Without privatization, the Correios monopoly will be judged by the STF

The Federal Supreme Court (STF) should judge in the coming months an action that questions the monopoly of Correios in postal services. As the government of Luiz Inácio Lula da Silva (PT) “buried” the privatization project of the state-owned company, the judgment in the Court became the main alternative for those who defend the end of the state monopoly and free competition in the sector.

The break of this monopoly would be a consequence of the proposal to privatize the Post Office, presented in the government of Jair Bolsonaro (PL). However, the project “stuck” in the Senate after being approved by the Chamber, and it is not in the interest of the new government, which defends the active participation of the State in the economy and withdrew the company from the National Privatization Program (PND).

The issue has been awaiting resolution for at least two decades. One of the actions that will be judged was filed almost two decades ago. Originally, the trial was scheduled for March 1st, but the President of the STF, Minister Rosa Weber, removed the matter from the agenda.

Liberal economists defend the breaking of the monopoly, stating that the postal system would gain more efficiency with the end of the absolute domain of the Post Office. Consumers would also benefit, who could count on lower prices and the development of innovations in the logistics area.

“In Brazil, Correios has a monopoly on many postal services, which limits the entry of other companies in the market and prevents competition. This can hinder innovation and the creation of new business models”, says Diogo Costa, CEO of Instituto Millenium, an organization that defends liberal values ​​such as the market economy.

Correios would be failing to comply with constitutional principles such as free competition

One of the actions that will be considered by the plenary of the Supreme Court is the Argument of Non-compliance with Fundamental Precept (ADPF) 70, filed in 2003 by the National Union of Express Parcels.

The entity alleges that Correios violate fundamental constitutional precepts and principles, such as free competition, practicing “acts of extermination of competition in complete dissonance with the constitutional precept and the laws in force, under the allegation of alleged monopoly”.

Parcel companies say that court decisions have led to the closure of micro and small companies in the country.

“Maintaining the ECT monopoly on certain postal services, in addition to being legally fragile, would be harmful to the country and increasingly anachronistic in view of the institutional and technological developments that our society is going through”, points out a technical note published by the Millenium Institute.

The 1988 Constitution established the Correios’ monopoly on postal services

The monopoly on postal services was established by the Federal Constitution of 1988, however it does not explain what these services are and how the Union will maintain them.

The detailing is done by previous law, 6,538, of June 22, 1978, which provides for postal services, regulating rights and obligations related to the postal service in the national territory. The legislation also deals with the competences and monopolies of the Post Office.

According to the legislation, the following are operated by the Union, under a monopoly regime:

• receipt, transport and delivery, in the national territory, and the sending of letters and postcards abroad;
• receipt, transport and delivery, in the national territory, and the dispatch of grouped correspondence abroad; It is
• manufacturing, issuing of stamps and other forms of postage.

The legislation also provides that they depend on prior and express authorization from the Post Office:

• sale of stamps and other postal franking formulas; It is
• manufacture, import and use of postage stamping machines, as well as templates for printing stamps or postmarks.

The law also provides that the following are not included in the monopoly regime:

• transport of letter or postcard made between premises of the same legal entity, in its business, by its own means and without commercial intermediation; It is
• transport and delivery of letters and postcards, occasionally carried out on a non-profit basis, as defined in the regulation.

The legal norm has already been questioned by the STF, being the subject of ADPF 46. The Brazilian Association of Distribution Companies questioned, in 2003, the right of private carriers to carry out parcel deliveries, which already occurred.

The plenary of the STF decided, in 2009, that Law 6538/78 is in accordance with the Federal Constitution. “Thus, personal and business letters, pouches and postcards can only be transported and delivered by ECT. It was defined, however, that the transport and delivery of other objects and orders are not exclusive to Correios”, points out the technical note from Millenium.

The companies require the Supreme Court to establish that Law 6538/78 is not in accordance with the Federal Constitution and determine that the Justice suspend the progress of lawsuits related to the ADPF.

