Ofcom has given Royal Mail the green light to “keep calm and carry on” by insisting the rules and safeguards the regulator introduced in 2012 are “generally working well for [those] who use the post”, despite an ongoing investigation into whether it breached competition law.
This full-scale review of Royal Mail’s operation was launched in 2015, following Whistl’s withdrawal from fine mile [end-to-end] deliveries. It has concluded with the regulator retaining the current framework for postal regulation – which had been due to expire in 2019 – until 2022.
However, a separate investigation is looking into whether Royal Mail abused a dominant position when it proposed to put up access prices in November 2013 and January 2014, following a complaint by Whistl. In July 2015, Ofcom released a strongly worded statement alleging Royal Mail had broken competition law by discriminating against rivals by trying to bring in the new charges – even though the plans were dropped within a fortnight. If found guilty, the firm could face a huge financial penalty.
At the time, Whistl boss Nick Wells told The Sunday Times: “We have a fairly complex relationship with Royal Mail. We compete with them but we are also their biggest customer. What I didn’t like was their behaviour to try to strangle us on end-to-end.”
Even so, Ofcom has decided not to impose new controls on Royal Mail’s wholesale or retail prices, as it says the company already has strong commercial incentives to improve its efficiency.
It also found “strong competition” in the ‘access’ market for large senders of letters. Some 58% of all letters in the UK are delivered this way. “We have decided to tighten some of the rules in this area,” said Ofcom, “This will stop Royal Mail being able to give shorter notice periods for changes in its contractual agreements with access operators.”
Jonathan Oxley, Ofcom competition director, said: “We know people value the universal postal service and we will continue to ensure that it remains effective. Our review has shown that current rules are generally working well for companies and households.
“Royal Mail still has room to improve. So we’ll keep a very close eye on all aspects of the company’s performance, and step in if we need to protect consumers from high prices.”
Focusing on Royal Mail’s role in the parcels sector, Ofcom said: “Competition in the parcels sector has intensified in recent years with the emergence of several rival postal operators, particularly for heavier parcels (above 2kg) and those requiring fast delivery. This has delivered significant benefits to consumers through innovation, choice and value for money.
“But despite increasing competition, Royal Mail retains an advantage in the delivery of small, individual parcels. So Ofcom has decided to keep the safeguard cap on Second Class parcel prices in place, to protect consumers from high prices.”
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