Overview of Licensed Post Office arrangements
Licensed Post Offices (LPOs) are Australia Post outlets that are not
owned and operated directly by Australia Post but are independent businesses
that hold a licence to provide Australia Post products and services.
The 2,895 LPOs operating in Australia represent over 65 per cent of
Australia Post's total retail outlet network. In particular, over 1,600
LPOs operate in rural and remote areas, representing approximately 63 per cent
of all non-metropolitan Australia Post outlets.
The LPO Group estimated an aggregate capital investment by licensees of
approximately $1.5 billion.
The following discussion provides an overview of the LPO model, the LPO
Agreement and representation of LPOs.
Introduction of the LPO model
With the introduction of community service and commercial obligations in
the Australian Postal Corporation Act 1989, Australia Post sought to
change its retail model based on postal agencies (which operated under
arrangements dating back to 1942) to a model offering a greater array of
services on a commercial basis.
Australia Post, in consultation with the Post Office Agents Association
Limited (POAAL), formulated a plan to convert postal agencies to LPOs. This
involved moving to the current LPO business model, based on 'a commercial
framework with in-built incentives to improve profitability thus giving
licensees greater freedom to grow their own businesses with the benefit of
Australia Post's brand and foot traffic'.
The basis of the new arrangement was the LPO Agreement, which 'is a
contract with an indefinite term and no defined territory'.
The LPO Agreement includes such matters as the obligations of Australia Post
and licensee, termination of the agreement and fees, commissions and discounts.
Existing Post Office Agents were given the opportunity to opt-in to the
new agreement, and provided top-up payments where the new LPO agreement
provided less remuneration than under their previous arrangements. Australia Post indicated that currently 140 rural and remote LPOs
remain in receipt of this payment.
POAAL informed the committee:
The underpinning principle of Licensed Post Offices under
Retail Post was that privately-owned post offices would no longer be dependent
upon Australia Post for their total income.
Licensed Post Offices would be able to offer Australia Post's
products and services, while operating in-conjunction with another business or
simply offering other complementary services and products...The LPO arrangements
would give protection and support to LPO owners and be sufficiently flexible to
cope with changes over the years to come.
POAAL also noted that the 'Special Conditions' clause of the LPO
Agreement can be customised for local conditions and allows for negotiation
between the licensee and Australia Post.
POAAL concluded that as a result of the implementation of the LPO
network was tightened.
operating tiny Post Office Agencies were given the opportunity to leave the
technology was extended to more post offices.
Post had a fresh image, and Australia Post would provide signage to LPOs.
easy-to-understand payment scheme for LPOs.
Post's retail network was transformed from a loss-making network to a
profitable, modern and efficient network.
Types of LPOs
LPOs are owned through a variety of entities and structures, including
sole practitioners, partnerships and corporations. In some instances, multiple
LPOs are owned by the same principals.
LPOs operate as either standalone – that is, run solely as a post office
– or 'in conjunction' businesses. Standalone LPOs account for 42 per cent
of total LPOs. The 'in conjunction' LPOs operate with a host business. This is
encouraged by Australia Post, particularly in smaller communities.
There was some discussion among stakeholders about the extent to which
'in conjunction' LPOs are still dependent on Australia Post for their
income. Mr Fahour, CEO, Australia Post, informed the committee that for
many LPOs operating in conjunction with another business, 'postal services are,
on average, around 10 to 30 per cent of their total activities'. Mr Fahour
stated that Australia Post has 'no visibility' on the rest of the business
activities undertaken by LPOs.
In contrast, licensees informed the committee that, while 56 per cent of
LPOs are labelled 'in conjunction' businesses, this simply means that they are authorised
to offer some non-Australia Post products or services, even if this is a very
small proportion of their overall business. Ms Angela Cramp from the LPO Group
...I have been given the right to change the status of my LPOs
to 'in conjunction' offices, which will allow me to sell gift cards and
stationery. It might be two to five per cent of my turnover, and that would put
me in the 56 per cent which Australia Post is saying is 'in conjunction'...It is
an unclear statistic. Fifty-six per cent of post offices may well be stamped
'in conjunction', but most of them would be like me. I can have a small range
of gift ware and greeting cards which are non-Australia Post. That allows my
office to be an 'in conjunction' office. In reality, I have three stand-alone
post offices and I do not have any capacity to take on other businesses.
The number of LPOs
A licence to operate an LPO is granted as an indefinite licence (rather
than a licence with a fixed period). Over time, the number of LPOs decreased:
from 2,963 in 2009–10 to 2,895 as at 31 October 2013.
The change to the number of LPOs was generally the result of closures, with
only a small number of new licences being issued.
Table 6.1: Closures of LPOs
Source: Australia Post,
Answer to written question on notice Nos 1 and 2.
In the five-year period to May 2013, 55 LPOs closed permanently: 19 in
metropolitan areas; and 26 in rural/remote areas.
Trading of licences in the secondary
On average, 260 LPO licences have been traded annually over the last six
years, with 270 licences bought and sold in the 2012–13 financial year.
Purchases of LPO licences are mediated through business brokers and Australia
Post has no control over the purchase price. Australia Post does, however,
assess the suitability of prospective licensees before the purchase can occur.
Australia Post indicated that 73 per cent of LPOs have had their
licence for less than 10 years.
Australia Post also commented that it could not provide information where a
buyer is not able to be found for an LPO as this is not captured on a central
POAAL provided information on the LPO sales market and stated that LPOs
'continue to be seen as stable small businesses to own'.