Question about sending tickets

Another measure that will be considered by the STF is the extraordinary appeal (RE) 667,958, of 2011, which deals with the possibility of federated entities, companies and public or private entities to deliver tax collection guides or collection slips to taxpayers or consumers without the intermediary of the Mail.

The theme gained general repercussions due to the decision of its rapporteur, Minister Gilmar Mendes. He understands that the issue concerns the political-administrative organization of the State and achieves economic, political and legal relevance that goes beyond the subjective interests of the cause.

The Federal Regional Court of the 1st Region (TRF-1) has already ruled in favor of the municipality of Três Marias (MG) for the delivery of guides and slips made by the city hall itself.

The Millenium technical note notes that Correios has a monopoly on services that will soon become obsolete, such as the delivery of authenticated documents and postcards. Therefore, according to the document, the postal service company wants to maintain the delivery of IPTU guides. “It is, perhaps, the only product on which the eventual monopoly of the Post Office, if maintained by the STF, should still make a difference for some time”, punctuated the publication.

What are the main problems of the Post Office monopoly?

The Millenium Institute considers that, in the case of Correios, the effects on the price and volume of services provided are not the main problem. The problem lies in discouraging innovation, which has an impact on the service provided to the consumer.

“As with many monopolies, this one is regulated by the State and operated by a state-owned company that, as it is not profit-oriented, does not resort to abusive pricing. The effects on innovation, however, are serious”, says the note.

In Millenium’s evaluation, the Correios’ monopoly on the sending of certain products inhibits innovations in the provision of transport services and delivery of letters and other documents throughout the country.

“Restrictions on the entry of new economic agents into the market lead to the accommodation of the monopoly company. Without competition, there is no longer any motivation or feedback from the market process to invest in innovative changes that make life easier for consumers, who, in turn, have no one to turn to”, emphasizes the note.

The institute points out that the monopoly “compromises the development of new business models, such as sending documents reconciled to passenger transport through charter applications, among other business models that we are not even capable of imagining, but which could be, today, in full operation, making the delivery of certain products simpler, faster and cheaper for everyone”.

For the entity’s CEO, Diogo Costa, the more companies operating in this market, the better. “The problem is not exactly the existence of the Post Office, it is the monopoly that is attributed to it and hinders its constant evolution.”

The opening of competition in postal services took place in at least three countries: Germany, United Kingdom and Sweden. The result, according to Costa, led to greater efficiency and innovation in the sector, with companies looking for ways to differentiate their services and offer more competitive prices. He claims that companies, which used to be monopolistic, have become more dynamic and innovative.

What are the impacts of the STF decision on the Correios monopoly

For Instituto Millenium, the interpretation of the Constitution is quite clear. The Constitution establishes that free initiative is a foundation of the Republic. The economic order also has free competition as a principle.

“So, those monopolies that are not clearly expressed and delimited as an exception by the Constitution cannot exist, as they collide with fundamentals and fundamental principles of our Republic and economic order”, points out the technical note.

Costa points out that a decision favoring free competition will make it possible, in the case of an extraordinary appeal, for city halls to choose other companies to send IPTU guides.

“Other parcel, logistics and postal service companies will not be pursued by the Post Office. This will allow the market to develop more freely and openly, which can lead to more innovation and more efficient business models”, says the CEO.

On the other hand, if the Supreme understands that the Correios monopoly extends to services such as delivery of IPTU guides and, eventually, other bills, slips and documents, the block to the development of innovations and new businesses will be maintained.

A decision against and in favor of the monopoly, assesses the think tank, will continue to cause limitations in the development of the market. Costa points out that this could be harmful to the economy, but the market can still circumvent the monopoly, as has already happened with other services, such as the digitization of water and electricity bills.

“Many people are choosing to digitally authenticate documents and recognize signatures to avoid the need to send physical documents through the Post Office. Brazil can no longer stand being anachronistic,” she says.