Royal Mail fined £50m for breaking competition law

 

(qlmbusinessnews.com via telegraph.co.uk – – Tue, 14 Aug, 2018) London, Uk – –

Royal Mail has been fined £50m for breaking competition law after it “abused its dominant position” in the letter delivery market in an attempt to force its rival Whistl to pay higher prices.

The penalty, the largest ever imposed by communications regulator Ofcom, relates to a change in the contracts Royal Mail offered wholesale customers more than four years ago.

At the time Whistl, then known as TNT, was expanding its letters arm by delivering “bulk mail” such as bank statements and utility bills in competition with Royal Mail, but was still reliant on the former state monopoly to deliver some letters on less profitable routes.

Ofcom’s investigation found that Royal Mail’s decision to hike the cost charged to competitors such as Whistl by 0.25p per letter was part of a “deliberate strategy to limit competition”.

The changes “would have had a material impact on a delivery competitor's profits, making it significantly harder for new companies to enter the bulk mail delivery market”, the watchdog said.

Royal Mail, which floated five years ago, plans to appeal the decision, which it said was “without merit and fundamentally flawed”.

It said the proposed price hike, which was cancelled after Whistl raised concerns, was designed to prevent so-called “cherry picking”, whereby competitors without Royal Mail’s obligation to deliver to all UK addresses for the same price pick and choose the most profitable routes.

“Royal Mail welcomes competition, provided it takes place on a level playing field,” it said.

A spokesman for Whistl, which exited the bulk mail market in 2015, said it would seek damages in relation to Royal Mail's actions, which he said had a “hugely negative impact on investment in and the competitive health of the UK postal sector”.

Ofcom’s Jonathan Oxley said: “All companies must play by the rules. Royal Mail's behaviour was unacceptable, and it denied postal users the potential benefits that come from effective competition.”

By Jack Torrance