However, since the global financial crisis, the LPO market has been slow. The
value of post offices has, on average, fallen from five to six times the annual
adjusted net profit figure to around 3.8 to 4.3 times in metropolitan areas. In
rural areas, LPOs are currently valued at around three times the adjusted
net profit figure. POAAL commented that:
This decline could be seen as a commercial-based reduction,
as prices for post offices were very high and the market forces adjusted the
In particular, purchase prices for country LPOs, where the adjusted net
profit is under $100,000, are being squeezed. POAAL stated that this is
typically because potential buyers do not wish to purchase a business, with an
adjusted net profit under $100,000, and have to work in the business for five
to five and a half days a week.
Termination of licences
Licences may be terminated by Australia Post or the licensee. The
LPO Agreement provides for termination of a licence with cause by Australia
Post under several circumstances, including where a licensee breaches the terms
of the LPO Agreement and does not remedy those breaches within 30 days. Actions
that may lead to termination of a licence include fraudulent conduct, the
abandonment of the business, a network planning decision around the
establishment of a new outlet or an irreparable break-down in the
Under the LPO Agreement, either party may terminate the agreement
without cause, with a notice period of 90 days. Examples where this provision
has been invoked include the establishment of a corporate outlet in close
proximity to an existing LPO in a new regional shopping centre location and the
unresolvable breakdown in the relationship between Australia Post and a licensee.
In cases where Australia Post terminates an agreement the payment
of compensation is subject to the circumstances surrounding the termination of
the Agreement, for example, compensation would be payable if Australia Post
took steps to close an LPO as part of a network planning decision.
Australia Post noted that in relation to licenses terminated by the
licensee (rather than traded):
LPOs and CPAs [community postal agencies] are run by small
business operators, many in conjunction with another business. Agents may
terminate for a number of reasons including availability of premises when a
lease expires, closure of the business that hosts the LPO or CPA or for a range
of personal reasons. In these instances, Australia Post seeks expressions of
interest to try to secure a new operator to ensure continuity of postal
At the November 2013 Supplementary Estimates, Mr Fahour commented on
closures of LPOs:
There are a number of reasons they give as to why they want
to hand back their licence and why they cannot sell it on. The biggest and most
prevalent reason that we hear is that they are retiring. They have reached an
age where they do not want to do this business anymore...
Obviously they will try to sell the business, but there are
some who are in some communities in some places where their total business is
not of a state where anybody else in the community wants it.
Australia Post provided information on termination of LPO agreements.
Table 6.2: Terminations of
LPO agreements, 2010–11 to 2012–13
Agreement terminated by
Australia Post with cause
Agreement terminated by
Australia Post without cause
Agreement terminated by
Source: Australia Post,
Submission 8, p. 32.
Location of LPOs
Australia Post has 2,561 retail outlets in rural and remote areas. The
majority of these, 64 per cent, are LPOs. The majority of rural and remote LPOs
are run in conjunction with a host business.
Table 6.3: Rural and remote network
Corporate Post Offices
Licensed Post Offices
Community Postal Agencies
Source: Australia Post,
Submission 8, p. 23.
Australia Post noted that it did not capture on any central database the
mail volumes passing through LPOs in regional areas.
Support provided by Australia Post
Australia Post stated that licensees receive a range of benefits
associated with being part of the Australia Post LPO network which include:
being part of a highly trusted and recognised brand which drives
foot traffic into their business which can be leveraged for host business
benefitting from the continual product development/customer
acquisition strategies of Australia Post; and
that the cost associated with these benefits is typically borne
by Australia Post and provided either free of charge or at a subsidised rate to
Other support provided by Australia Post to licensees includes
technology such as point of sale technology, site communications equipment and
hand-held scanners; product and service marketing; training; and credit
The LPO Agreement
LPOs are subject to a number of licensing and trading conditions under
their agreement with Australia Post. These conditions are outlined in the LPO
Agreement and other related documents.
Additionally, the relationship between Australia Post and licensees is subject
to the Franchising Code of Conduct, a mandatory industry code regulated by the
Australian Competition and Consumer Commission (ACCC).
The LPO Agreement is made up of a number of individual components
including but not limited to:
contractual terms for Australia Post's relationship with its
basis of payment to licensees; and
operational and accounting instructions.
Australia Post noted that:
While the contractual terms between Australia Post and its
licensees have remained largely unchanged since the inception of the LPO
Agreement in 1993, the other elements of the Agreement such as the payment
scheme and operational procedures are subject to constant review in line with
changing business requirements. This results in, for example, annual adjustments
to payments in line with price adjustments for a large majority of products and
services. Any changes to either the LPO payment scheme or operational
procedures are subject to consultation with the licensee representative body,
the Post Office Agents Association Limited (POAAL).
Australia Post's obligations
Australia Post's obligations under the LPO Agreement includes
obligations to provide the licensee with:
relevant operational manuals;
product and services information; and
initial and ongoing training covering the postal system generally
and operating procedures relating to LPOs.
In addition, the LPO Agreement requires Australia Post to 'use its best
efforts to maximise sales of Products and Services to the mutual benefit of the
Licensee and Australia Post'.
Under the LPO Agreement, licensees are required to provide certain
'mandatory' products and services to customers, as well as an obligation not to
offer products that compete with specified products and services provided
through Australia Post. The mandatory products LPOs are obliged to provide are postage
assessment, mail acceptance and delivery and agency banking and bill-pay.
Australia Post noted that in addition to mandatory products, it offers
licensees a range of additional products that LPOs may choose to sell to
enhance their business and meet local customer needs.
LPOs may also source products for sale from suppliers other than Australia
Licensees are obligated to maintain the premises from which the LPO is
operating, and may only change location with the agreement of Australia Post.
