CCA terminates proceeding against Croatian Post due to lack of evidence of unfair pricing

On 3 February 2022 the Croatian Competition Agency (CCA) opened ex officio infringement proceeding against Croatian Post – the undertaking HP – Hrvatska pošta d.d. (HP) with its seat in Zagreb, to investigate whether HP abused its dominant position within the meaning of Article 13 of the Croatian Competition Act and Article 102 of the Treaty on the functioning of the European Union (TFEU) by applying a customs clearance fee levied by the customs clearance agent or customs broker for the examination of IOSS postal items in the relevant market covering the imported postal items from third countries delivered to the Republic of Croatia in on-line sales (e-commerce).

Namely, on-line retailers registered in the Special Taxation Procedure (IOSS) system offer the option of paying VAT when ordering goods. In that case, the amount of VAT is included in the final price and the IOSS number will be indicated on the customs declaration of the postal item or on the invoice. If the electronic information on the IOSS number is correct, the postal item will reach the recipient with no additional cost.

As of 1 July 2021, in the territory of the European Union all the shipments in on-line sales from third countries regardless of their value are subject to VAT payment. Concretely, in the event that an incorrect IOSS number arrives via the electronic system, or the number is not specified at all, representation costs are charged for the issuance of the customs declaration amounting to HRK 18.50 for shipments worth up to 150 euro, or HRK 37.00 for shipments worth from 150 to 1000 euro (since 1 January 2022 known as “customs clearance representation costs”).

In the course of the proceeding, the CCA investigated whether HP held a dominant position in the import on-line sales of postal items from third countries delivered to Croatia, realized within and outside the IOSS system, and whether HP abused this dominant position in the relevant market concerned within the meaning of Article 13 of the Competition Act and Article 102 TFEU, in other words, whether the customs clearance representation costs introduced by HP constituted abuse of dominance by imposing unfair pricing.

After analysing the data on the total number of international incoming shipments that can contain goods from all countries including the EU, it was established that HP holds a dominant position in the relevant market concerned in the sense of Article 12 of the Competition Act. However, the mere fact of existence of a dominant position in the relevant market is by itself not prohibited, whereas the abuse of dominance is.

Therefore, during the proceeding, and based on the data submitted by the Customs Administration of the Republic of Croatia, the Croatian Regulatory Agency for Network Industries (HAKOM) and HP, the CCA made a comparison of the prices and representation costs in the drafting of a customs declaration by HP as well as the comparison of the prices of HP, its competitors and several national postal operators of the EU member states.

During the investigation of the collected data the CCA found that:

• According to the minutes of the inspection carried out by HAKOM on 17 November 2021, it was established that HP indeed performed control and security inspection activities relating to the submission of customs declarations, that is, the inspection found, among others, the activities of HP workers in handling postal items from third countries in the case when the VAT on the goods had been paid in advance by the recipient via the electronic IOSS system, as well as in the case when the VAT had not been paid to the merchant via the IOSS system;
• the national postal operators of Slovenia, Slovakia, Romania, Greece, Hungary, Poland, Austria, the Netherlands and Belgium also charge the fee concerned;
• in the Republic of Croatia, the customs clearance service for goods from third countries with a value of up to 150 euro was charged by three other companies besides HP, and compared to their prices, HP fee in the amount of HRK 18.50 (2.46 euro) was not excessive or unfair within the meaning of Competition Act.

The analysis carried out by the CCA indicated that the charge of HRK 18.50 (EUR 2.46) with VAT or HRK 14.80 (EUR 1.96) without VAT is not excessive, since the profit margin of [0-5] % does not indicate charging a price which is excessive because the price of the service has no reasonable relation to the economic value of the service provided.

Consequently, although the data collected during the preliminary market investigation represented sufficient indications for the initiation of the infringement proceeding, the collected data and facts established in the course of the proceeding did not constitute evidence for establishing abuse of a dominant position by imposing unfair prices in the sense of Article 13 of the Competition Act and Article 102 TFEU. Therefore, the CCA terminated the infringement proceeding against HP on 18 February 2023.