Royal Mail is facing a huge financial penalty after Ofcom released a strongly worded statement alleging it had broken competition law by discriminating against rivals by trying to bring in new charges – even though the plans were dropped within a fortnight.
The issue dates back to February last year, when Royal Mail announced changes to the prices, terms and conditions for bulk mail delivery (access) services – the amount of money it charges for final mile deliveries – which were due to come into force in that March.
Whistl rifled off a complaint immediately, alleging that the changes were anti-competitive, and Ofcom launched its inquiry. Within a fortnight Royal Mail had cancelled the price rises.
In a so-called Statement of Objections, which was issued this morning (July 28), Ofcom sets out its “provisional view” that Royal Mail “breached competition law by engaging in conduct that amounted to unlawful discrimination against postal operators competing with Royal Mail in delivery”.
“The Statement alleges that these higher access prices would act as a strong disincentive against entry into the delivery market, further increasing barriers to expansion for postal operators seeking to compete with Royal Mail in this market, and leading to a potential distortion of competition against the interests of consumers.”
Although the watchdog conceded that its statement “represents one stage in Ofcom’s investigation, and no assumption should be made at this stage that there has been a breach of competition law”, if found guilty Royal Mail could face stiff financial penalties.
Royal Mail has responded saying it will submit a “robust defence” of its position. In a statement it said: “Royal Mail takes its compliance obligations very seriously and is disappointed by Ofcom’s announcement. The company considers that the pricing changes proposed in 2014 were fully compliant with competition law.
“They were an important part of Royal Mail’s commercial response to both changing market conditions and to Ofcom’s statements in its March 2013 guidance document on end-to-end competition in the postal sector.
“The pricing proposals were never implemented and were withdrawn altogether in March 2015. Royal Mail has co-operated fully with Ofcom throughout its investigation to date and will continue to do so.”
The move comes as the regulator is already conducting another “fundamental” review of Royal Mail, which followed Whistl’s decision to pull out of the end-to-end delivery market. That will investigate both the firm’s pricing and market dominance to ensure rivals are not being squeezed out.
It followed claims by Whistl boss Nick Wells that Royal Mail was throttling his company out of the market.
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