The licensee must pay costs associated with any fit-out, set-up and maintenance
costs relating to the premises, and is obligated to staff the LPO appropriately
and meet all staffing costs.
Payments made to LPOs under the LPO
The remuneration structures for LPOs are based on several different
components, which are detailed in Annexure A of the LPO Agreement and the LPO
payment scheme. The payment amount for each component is reviewed in June each
year, with licensees being advised of any variations.
The Australia Post income streams delivered to licensees are derived
the sale of letter and parcel products, on which licensees
receive a percentage‑based purchasing discount from Australia Post;
processing and delivery fees for mail related services such as
post office box servicing;
commissions for processing 'trusted service' transactions such as
bill payments and banking; and
some other subsidies, top up payments and discounted merchandise
available from Australia Post.
In addition, Australia Post informed the committee that arrangements
exist for licensees to be provided with a minimum annual payment:
In order to ensure that all licensees are fairly compensated,
Australia Post provides a minimum annual payment to licensees who have an
annual income from Australia Post of less than $13,995. This payment was initially
established with POAAL in 2002 at $10,000 and is reviewed every year.
There are currently 154 (5%) LPOs
in this category,
The cost of providing this support
to licensees was around $480,000 in 2012/13.
The majority (94% – 146) of LPOs receiving the minimum
payment are in rural and remote Australia. In some cases this represents a
commensurately reduced level of service based on community expectation, for
example reduced opening hours.
Changes have been made to payments during the course of this inquiry.
These are discussed in detail in Chapters 7 and 8.
Assessments of the LPO Agreement
The LPO Agreement has been in place since the establishment of the LPO
model in 1993. Amendments have made from time to time to the LPO Agreement.
Some submitters, including the LPO Group, considered the LPO Agreement
was inadequate and outdated particularly in relation to payment arrangements.
One licensee stated:
Quite simply the LPO business arrangement with Australia Post
is based on an LPO agreement which has put together in the late 1980’s and was
based on the basic rate of postage. It is an out dated document, and although
they are observing their community service obligation to our area, the antique
nature of this agreement does not reflect the work that licensees are doing on
behalf of Australia Post.
Mr Andrew Hirst, LPO Group, commented:
The 1993 LPO agreement is broken. It is well past its use-by
date. Its payment regime no longer works. It has not worked for well over a
decade...The evidence is that the LPO agreement has not kept up with business for
more than a decade, and such is the case that it is a yardstick of the very
fears I am putting forward.
The LPO Group recommended that an independent arbitrator be appointed to
review the terms and conditions of the LPO Agreement with a view to ensuring
that it adequately respond to the contemporary needs of modern postal
However, POAAL did not agree with this assessment. Mr Ian Kerr, CEO,
POAAL, commented that the Agreement had coped very well with changes over the
Further, it has 'shown itself to be a very strong and flexible document that
has been able to adapt to changes over the past 20 years. It is the benchmark
for other franchise agreements.'
Some licensees also indicated support for the LPO Agreement stating that
it provided it provided flexibility to operate a small business.
Mr Fahour was also of the view that the agreement 'has served us well
over the last 25 years'. However, he commented that the real issue is that the
'fundamental business model that relies upon the letter product is broken into
the future, and we need to find an alternative'. Asked whether the Agreement
would be reviewed, Mr Fahour stated that Australia Post's entire business
would be reviewed.
The committee believes that the significantly different postal
environment, which continues to experience rapid change, no longer reflects the
market that existed when many of the LPOs originally negotiated their service
agreements with Australia Post.
The committee recommends that, at the request of any recognised
association, Australia Post be required to renegotiate the terms and conditions
of an LPO Agreement.
Consultation between licensees and Australia Post are undertaken in a
number of ways: through arrangements under the LPO Agreement, through
consultative forums (Australia Post Licensee Advisory Council (APLAC) and the
Carded Parcel Forum) and through day-to-day interactions with licensees and
Australia Post employees.
The LPO Agreement provides for consultation concerning the LPO Agreement
between Australia Post and the 'Association'; that is, the LPO representative
group. The LPO Agreement contains clauses which refer to the 'Association':
clause 9 – the fees and commissions paid, and discounts made, to
licensees are reviewed annually, during which review Australia Post must
consult with the Association; and
clause 34 – any variations or amendments to the terms of the LPO
Agreement to occur only after Australia Post has consulted the Association.
The LPO Agreement also provides for consultation with the Association in
relation to amendments to the Licensed Post Office Manual and variations to
products and services. The LPO Agreement contains a definition of 'Association'
as meaning POAAL.
Australia Post Licensee Advisory
Following a review of Australia Post's consultative arrangements with
licensees in 2002, APLAC was established in 2003. APLAC is a forum where
licensees and Australia Post representatives formally discuss business
opportunities and issues, and develop ideas and recommendations for the mutual
benefit of stakeholders in the LPO network. APLAC membership is free to
licensees with quarterly state and national council/ board meetings with
Australia Post fully funding its operations. Around 40 per cent of licensees
are members. Licensees may put themselves forward to be State Council members
or National Board directors who are elected in a democratic process.
Carded Parcel Forum
Australia Post has also recently established the Carded Parcel Forum as
a result of consultation between Australia Post and POAAL rather than as a
result of complaints from any individual licensees. The establishment of the
forum recognised the challenges being faced by Australia Post's retail network
in handling the increase in carded article numbers. The forum discusses
operational issues and opportunities relating to carded articles and has
contributed to initiatives such as:
introduction of formal by-pass arrangements where outlets reach
site storage capacity;
establishment of dedicated arrangements for the handling of
oversize items in metropolitan areas which avoids the involvement of retail
rollout of handheld scanners to LPOs; and
provision of parcel trolleys to LPOs at a subsidised price.
