Royal Mail has been rocked by a £50m fine – wiping out nearly a quarter of last year’s £212m pre-tax profits – after a long-running Ofcom investigation into a serious breach of competition law against arch-rival Whistl, which dates back over four years.
The investigation centred on whether Royal Mail abused a dominant position when it proposed to put up prices in January 2014, even though the rises were never implemented.
At the time, Whistl (then TNT Post) had launched its own end-to-end service but Ofcom found that Royal Mail price rises meant any of its wholesale customers seeking to compete with it would have to pay higher prices in the remaining areas where it used Royal Mail for delivery.
As a result, Whistl suspended plans to extend delivery services to new parts of the country and eventually ditched end-to-end deliveries altogether. Boss Nick Wells accused Royal Mail of trying to “strangle” the firm.
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.
In today’s announcement, Ofcom’s ruled that Royal Mail’s actions amounted to “anti-competitive discrimination against customers, such as Whistl, who sought to deliver bulk mail”.
Royal Mail plans to appeal against the fine, which comes at a difficult time for the company. Last month, it revealed that direct mail volumes have fallen by 6% in the previous three months due to nervousness around GDPR.
The move sparked senior figures in the marketing industry to urge clients to wake up to the power of direct mail.
Industry mounts fightback over GDPR direct mail jitters
Royal Mail gets all-clear but awaits fate in Whistl ruling
Royal Mail flayed for price hike plan
Whistl axe triggers Ofcom probe
Wells: Royal Mail put squeeze on us
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