Royal Mail’s joy at the withdrawal of Whistl from the end to end delivery market could be short-lived after regulator Ofcom said it has opened a “fundamental” review of both the firm’s pricing and market dominance to ensure rivals are not being squeezed out.
Following last week’s announcement that Whistl (formerly TNT Post) is pulling out of direct deliveries, Royal Mail no longer faces any national competition for this service.
Ofcom said the move represented “a significant change” in the market, and confirmed its review will look at whether Royal Mail’s prices are “both affordable and sufficient to cover the costs of the Universal Service”.
In what will be a small crumb of comfort for Whistl boss Nick Wells – who accused his rival of throttling his company out of the market – the review will also consider whether Royal Mail’s “commercial flexibility remains appropriate”, and whether wholesale or retail charge controls might be necessary.
Ofcom, which expects its review to be completed during 2016, will also weigh up its performance in the parcels market, and assess its potential to set wholesale prices in a way that may harm competition.
Royal Mail said it would participate “fully”, adding: “As the regulator notes, there is significant competition in the UK market in the mail and parcels segments.
“At the same time the letters segment is in structural decline of 4-6% a year. There is therefore a need for regulatory clarity and certainty for all market participants. It is essential that Royal Mail is able to sustain the UK’s valued, high quality, high fixed cost universal service for the benefit of all consumers and businesses.”
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