GEO

Comments on the revised version of the draft law on Postal Market

04 September, 2014

 

The Georgian Ministry of Economy and Sustainable Development’s draft law and later revised draft law on Postal Market will change the regulatory framework on which the activities of the postal service market rest. Below we list the serious incongruities between the regulations proposed under this draft law, the Georgia-EU Association Agreement and Georgian legislation.

1. The draft law does not take Georgian reality into account

The  draft law foresees the introduction of state regulations on the postal, courier, and express-delivery service markets, while, in Georgia the postal market was fully liberalized in 2005. The liberalization process boosted competition in this sector. Now there are more than 40 companies providing postal service in the Georgian market.  Yet, this draft law aims to re-introduce state regulation into this market and re-regulate postal market. We believe that introducing the proposed regulations will alter the market in a way which is neither economically justifiable nor in line with best international practices. The proposed regulations will have a negative  impact  on creating a free, fear and competitive business environment.

2. Governmental authorities are defined vaguely

The draft law defines the Georgian National Communications Commission (GNCC) as the regulatory authority in the postal sector. At the same time, the status of the Governmental body defining/steering/implementing the state policy remains vague and inconsistent. On the one hand, the draft law envisages that in the postal sector, the government shall “manage and approve Georgian Government state policy” (in the draft’s previous version, however, the Prime Minister was responsible). On the other hand, however, it stipulates  that “in the postal sphere state policy will be developed and implemented by the Ministry of Economy and Sustainable Development”. Consequently, It is appropriate to ensure that the Governmental authority’s functions are properly separated/divided between the governmental bodies.

3. Market monopolization by Georgian Post

The draft law envisages that only one company, Georgian Post being granted the status of national (designated) operator status without competition. The mentioned status will be conferred for a five year period of time. (In the previous version, a 20 year period was to be conferred.) A comparable or analogous situation cannot be found in international practice. After the expiration of this period of time, the Ministry shall either extend the status of the operator or select a new operator. The national (designated) operator will implement both universal postal services and universal reserve postal services. Universal postal services include the reception, handling, conveyance and delivery of letters of up to two kilograms (Priority/non-priority or simple/registered post), Seccogramees of up to 7 kilograms, parcels of up to 20 kilograms, and “M” cargo of up to 30 kilograms, while the reserve services include the reception, handling, conveyance and delivery to the addressee of local and international letters and postcards of up to 100 grams and for international parcels of up to 30 kilograms which are sent and/or received by land or sea to or from Georgia. Consequently, competition in this market segment will be severely restricted by the regulations and other operators will only be able to offer their services through the umbrella of Georgian Post (The Nationally (Designated) Operator) – the approval of this decision as part of economic policy will severely damage the business environment, and as such it is important that this draft law is not adopted.

As we know, the Parliament of Georgia, will again (in March) adopt competition policy reform draft laws, which intend to help build ensure a free and fair market. It is worthy of attention that the reforms proposed in the draft law fully exclude free and fair competition in the affected market segments. The noted reforms also go against the obligations given within the Association Agreement between Georgia and the European Union (Title 4, Sub-Section 4 "Postal and Courier Services"), which envision postal and courier service markets working on the principle of liberalization. The given legislative regulations are not in line with international practice, according to which, the postal market should be fully liberalized and support free competition (European Union Directive 2002/39/EC) as well as the doing away with of “Reserve Postal Services” (European Union Directive 2008/6/EC). These practices are considered a successful path to reform in the postal sphere.

4. Suggested regulations have a regressive character

The draft law envisions (Article three, point “K”) the regulation of postal operators with “significant market share” according to Georgian law as defined by the law “On Competition’s” definition of market share holders. We would like to emphasize that the law “On Competition” does not define regulation for “significant market share” holders. Also, in the present draft law, as in the law “On Competition”, the percentage of a given market which is defined as a significant market share is not given. As such, the draft law “On Post” must consequentially come in line with existing regulations in the Law on Competition.

The project also envisions the regulation by the national commission of the maximum tariffs for universal postal union services and universal reserve postal services. As a result, there will not only be a given tariff for local and international letters and postcards weighing up to 100 grams, but also for the reception, handling, conveyance and delivery of international parcels weighing up to 30 kilograms. This is not justified on any economic basis and is against free market principles.

