Brussels opens probe on planned Royal Mail restructure
Europe's anti-trust watchdog on Friday launched a probe into British government plans to take on the Royal Mail's hefty pension fund and deficit when the postal service is privatised in 2012.
The European Commission said it had begun "an in-depth investigation" to ascertain whether plans to buy back a nine-billion-euro pension fund and write off around 1.9 billion euros in debt would create market distortion.
"The Commission acknowledges the importance of the reform of the postal market in the UK," said European Union competition commissioner Joaquin Almunia in a statement.
"However, we must ensure that the state measures do not provide undue advantages to Royal Mail as this would distort the conditions of competition among postal operators in the Internal Market."
The state company moved a step closer to privatisation last month after parliament approved legislation to sell up to 90 percent of Royal Mail Group, with postal workers offered 10 percent of shares -- the largest such proportion ever for a state firm being sold off.
The company faces a sharp turndown in finances, however, with annual profits slumping more than 78 percent and job losses and closures looming.
In its statement, the Commission said British authorities "have not convincingly demonstrated" that the restructuring complied with EU guidelines.
It notably expressed "doubts" on whether the buyback of the pension was "compatible as compensation for an exceptional burden resulting from Royal Mail's past status as public sector monopoly."
In another case involving pension deficits, the Commission in 2007 approved a plan for France's La Poste.
But it said that in the case of Royal Mail "it seems at this stage that a large share of Royal Mail's pension deficit is due to the adverse conditions on the stock markets which have affected all UK undertakings alike."
© 2011 AFP