UPS Disappointed by DOT Ruling On DHL.

Business Editors

WASHINGTON--(BUSINESS WIRE)--May 11, 2001

Decision recognizes potential for anti-competitive behavior

By Deutsche Post / DHL in the United States 

UPS said it is disappointed and regrets today's ruling by the U.S. Department of Transportation affirming a Nov. 16, 2000, decision allowing DHL Worldwide Express to operate as a Foreign Air Freight Forwarder (FAFF) in the United States.

UPS challenged the license before the recently reorganized DHL/Deutsche Post began operations in the U.S. on grounds that a foreign postal entity like the Deutsche Post, with its history of abusing its monopoly through cross subsidies, should not be licensed to operate because of its potential to distort the marketplace.

UPS said it accomplished one of its main goals through the challenge, raising public awareness of the unfair competitive practices of Deutsche Post. "Our petition and today's ruling have brought to light the practices of Deutsche Post and helped educate the public about the competitive dangers of granting access to a foreign government monopoly that has been found guilty of anti-competitive behavior in its home market," said UPS spokesman Tad Segal.

On March 20, 2001, the European Commission ruled that Deutsche Post abused its monopoly on first-class mail and had engaged in unlawful, anti-competitive practices including predatory pricing.

Although UPS was disappointed by today's decision, company officials noted the DOT said it would welcome UPS or others in raising the issue in the future should evidence of cross-subsidization by Deutsche Post, the majority shareholder of DHL, come to light.

The DOT stated: "We agree with UPS that there is a risk of market distortion and unfair trade activity when a government-owned entity seeks to compete against private entities."

"DOT's ruling is important because it leaves the door open for further action," noted Segal.

UPS initiated its challenge and then was followed by other businesses and labor organizations, including FedEx, the Transportation Trades Department of the AFL-CIO, the International Brotherhood of Teamsters, the American Trucking Associations and the U.S. Chamber of Commerce in asking DOT to revoke DHL's FAFF license because of unfair business practices. A FAFF license allows a company to conduct ground-handling and delivery services within the United States as well as market and sell air service.

In its petition filed with the DOT in January, UPS argued the German post office - which benefits from a government-granted monopoly on first-class mail in Germany - should not, as a matter of law, be licensed to operate and compete in the U.S. market through its control of DHL. UPS believes that allowing Deutsche Post access to the U.S. market would distort competition because the agency can subsidize its competitive activities with revenues earned from its monopoly.

In addition to the support received from the business and labor communities, 347 members of Congress as well as mayors and state legislators from around the country endorsed UPS's efforts.

"We received tremendous support from all quarters, which illustrates that there are important public policy concerns at issue in this case," concluded Segal.