ACCC report finds no cross-subsidy of contestable services
The Australian Competition and Consumer Commission has issued its tenth report assessing cross-subsidy between the services provided by Australia Post.
The ACCC has found, after economic testing of Australia Post’s 2013-14 financial accounts, that Australia Post is not using profits from its monopoly reserved letter services to unfairly compete in other markets.
“Australia’s Post’s regulatory accounts do not show that it is cross-subsidising its contestable services with revenue from its monopoly services,” ACCC Chairman Rod Sims said.
“On the contrary, in 2013-14 Australia Post’s monopoly letter services were unable to recover their costs.”
“The regulatory accounts also show that Australia Post’s overall revenues were actually lower than its costs, allowing for capital costs.”
Australia Post has a statutory monopoly over the delivery of standard letters, which weigh less than 250g and cost no more than $2.80 to send. All other services provided by Australia Post are open to competition.
The ACCC has a number of postal regulatory responsibilities including assessing price increases for the 70¢ basic postage rate. However this report deals only with the ACCC’s role in assessing cross-subsidy by Australia Post.
The ACCC uses regulatory accounts submitted by Australia Post to conduct economic tests to assess whether Australia Post is using revenue from its monopoly letter service to cross-subsidise those services it provides in competition with other businesses.
Any cross-subsidy by Australia Post from its reserved (statutory monopoly) services to its non-reserved services would be a concern because Australia Post could damage competition in other markets by the use of its legislated monopoly.
The ACCC was given the power to monitor cross-subsidy in Australia Post in response to complaints by Australia Post’s competitors that Australia Post was damaging competition by cross-subsidising its contestable services with revenues from its monopoly letter services.