Australia Post commented that, as the parcel business is still
experiencing rapid growth, it is intended that the Carded Parcel Forum will
continue to meet periodically to discuss issues and opportunities relating to
the handling of carded articles.
Post Office Agents Association
The Post Office Agents Association Limited (POAAL) is the recognised
representative body for licensees.
Australia Post commented that it had chosen to recognise POAAL as the LPO representative
group at the time of establishing the LPO network with consideration to:
POAAL's history in representing the interest of post office
operators since around 1939;
the involvement of POAAL from around 1989 in the development of
the LPO Agreement; and
the practicalities and benefits to Australia Post and licensees
associated with engaging with a single industry group as opposed to around
3,000 individual licensees on matters relating to general contractual terms
(including payment rates).
POAAL's activities in relation to LPOs include:
annual review of LPO payments;
meeting quarterly at a State level with Australia Post to discuss
State-based LPO operational and security issues;
meeting quarterly with Australia Post at a National level to
discuss marketing and security matters;
meeting monthly with Australia Post to discuss operational
matters such as issues with stock returns or proposed improvements to
co-ordination of meetings, workshops and seminars (both face-to-face
and by teleconference) for licensees across Australia;
publication of regular newsletters, frequent email newsletters
and its quarterly full-colour magazine Postal News for licensees; and
holding payments workshops, seminars, and assistance in writing
to Australia Post.
In addition to the LPO Agreement, in 1993 Australia Post and POAAL
entered into a consultative agreement. The consultative agreement was amended
in 1997. The agreement, which is confidential between the parties, provides the
framework for how the consultative arrangements will operate.
Licensees pay an annual fee to become members of POAAL. Together with
mail contractors, the total membership of POAAL is around 4,000. While POAAL
could not provide the committee with an exact number, it indicated that LPO
membership was 'north of 2,000'. It stated that 'typically, the licensees who
do not join any association are usually those that have the LPO as a small part
of their business or the LPO generates a very small amount of income'.
Dispute resolution between licensees and Australia Post
In the event of a dispute arising between licensees and Australia Post,
mechanisms are available under both the LPO Agreement and the Franchising Code
of Conduct to resolve it.
LPO Agreement dispute resolution
The LPO Agreement provides for a five-stage dispute resolution process.
Australia Post noted that the process is a staged progression commencing from
the local information resolution of the issue with pursuit of legal action as a
last resort. Australia Post stated that 'as a result of this staged process the
historical number of formal disputes has been low'.
Mrs Christine Corbett, Australia Post, commented that while there are
'dozens of issues that are occurring all across the country on a daily basis'
only those which cannot be resolved progress to the next stage, that is Stage
2. It is only then that a dispute is recorded.
To progress to Stage 2, an LPO11 form is issued (either by the licensee
or Australia Post) and a dispute is recorded. POAAL must be informed and an
attempt is made to find a resolution. If this is unsuccessful, the matter is
referred to the State Dispute Resolution Committee, whose members include the
state chairman of POAAL (or nominee).
Licensees who are not members of POAAL may still be represented by it at
the relevant stages of the dispute resolution process with Australia Post.
Figure 6.1 outlines the processes available for resolving disputes
between Australia Post and licensees under the LPO Agreement
Dispute resolution processes between Australia Post and licensees
SDRC: State Dispute Resolution Committee; NDRC: National Dispute
Source: Australia Post, Submission 8, p. 31.
The table below provides information on disputes which have progressed
to Stage 2. The committee sought evidence on the number of LPO11 forms lodged.
Australia Post informed the committee that:
The details sought about the receipt of the LPO11 forms, are
not captured on any central database. As such Australia Post is not in a
position to provide the information as requested.
However, Australia Post does keep records of disputes which
have progressed to Stage 2 or further in the process.
Mr Fahour also commented:
We receive a number that are called stage 1, which is held in
the local area and involves people wanting to deal with a range of issues,
including payment issues. The reality is: what private business that operates
in the community will not want to be paid more?
Table 6.4 provides information on the number of disputes from Stage 2 of
Table 6.4: Number of disputes
Formal advice of a 'dispute' (Stage 2)
Percentage of network
Number referred to State Resolution Committee/office
Percentage of network
12 (YTD Sept 2013)
Source: Australia Post,
Submission 8, p. 31.
Assessment of the dispute
Mr Stephen Giles described the dispute resolution process as
'comprehensive', containing an informal process supplementing the formal
dispute resolution processes.
However, licensees commented on the inflexibility of Australia Post in relation
to disputes and the cost to the licensee of proceeding to Stage 2.
Mr Terry Ashcroft, post office broker, provided further comment and
stated that Australia Post refuses to negotiate in most disputes. It then
forces licensees into the disputes resolution process with the knowledge that
the costs and time to the licensees 'create a financial disincentive for
licensees to continue the dispute to fair resolution and in most cases if the
licensee does proceed [Australia Post] can and has refused to be fair in the
knowledge that the Licensee cannot afford court action'. Mr Ashcroft also
stated that Australia Post 'has also been known to reach agreement on a dispute
only to repudiate the resolved mediation a short time later leaving the licensee
to start the process all over again'.
The LPO Group recommended that the terms and conditions of the dispute
resolution process be reviewed with a view to 'implementing a three tier option
commencing with a fast track option through to a fully mediated option where
other attempts to resolve the issues are unsuccessful'.
In relation to Australia Post's dispute resolution process, it appears
to the committee that, given the overwhelming evidence of the problems within
the LPO network, the low number of Stage 2 disputes is somewhat surprising.
