UK - The European Commission (EC) has launched an investigation into government plans to free Royal Mail of its £8.4bn (€9.3bn) pensions deficit, arguing it could lead to an unfair competitive advantage.
The investigation, pertaining to European Union state aid regulations, comes after the Postal Services Bill received royal approval last month, outlining government plans to privatise the UK postal service.
In a statement, Commission vice-president for competition policy Joaquín Almunia stressed that while it accepted the need for reform in the postal sector, the EC needed to ensure no "undue advantage" was granted to Royal Mail, distorting market competition.
The EC said further that deficit costs could potentially be viewed as a legacy cost and permission for the plan given under that guise.
However, it emphasised that the UK government had yet to demonstrate its proposal's compliance with guidelines.
It added: "In particular, the Commission has doubts that Royal Mail's role as the sole universal service provider and the liabilities resulting from its public sector monopoly legacy would justify mitigating the guidelines and notably the conditions ensuring that competition distortions are limited and that the cost of restructuring is shared by shareholders."
A spokesman for the Department for Business, Education and Skills (BIS) told IPE that the investigation was "expected" and the beginning of the process to achieve permission for its proposals under EU state aid rules.
He added that the language used by the Commission was mirrored in similar statements into the privatisation of other European state postal services and that the government hoped to resolve the matter by March next year.
Minister for postal affairs Ed Davey said achieving state aid approval was the next "critical" step to guaranteeing Royal Mail was put on "secure footing".
He added: "It is only right that the Commission has opened the state aid process to properly investigate the case.
"The Commission will now begin a dialogue with us and also invite views from relevant stakeholders such as Royal Mail's competitors and European counterparts."