Ofcom, the UK’s communications regulator, has fined Royal Mail £50m (US$64m) for what it describes as a “serious breach of competition law,” after the post abused its position by discriminating against the only major competitor delivering letters.
The penalty is the result of an investigation into a complaint, made to Ofcom by Whistl (one of Royal Mail’s wholesale customers). The complaint was about changes Royal Mail made to its wholesale customers’ contracts in early 2014, including wholesale price increases it was introducing.
At the time, Whistl was expanding its business to compete directly with Royal Mail by delivering business letters (bulk mail) to addresses in certain parts of the UK – becoming the first company to challenge Royal Mail’s monopoly in the large-scale delivery of bulk mail.
The 2014 wholesale price increases meant that any of Royal Mail’s wholesale customers seeking to compete with it by delivering letters in some parts of the country, as Whistl was, would have to pay higher prices in the remaining areas – where it used Royal Mail for delivery. Following notification of these new prices, Whistl suspended plans to extend delivery services to new areas.
Jonathan Oxley, competition group director, Ofcom, said, “Royal Mail broke the law by abusing its dominant position in bulk mail delivery. All companies must play by the rules. Royal Mail’s behavior was unacceptable, and it denied postal users the potential benefits that come from effective competition.”
Today (August 14), Royal Mail responded by saying that it would appeal the decision as the 2014 price change was never implemented or paid, and had been “robustly stress tested by Royal Mail under competition law and the relevant regulatory framework”.
Royal Mail said in a statement poste to its website: “Royal Mail is very disappointed by Ofcom’s decision to impose a fine of £50m (US$64m). Royal Mail strongly refutes any suggestion that it has acted in breach of the Competition Act, and considers that the decision is without merit and fundamentally flawed. The company will now lodge an appeal with the Competition Appeal Tribunal within the next two months. No fine is payable until the appeals process is exhausted.”