While it may point to the effectiveness of the resolution processes available
at the first, informal resolution stage, it could also point to complexity of
the system, time considerations and cost of accessing the process. Or, indeed,
it could point to a lack of confidence in the process.
The committee also notes that Australia Post does not keep a central
database of 'issues requiring attention' received under Stage 1 of the process.
The committee understands that Australia Post receives a large number of
'issues requiring attention' each day and many may be easily resolved. But it
notes that this stage requires 'notification' of an issue and a timeframe for
resolution so it appears that formal records of interactions must be
established and kept.
The committee considers that individual matters raised by licensees can
provide early evidence of broader problems that Australia Post should monitor
and address. The number of unresolved issues that are dropped rather than
progressing to the next stage can also be helpful in identifying problems.
The committee notes, in this regard, the evidence provided by POAAL
which pointed to problems experienced for many years in New South Wales. Owing
to the attitude of NSW Australia Post management, which Mr Kerr described as
'verging on bullying', the number of licensee complaints from New South Wales
at times outnumbered licensee complaints from the rest of Australia. While
POAAL welcomed the recently implemented changes in the management team in New
South Wales, it reported that many people were affected by the actions of the
former management team.
The committee therefore considers that it would be desirable for
Australia Post to capture this information on a central database to identify
possible systemic problems at an early stage as well as the number of
unresolved issues that are not progressed to Stage 2 of the process.
The committee recommends that Australia Post capture information
relating to 'issues requiring attention' raised under the dispute resolution
process in order to provide early identification of systemic problems.
The committee further considers that the dispute resolution process is
overly complex. If disputes are not resolved at an informal level (Stage 1),
the parties must move through three further stages before independent
arbitration. Time limits are provided for at each stage which appears to allow
a maximum of 85 working days before moving to arbitration. The committee
considers that this is an overly prolonged timeframe which may result in
significant costs – such as lost wages, representation and travel costs – being
incurred by the parties involved.
The committee notes that more streamlined dispute resolution processes
are generally the norm in both the government and business sectors. The
committee therefore considers that the dispute resolution process should be
simplified so that there are fewer stages to be traversed before arbitration.
This will provide for a more time and cost efficient system.
The dispute resolution process includes POAAL at Stages 2, 3 and 4. With
the establishment and expansion of other groups representing licensees, notably
the LPO Group, the committee considers that the dispute resolution process
should be changed to recognise this development.
The committee recommends that the Australia Post dispute
resolution process should be amended to provide for a more streamlined process.
Dispute resolution under the Franchising
Code of Conduct
LPOs are also covered by the Franchising Code of Conduct. The Code is
mandatory and provides a dispute resolution process, including the option of
mediation. The Office of the Franchising Mediation Adviser was established
under the Franchising Code of Conduct to regulate the conduct of franchisees
and franchisors towards each other and provide a cost-effective dispute
resolution solution to the industry. The Department of Communications noted
that the LPO Agreement emphasises the use of dispute resolution services.
The Department also indicated that it had received communications from
LPOs, expressing concerns with the viability of their businesses and other
matters. It stated that in 2000, 2006 and most recently in mid-2013, the Office
of Small Business conducted reviews of the Franchising Code of Conduct which
included LPO issues. Likewise in 2002 and 2007 there were reviews of the
competition provisions of the then Trade Practices Act 1974. These
reviews considered the rights and remedies available to small businesses,
including LPOs. The Department concluded it:
...considers it appropriate that, in the case of dispute, LPOs
avail themselves of the protections of the CCA and the opportunities for
redress and resolution afforded by the Franchising Code of Conduct.
Mr Fahour also commented that licensees had the choice of using either
the internal dispute resolution process or the process under the Franchising
Code of Conduct. However, he acknowledged that not all licensees may understand
that there was another option available:
I think we could do a better job of communicating the rights
and the process to ensure that our licensees understand that it is far broader
than that. And I think we have not done a very good job in communicating the
various options available, and we should do a better job on that.
The committee considers that licensees and franchisees require better
information on the dispute resolution processes available to them under the
Franchising Code of Conduct.
The committee recommends that Australia Post provide further
information to licensees and franchisees on the alternative dispute resolution
processes available under the Franchising Code of Conduct.
The Commonwealth Ombudsman submitted that it received a number of
complaints from licensees. These typically relate to the terms of the LPO
agreement and commercial arrangements; Australia Post's policies for mail
sorting and delivery; and the behaviour of Australia Post employees or
Generally, the Ombudsman exercises the discretion under the Ombudsman
Act 1976 to not investigate complaints about LPO agreements and commercial
practices. Licensees are advised to use the avenues for resolving disputes open
to them under LPO agreements, the Code, or through the courts. The Ombudsman
also commented that, depending on the issue raised, ACCC may also be relevant.
The Ombudsman noted that when complaints from licensees about Australia
Post are investigated, 'it is typically to resolve a lack of response or an
unclear response from Australia Post to the complainant's attempts to resolve
the matter, rather than license or commercial matters. We investigate such
matters under the Commonwealth jurisdiction.'
Effectiveness and adequacy of LPO representation
The committee received extensive evidence from licensees during the
inquiry about the effectiveness of the representation under the LPO Agreement by
POAAL. This ranged from support for POAAL's role to severe criticism of its
ability to effectively represent LPO interests, including during dispute
For example, one licensee was highly supportive of POAAL and commented:
POAAL is the recognised representative body for LPOs. It is
the only body with which Australia Post deals. In my experience POAAL
understands the details and complexity of Australia Post/LPO issues in a way
that the LPO Group does not, and they deal with Australia Post in a
professional manner – assertive and even adversarial when necessary, but not in
During a number of estimates hearings, Australia Post also commented on
its working relationship with POAAL. For example, at the October 2011
Supplementary Estimates, Mr Fahour praised POAAL, along with the CEPU and
Australia Post staff, for their contribution to the results gained by Australia
At the May 2013 Budget Estimates, Mr Fahour commented on the successful
conclusion, after 18 months of negotiation, of agreement on the additional
payment of 22c scanning fee.
