighing not
more than 350 grams and costing not more than five times the basic rate of 30p. For larger items
there are a number of private firms who provide delivery services on a local, national and
international basis in competition with An Post.
6. Postal franking machines are supplied by a number of companies authorised by An Post.
At present there are three authorised suppliers and the agreements under which they are licensed
by An Post to supply franking machines have been notified to the Competition Authority and
have been issued certificates (Decision No. 451, 452 and 453). Under the terms of the
agreements between An Post and the suppliers, the supplier of franking machines is required to
ensure that every customer obtains a licence from An Post to use their franking machine. The
postal franking machine is of no value to the customer without the licence because the customer
cannot obtain an initial or new supply of postage from the post office for the franking machine
without being licensed. Postal franking machine users are charged at the standard postage rates.
(d) The Arrangements
7. The notified arrangements concern a standard licence agreement between An Post and
its customers for the use of postal franking machines for affixing postage marks on envelopes,
parcels and packages denoting prepayment of postage. The licence sets out the terms and
conditions which apply to the licence and use of such postal franking machines.
8. The customer is obliged to have the machine inspected and maintained once every six
months by the supplier or their authorised agent, or a maintainer approved by An Post.
According to An Post, only the manufacturer's authorised agent/engineers would have the
detailed knowledge of the particular machines which is required to detect the more technical
faults which might not be apparent to post office staff. In effect this obliges the customer to
enter into a maintenance agreement with the supplier of the machine.
9. The notified arrangements include the following conditions, which do not appear in the
certified 1995 agreement. The postal franking machine must only be used by the agreed “User”,
and only for the purposes of the business at the premises specified in the agreement. The
customer may not permit anyone other than the supplier or their authorised agent to remove the
postal franking machine, with the postage printing mechanism intact, from their premises.
When the machine is withdrawn for repairs it must be presented to the appropriate post office so
that the register readings may be recorded by An Post. The supplier of the postal franking
machine retains legal ownership of the franking dies, date stamping dies and postage printing
mechanisms. The licence may be revoked (a) if the machine is not in active use and has not
been recredited for a period of three months or (b) if there has been a breach of the conditions of
the licence. The customer is obliged to notify An Post of any fault in the machine or if the
machine is lost or stolen. The customer must also notify An Post in the event of bankruptcy,
liquidation or receivership. An Post may refuse to post any item if there has been a breach of the
conditions of the licence, if the postal franking machine is mechanically or functionally
unsatisfactory or if the machine has been used in such a manner as to cause embarrassment to
An Post.
(e) Submissions of the Parties
10. An Post submitted that it placed no restrictions on the number of customers who may
have postal franking machines. The customer has the alternative of purchasing postage stamps
and affixing them to his letters and parcels or using the Ceadunas system at no additional cost.
Assessment
(a) Section 4(1)
11. Section 4(1) of the Competition Act states that 'all agreements between undertakings,
decisions by associations of undertakings and concerted practices which have as their object or
effect the prevention, restriction or distortion of competition in trade in any goods or services in
the State or in any part of the State are prohibited and void.'
(b) The Undertakings and the Agreement
12. Section 3(1) of the Competition Act defines an undertaking as 'a person being an
individual, a body corporate or an unincorporated body of persons engaged for gain in the
production, supply or distribution of goods or the provision of a service'. The parties to the
present arrangement are An Post and its customers who obtain licences from it in order to use
postal franking machines. An Post is a body corporate which is engaged for gain in the
provision of postal and other services to the public and is an undertaking. The majority of the
licensees are engaged for gain in various businesses involved in the provision of goods and
services and are undertakings. Therefore the standard licence agreement constitutes an
agreement between undertakings.
(c) Applicability of Section 4(1)
13. Under the terms of the licence agreement An Post authorises the use of postal franking
machines by various businesses and institutions who apply to it for such a licence. Essentially
this is an agreement to use the postal franking machine as a means of paying An Post for using
its postal services and clearly is not in itself anti-competitive. An Post does not restrict the
number of users who may obtain licences and the only criterion necessary to obtain a licence is
compliance with the terms and conditions of the licence. The licence does not prevent the user
from using the postal services of An Post’s competitors for larger items, over which An Post
does not have a statutory monopoly. Postal franking machines are a convenient and efficient
method of paying for postage, especially for large businesses, government departments and
other institutions where a high volume of post is processed each day.
14. The licence contains certain restrictions relating to the inspection, maintenance and
removal of machines. The Authority considers that these conditions are essential for the
efficient operation of the system and the prevention of fraud. Consequently, in the Authority's
opinion the licence does not contravene Section 4(1).
The Decision
15. In the Authority's opinion, An Post and its customers are undertakings within the
meaning of Section 3(1) of the Competition Act, 1991 and the notified arrangements constitute
agreements between undertakings. In the Authority's opinion the arrangements concerning the.Licence agreement for the use of postal franking machines for denoting prepayment of postage
do not have as their object or effect, the prevention, restriction or distortion of competition and
do not contravene Section 4(1).
The Certificate
The Competition Authority has issued the following certificate:
The Competition Authority certifies that in its opinion, on the basis of the facts in its possession,
the standard agreement between An Post and its customers relating to the licence by An Post of
postal franking machines for denoting prepayment of postage (notification no. CA/10/00),
notified on 30 November 2000 under Section 7, does not contravene Section 4(1) of the
Competition Act, 1991.
For the Competition Authority
Declan Purcell
Member
20 March 2001