Postal regulator depends on postal information

According to a report, the Postcom regulator has to rely too heavily on the figures it receives from the post office.

Because the Post's core business is shrinking, new sources of funding must be found.

Because the Post’s core business is shrinking, new sources of funding must be found.

Pius Amrein / Luzerner Zeitung

The postal shopping spree aroused tempers in the bourgeois camp and in business circles. The group wants to take over companies for around 1.5 billion francs by 2030. Above all, the acquisition of companies such as Livesystems (digital advertising) or Klara (development of office software for SMEs) triggers criticism. With this, Swiss Post is advancing into new business areas and is increasingly competing with private companies.

Cross-subsidies are prohibited

While the basic criticism of the shopping spree is understandable, not all arguments are completely convincing. It is regularly claimed that Swiss Post could use monopoly profits to cross-subsidize the development of new business areas. However, this is not allowed at all.

The group may use proceeds from the remaining monopoly for letters up to 50 grams to finance the basic service. However, cross-subsidization of services or products outside of the basic service is prohibited by law.

It is not the Federal Office of Communications (Bakom) that checks whether Swiss Post is complying with the rules, but the independent supervisory authority Postcom. In this way, conflicts of interest are defused. As the owner and “orderer” of the universal service, the Confederation is not a neutral observer, but primarily interested in the success of Swiss Post.

Bund could turn a blind eye

As the sole shareholder of Swiss Post, he recently approved a dividend of 50 million francs at the general meeting. When the company was doing even better economically, 200 million Swiss francs per year flowed to the Swiss Confederation. The federal government is also interested in ensuring that the basic postal service continues to be provided without using taxpayers’ money.

Ofcom might therefore not have an overly great interest in preventing market distortions in favor of Swiss Post. It could perhaps turn a blind eye if the Post were to creatively interpret the legal requirements. According to the motto: Distortions of competition are unpleasant, but the closure of further post offices is even worse.

Especially now that it is foreseeable that Swiss Post is heading towards financial difficulties without cuts in the public service, Postcom is playing an all the more important role. The supervisory authority may not carry out any balancing of interests. It must ensure that no money flows illegally from the letter monopoly into areas outside of the basic service.

Covert cross-subsidization is possible

However, the Swiss Federal Audit Office (SFAO) has now come to the conclusion in a report that the authority is not necessarily in a position to do this. In other words: the fear that the post office could finance its shopping spree with funds from the letter monopoly is not far-fetched. According to the SFAO, despite the legal ban, there is a risk of hidden cross-financing. This is because Postcom today essentially has to rely on information from Swiss Post.

The state-owned company has an army of controllers and specialists for regulatory issues. Postcom, on the other hand, only employs around half a full-time position to check whether Swiss Post is complying with the ban on cross-financing. This inequality of funds can be explained by the fact that a large part of the work is carried out by an auditing company. However, the order for this is given by the supervisor – i.e. Swiss Post.

In addition, Postcom currently does not have the right to check the figures supplied by the group on site. In practice, the supervisory authority must therefore basically rely on the information provided by Swiss Post being correct. This is potentially problematic. Whether cross-subsidization occurs is not an exact science. The result depends on assumptions and can certainly be influenced. The keys with which the overhead costs are allocated to different divisions are decisive. These are determined today by the post office.

This gives the group a certain amount of leeway. He could, for example, add too little of the costs to an area outside the basic service and shift it to payment transactions. That would be very tempting: A business area that Swiss Post wants to rebuild could be financially relieved. In fact, this would amount to illegal cross-subsidization.

Right of inspection for the supervisor

The hole caused in payment transactions would not be so bad. This area is part of the basic service, in which the ban on cross-subsidization does not apply. The hole could (legally) be plugged with proceeds from other parts of the group. Swiss Post does this regularly. In 2020, she shifted 56 million francs of the profit from the letter monopoly to the area of ​​payment transactions.

This does not mean, mind you, that Swiss Post cheated. The process described above is a hypothetical scenario. The Postbus scandal shows, however, that the postal group was not immune to such temptations in the past. The SFAO therefore proposes that Postcom be granted a right of inspection. In addition, the cash flows within the group are to be reported more transparently.

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