Other matters noted by Australia Post which had been concluded following
discussion between Australia Post and POAAL included:
the introduction of new scanning technology at no cost to licensees;
an increase in minimum payment allowance; and
a number of operational changes such as by-pass arrangements,
subsidised equipment and improved carding arrangements.
At the May 2014 Budget Estimates, Mr Fahour noted:
I am saying I believe, from looking at the track record that
I have seen, that we have actually been very good at discussions and dialogue
Australia Post also commented that it considered that POAAL represented
the views of licensees:
Australia Post is satisfied that POAAL represents the views
of licensees with consideration to the nature of the issues they represent on
behalf of licensee to Australia Post and Australia Post's engagement directly
with licensees who are POAAL members at various POAAL hosted events throughout each
During evidence to the committee, POAAL also outlined its efforts on
behalf of licensees in relation to matters such as parcels, product margins,
competitive practices by Australia Post and failure to negotiate in good faith.
In relation to competitive practices, POAAL commented that it had sought
assistance from politicians, the ACCC and the franchising inquiries to resolve
the issue, to no avail.
However, Mr Kerr concluded:
We send out to licensees a list of our achievements, things
that I know with great certainty that we have achieved. We might not have had
traction on a couple of matters...but we have done an awful lot for licensees.
However, many other submitters commented on POAAL's role in negative
terms. These ranged from general criticisms, including the confidential nature
of POAAL's agreement with Australia Post, to specific instances where licensees
had unsuccessfully sought assistance from POAAL to help address an issue with
In addition, a number of licensees raised with the committee matters
concerning the operational effectiveness of POAAL, including that:
annual reports and financial statement were not received;
membership renewals were not received or not acknowledged or
returned to the sender;
membership was refused; and
no response to correspondence was received.
POAAL responded to a number of these issues. Mr Kerr indicated that
while annual reports were not provided on POAAL's website, a hardcopy was
posted to each member each year.
In relation to the refusal of membership to POAAL, Mr Kerr commented
that 'the board [of POAAL] was unaware of any applications for membership being
refused in recent years'.
However, Mr Kerr had earlier stated:
If a licensee were a member of an alternative association and
indicated that they were an office holder of that association, we probably
would not even bother offering them a membership in the first place.
Mr Kerr clarified this comment by stating that should an
office holder of another association seek membership, the matter would be
provided to the POAAL board for its consideration.
Following its March hearing with POAAL, the committee requested
additional information from POAAL including information on its financial
position. In particular, the committee sought clarification of a significant
discrepancy of some $400,000 in the POAAL 2012–13 financial statements.
POAAL responded that:
Following enquiries, we have ascertained that the dash that
appears in Note 7 is an error that occurred during print production. In
short, it is and inadvertent printing error. Instead of a dash, the amount of
$393,870 should have been included in accordance with the notes. This amount of
$393,870 is include in Note 16 of the same printed notes and is included
in the amount of $1,831,727 in the printed financial statement. The notes to
the financial statements show the figure in both Notes 7 and 16. The dash is a
mistake made by the printers and the correct amount is disclosed in Note 16 of
the printed Notes.
The committee, on four occasions, sought additional comments and
information from POAAL including further clarification of its 2012–13 financial
statements. Finally, in September POAAL provided a statement from its auditors
clarifying the matter.
The position of POAAL in relation to the delivery of postal services in
Australia is unique: it is specifically named in the LPO Agreement in relation
to consultative arrangements related to fees, commissions and discounts; and
the variation of the agreement. It is thus a key player in negotiations of
matters that go to the viability of LPOs. POAAL also advocates on behalf of LPO
with the Minister for Communications and politicians generally in relation to
In addition, POAAL is included at Stages 2, 3 and 4 of Australia Post's
dispute resolution process. Again, this is a very significant role in terms of
ensuring the effective functioning of the LPO network.
The committee acknowledges changes that have been made which have
benefited licensees. Both Australia Post and POAAL commented that these have
arisen directly from the work of POAAL. The committee also acknowledges that
POAAL expressed a degree of frustration with the lack of progress in relation
to a number of matters that are having a significant adverse impact on
licensees particularly elements of Australia Post's competitive practices.
Evidence of slow progress, or lack of progress, in negotiating matters
is of great concern to the committee and appears to be at odds with Australia
Post's acknowledgment of the importance of the LPO network. For example, it
seems extraordinary to the committee that it would take 18 months to
negotiate the introduction of the 22c scanning fee for parcels at a time when
the increasing number of parcels being processed was a serious concern to
licensees. Of deeper concern is the evidence from POAAL of the lack of good
faith negotiation by Australia Post in relation to certain matters.
It appears to the committee that these matters point to either a
significant power imbalance in the relationship between Australia Post and
POAAL which places POAAL at a disadvantage; or, the lack of effectiveness of
POAAL as the main advocacy body for licensees. Adding complexity to these
matters is the lack of transparency in the relationship between POAAL and
Australia Post. This is evidenced by the confidential nature of the
consultative agreement between POAAL and Australia Post. Given that POAAL is
acting on behalf of the members who provide it with its funding, the committee
can see no reason why such an agreement would remain confidential from its
members. Indeed, the perception of secrecy by POAAL in its dealings with
Australia Post can only serve to undermine its position.
