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).

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.

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.

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.

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.

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.

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.'

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.

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).

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 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