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Communications
The New Law on Post Office Franchises: A step backwards?
São Paulo, May 26, 2008 – On May 5, 2008, Law 11,668 was published, which covers the operation of post offices by franchised operators. Although the law does not define this institute, it establishes that the contracts will be governed residually to the new law itself by the Civil Code, Public Tenders Law, Concessions Law and Franchising Law.
The contracts between the Empresa Brasileira de Correios e Telégrafos (ECT, the Post Office) and franchise operators marked the start of the relationship with private initiative. This franchising of post office operation is still highly controversial, mainly regarding the form of implementing the system, which was initially seen as a way for the ECT to obtain revenues from the use of its intangible assets (marks) and to become more efficient by expanding its presence at no additional cost.
In 1998, the Ministry of Communications (MC) issued Normative Instruction no. 1, approving the new configuration of post offices. However, the ECT concluded it did not have operational conditions to hold public tenders or to immediately replace the existing Franchised Post Offices (Agências de Correios Franqueados, or ACFs) with its own branches. Then came Provisional Measure 1531-18, transformed upon congressional approval into Law 9648/98, which extended the duration of the ACF contracts until December 31, 2002. In 2001, the ECT began the process of granting new franchises, but very few contracts were executed (existing franchisees filed lawsuits to maintain the status quo, fearing diminished revenues). In 2002, a new normative instruction from the MC revoked the previous one, approved a new configuration for the post office network and canceled any tender results not yet ratified. That same year, Law 10,577 extended for a further five years the contracts with the ECT entered into without public bidding.
This was held unconstitutional by the Federal Audit Tribunal, or TCU (it is not the aim of this article to analyze whether or not the TCU can declare a law unconstitutional or fail to apply a law so considered).
Then on November 26, 2007, Provisional Measure 403 was issued, which extended the contracts of the roughly 1,500 ACFs for a further 18 months, an extension that according to reports was agreed in advance with the TCU, which had ordered there be tenders to choose new franchisees, and with Congress, which approved the provisional measure, turning it into Law 11,668/08.
It must be noted that the ECT, after the TCU decisions, started to hold tenders to award permits to so-called Convenience Post Offices. Clearly the introduction of this permission regime which provides less legal security to the operator than under a franchise or concession regime was a means for the ECT to regain more control over the rendering of its services, and especially to hinder the development of competition in the sector.
In this respect, the fact that Law 11,668 does not repeal Art. 1, VII, of Law 9074/95 means that it is still possible to provide postal services under either a permission or concession regime. On the other hand, Law 11,668 expressly repealed Art. 1, paragraph 1, of Law 9074, which established the durations of the franchise agreements. Under the new law, these will remain in force until the new contracts are executed under its aegis.
Furthermore, Law 11,668 formalizes the use of franchises to provide services called “auxiliary” to postal service per se. These activities, however, were not defined in the law because of the presidential veto of Art. 1, paragraphs 2, 3 and 4 (provisions that were contained in Provisional Measure 403, converted into Law 11,668). According to the Veto Message, issued by the MC, these provisions were “against the public interest”, because “through an extensive interpretation, they could result in reduced revenue for the ECT by expanding the scope of the franchise contracts, even jeopardizing the postal monopoly.” Therefore, the “auxiliary” services the franchisees are authorized to provide must, in principle, be defined in the contract itself.
This once again shows the government’s intention of preventing the highly debated postal “monopoly” from being undermined.
I do not mean to argue here, however, that the system of public franchises should remain as set up by the ECT. Rather, I argue for the implementation of the franchise system in orderly fashion, based on a careful study of the sector, as a way to expand the network in line with the principle of universalization of public services, and at the same time to enhance competition in the sector.
In this sense, Law 11,668 unfortunately falls short of being an instrument to define a clear regulatory framework, since as seen, it has a series of loopholes. The impression one gets is that the intention is to strengthen the supposed postal “monopoly”, without the necessary institutional reformulation.
(Maria Carneiro Goldberg is a lawyer with the office of Siqueira Castro, holds a masters degree in Regulation and Competition Law from UCAM/RJ, postgraduate specialization in Business Law from IBMEC Business School/RJ and is author of the book Uma Nova Visão do Setor Postal Brasileiro.)
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