While the committee considers that POAAL appears to have a somewhat
difficult negotiating position, there are other matters which raise questions
in the committee's mind as to its competence. The committee notes that, in some
instances, the evidence provided by POAAL was less than satisfactory. Mr Kerr,
CEO of POAAL, appeared to lack an in depth knowledge of POAAL's membership, the
structure of its subsidiary company, POAAL Services Ltd, and was less than helpful
to the committee in relation to some matters it wished to pursue. In its
dealings with licensees, POAAL also showed a lack of sound administrative
practices. For example, the committee received evidence that letters addressed
to POAAL at its post office box were returned to the sender as they had
remained uncollected. Indeed, one of the committee's letters sent to POAAL
suffered this fate.
The committee also sought information in relation to POAAL's financial
statements. The committee considered that this information was important to its
inquiry as POAAL represents LPOs not only in direct negotiations with Australia
Post but also during meetings with the responsible Minister.
In relation to the information sought by the committee, POAAL had four
opportunities to provide the information the committee requested following the
March 2014 hearing. While the committee eventually received a response in
relation to POAAL's 2012–13 financial statements, no other information was
forthcoming. The considered the use of its powers to call for documents and
persons. Ultimately, the committee agreed not to use these powers as it
considered that it already had sufficient evidence that called into question
the effectiveness of POAAL as an organisation advocating on behalf of
The committee's view on the adequacy of POAAL's representation of
licensees was also informed by evidence from licensees and their assessment of
POAAL. Many submitters pointed to the positive outcomes that POAAL has achieved
for licensees while others were damning in their assessment of POAAL.
The committee notes that the LPO Group has emerged as a second
organisation seeking to represent licensee views to Australia Post and the
Government. Some licensees indicated that they had joined the LPO Group as a
result of the dissatisfaction they felt with POAAL's representation of licensee
The committee notes that membership of the LPO Group is expanding. As a
consequence, the committee therefore considers that Australia Post must
recognise this new group in its negotiation of licensee matters.
Recognition of other groups by
POAAL had, for many years, been the only representative body with which
Australia Post would enter into consultations. However, by the commencement of
the committee's inquiry a second body, the LPO Group, had formed to represent a
number of licensees. As at March 2014, the LPO Group had approximately 700
Australia Post has recognised the establishment of the LPO Group and at
the committee's December hearing Mr Fahour stated:
We do not have an exclusive relationship with POAAL. It is
not exclusive. They are a very important partner in representing many licensed
post offices. We have had a very fruitful relationship. But the reality is we
have also agreed that we will deal with any individual post office or a
collection of them. We have agreed that LPO [Group] represent a number of
legitimate licensed post offices and they should have a voice. We are very
happy to engage.
Mr Fahour informed the committee in March 2014 that a documented 'professional
process' had been established to discuss issues with other licensees.
While Australia Post has a formal agreement with both the LPO Group and POAAL,
Mr Fahour described them as 'different types of agreements. In a sense, we have
formalised and recognised LPOG. We are having conversations that recognise that
they are an important stakeholder in the licensed post office community.'
At the May 2014 Budget Estimates, Mr Fahour reiterated Australia Post's
engagement with other groups, including the LPO Group:
Where we have had to face into the current reality is that
there are other interest groups who are either a single post office or a
culmination under different groupings, we have had to improve the quality of
dialogue with them too. We are happy to say that we have improved a lot since
that Senate inquiry.
Mr Fahour added:
As you know, one of the positives that came out of the Senate
inquiry is that we have agreed on an extended level of understanding for consultation
and dialogue to include the LPO Group, and we have exchanged letters on that
The LPO Group stated its desire to engage with Australia Post to
identify solutions to ensure the long-term viability of the LPO network. Mr
Andrew Hirst, Vice Chair, LPO Group, stated:
All the LPO Group are interested in is dealing with Australia
Post in good faith, including bringing to the table the collective wisdom and
experience of its members to solve the common problem: how to make the network
financially viable in everyone's interest.
At the committee's March hearing with the LPO Group, it was indicated
that a consultative agreement had been signed. The agreement included a
'good-faith' negotiation clause at the instigation of the LPO Group.
The LPO Group indicated that it had expectations that a consultative agreement
entered into with Australia Post would allow for a consultative process between
the LPO Group and Australia Post. However, the LPO Group stated that:
The reality is that some Australia Post junior executives,
without decision making authority, agree to meet with LPOG representatives in
order for fruitless discussion to be held. The LPOG has been advised that
Australia Post do not agree to negotiate or consult with LPOG, but will
continue to agree to meetings. This appears to be nothing short of a token
gesture to satisfy the need to be seen to address the need to consult with the
The LPO Group stated that it had prepared a list of issues of major
concern to licensees for Australia Post and presented several submissions.
However, rather than the expected meaningful discussion, the LPO Group
submitted that it had been advised by Australia Post that there will be no such
discussions with it and that most correspondence from the LPO Group to
Australia Post remains unanswered. In addition, all its submissions except that
on the Dispute Resolution Process have been dismissed out of hand or ignored or
denied. The LPO Group went on to state that it has had no further communication
from Australia Post in regard to the only agenda item that was agreed to be
reviewed in March 2014.
The committee was pleased when Australia Post indicated that it was
consulting with the LPO Group in relation to licensee matters. However, the LPO
Group expressed its concern that its consultations with Australia Post were not
The committee is disappointed that the LPO Group feels that it has been
unable to engage with Australia Post in any meaningful way. The LPO Group is expanding
and now represents a considerable number of licensees. No doubt, other groups
will emerge in the future. In these circumstances, it would be expected that
Australia Post would also consult with all these groups.