In connection to the creation of the draft law, representatives of international companies working in the sector (DHL, TNT) and Transparency International Georgia met with the First Deputy Ministers of Economy and Sustainable Development, Mr. Dimitri Kumsishvili and Mrs. Natia Mikeladze on April 16th. During negotiations, agreement was reached on a number of issues in the draft law. Many of the issues on which agreement was reached have not been dealt with in this draft law including:

5. Demands of carriers

  • The definition of “universal postal services” should be clarified, defined, and regulated in accordance with international practice. Specifically, it, at a minimum, should consist of the basic requirements of the definitions on sending post and government regulations on prices for basic service categories. This request has not been provided for.

Chart: Universal Postal Service definitions according to international practice

Country

Universal Postal Service Definition

Source

Germany

Universal services are a minimum package of postal services (According to Paragraph §4 Sub-paragraph 1), of a specific character available at an accessible price across the entire territory of the German Federal Republic. Universal postal service should be provided by a licensed postal service. This must include services which are considered mandatory/necessary.

http://www.iuscomp.org/gla/statutes/PostG.htm

Estonia

Universal postal services are defined as consisting of a package of services which must be provided on the entire territory of Estonia at fixed and affordable prices.

http://www.legaltext.ee/text/en/X50065K2.htm

Lithuania

Universal postal services are postal services of a character that are affordable for all and must reach the entire territory of Lithuania as given in legislative acts.

http://www3.lrs.lt/pls/inter3/dokpaieska.showdoc_l?p_id=467253  

Romania

Universal postal services must available for all users to access at affordable prices on the entire territory of Romania’s territory.

http://www.legi-internet.ro/en/postal_service_law.htm  

Portugal

The government must ensure the existence and availability of a universal postal service, which allows for the opportunity to receive a quality service for everyone at affordable prices throughout the country. Delivery of these services is designed to meet the country's population’s communication, economic and social needs.

http://www.anacom.pt/render.jsp?contentId=980037

  • The draft law on the postal services sector and the state regulation regime (Article 24) should be in line with Georgian Legislation and the obligations foreseen by the Association Agreement between Georgia and the European Union (Chapter 6). Consequently, those wishing to be operators in the universal postal service market sector, instead of being authorized, should request a license (This demand is also foreseen in the Association Agreement between Georgia and the EU, Chapter 6 Article 101).  Furthermore, only those who wish to be universal postal service operators should be required to meet the demand to have “appropriate material-technical basis and appropriately qualified personal”, which will be included in Georgian law “On Licenses and Permits” together with regulations. This request has not been provided for.
  • The draft law must consider rules on competition in regards to the potential influence on those wishing to be universal postal service operators taking into account international practice. The legislation must ensure the possibility that two or three designated operators may exist on the country’s territory, so long as the operators satisfy the demands of legislation. European Union legislation does not restrict the number of nationally designated operators (for example, in the country, there could exist two or three designated operators in different geographic regions, and they could have free access to one another’s infrastructure). This request has not been provided for.

  • The postal market sectors which do not include universal postal services should remain liberalized. In this sector, activities by operators who wish to partake in the field should not be regulated by any additional bureaucratic or formal barriers besides those envisioned for “authorization” by the national communications regulatory committee. Despite this, the revised draft law envisions that operators who wish to participate in this sector must possess “appropriate material-technical basis and appropriately qualified personnel.”  It is undeniably important that articles 25 and 48 are clarified so that they are in line with liberalization of the market and “authorization procedures” are of economic substance.

  • The regulation of other kinds of services (article 22) which are included in the draft law should be removed from the draft law. This request has not been provided for.

  • During the meeting, agreement could not be reached on conferring exclusive rights to the “National Operator” to services pertaining to parcels of up to 30 kilograms shipped by land and sea in the so called “Reserved Area.” International practice does not contain this type of precedent, and as such it is important that Georgian legislation take this into account. This request has not been provided for.

6. Transparency International Georgia’s recommendations

Before the Ministry of Economy and Sustainable Development presents the draft law to the Parliament of Georgia, the following must be ensured:

  • New legislative rules and regulations on activities in the postal sphere given in the draft law on Postal Service are in line with international best practice;
  • Adequate legal regulation in the postal sector through the introduction of market liberalization and removal of monopoly;
  • Transparency should be ensured in the process of selecting the nationally (designated) operator;
  • Support the existence of a free, fair and competitive business environment, and ensure that an already liberalized market is not re-regulated and remains open.

 

Author: Transparency International Georgia