Indeed, the committee was led to believe that Australia Post was
committed to consulting effectively with other groups, including the LPO Group,
rather than just agreeing 'on an extended level of understanding for
consultation and dialogue'.
The committee understands that the LPO Agreement definition of
'Association' is limited to POAAL unless the consultative agreement with POAAL
is terminated. The committee notes that in recent correspondence to a licensee
Australia Post stated:
Australia Post has in place various arrangements for consulting
with licensees and their representatives. In more recent times these
arrangements have been extended to include meeting with representatives of the
Licensed Post Office Group (LPOG).
Notwithstanding any other arrangements that may exist the LPO
Agreement has specific requirements for consultation relating to the review of
LPO payments As provided at clause 9.b of the Agreement, Australia Post is
required to consult with the Association on the review of payments. The LPO
Agreement defines the Association as POAAL.
The committee considers that as the LPO Group is now a major
representative body, the LPO Agreement should be amended to recognise the
representation of licensees by other groups.
The committee recommends that the definition of 'Association' in the LPO
Agreement be amended to include, in addition to POAAL, other licensee
representative groups including but not limited to the LPO Group.
Australia Post is facing considerable challenges in the face of declining
mail volumes and digital substitution. The LPO network is also feeling the
effects of these challenges. In order to find a way ahead, and a long-term
solution to viability concerns, all parties must work together. This includes
Australia Post engaging in meaningful consultations with all stakeholders,
including the LPO Group.
Direct consultation with Australia
Post by licensees
Australia Post noted that day-to-day interactions between it and LPOs
occur through dedicated network managers, giving licensees a contact point
within Australia Post to raise issues or opportunities. LPOs can use this
mechanism 'to represent opportunities and issues directly to Australia Post'.
The committee received much evidence from licensees which pointed to difficulties
in having issues resolved and the attitude of some Australia Post employees to
the LPO network.
Licensees did not consider that Australia Post saw them as partners in
the postal network. For example, one licensee stated:
Licensees need to be recognised as important cogs in the Post
machine, we need to be treated with respect and as equal partners.
From over 40 years of working in the postal industry I have
seen at firsthand how Australia Post treats Licensees. When I was employed in
the Government section of Australia Post many of the staff referred to postal
agents (pre Licensee) and now Licensees in derogatory and disparaging remarks.
It was and still is, "us versus them" mentality. Many
line managers of Post think we are inferior and treat us as second class
personnel of the Postal industry.
This culture needs to be addressed as a matter of urgency. We
should be valued members of a big team, yet Post does not recognise us and is
quite dismissive of us.
Mr Kerr, POAAL, was also of the view that 'there are people within
corporate Australia Post who do not understand the value of the LPO network and
how they can contribute and how licensees can contribute to the success of
Other comments received by the committee from licensees included that
they felt intimidated, dismissed and are not treated with respect.
In addition, there were concerns about the lack of negotiation on items
which the LPO Agreement allowed for negotiations. For example, the LPO
Agreement allows for negotiation of the fee where more than 25 carded articles
are received per week. However, POAAL stated that 'it is greatly disappointing
that Australia Post has failed to negotiate increases in this payment in good
faith with Licensees'.
Mr Kerr commented that POAAL had 'approached Australia Post on numerous
occasions to point out that the existing payment structure is a negotiated
payment and that Australia Post must negotiate with licensees'.
Mr Kerr went on to comment that if a licensee lodged an LPO11 and
commenced Stage 2 of the dispute resolution process, there was usually a
satisfactory outcome for the licensee. However, as previously noted, very few
LPO11s are lodged.
Although the committee received some submissions which indicated success
in negotiating with Australia Post over the carded article fee, many other
licensees commented that they had been unsuccessful. Other submitters reported instances
of licensees seeking to negotiate on this matter with no result.
Mr Fahour responded to comments concerning negotiations on payments and
We act in good faith. When you sit down and
negotiate—negotiation does not mean they ask and I give whatever anybody wants.
Negotiation means we have a dialogue; we have a discussion; we have a debate;
we look at the facts; we look at what we can afford. I have just said that we
are about to lose money and we are becoming financially unviable. There are
some things that they will get and there are some things that they will not
The committee acknowledges that not all representations from licensees
can be met by Australia Post: Australia Post has its own sustainability to
consider as well as the wider postal network. However, the committee was
concerned by the number of submissions from licensees which pointed to some
very difficult relationships between Australia Post employees and licensees
including comments about bullying and harassment.
It appears to the committee that often these difficulties arise when
licensees choose to exercise their rights under the LPO Agreement to negotiate
over issues with Australia Post. The committee also notes the evidence from
POAAL that if the licensee lodged an LPO11 form, there was often a successful
outcome for the licensee. However, very few LPO11s are lodged and it appears to
the committee that many licensees, rather than exercise their rights to
negotiate under the LPO Agreement, cease to continue to pursue the issue.
The committee was also disturbed by the evidence of lack of good faith
negotiating, in some instances, by Australia Post and the attitude of some
Australia Post employees to licensees. The committee has not pursued particular
cases – it is not the committee's role to do so. However, there was evidence of
inflexibility by managers, competitive practices undertaken by some Australia
Post employees and a lack of understanding of the value of the LPO network.
While the committee concedes that the Australia Post executive has been
at pains to acknowledge the important role of LPOs within the postal network,
it appears that an attitudinal shift may be beneficial in some areas of
Australia Post corporate offices.
Navigation: Previous Page | Contents | Next Page