Royal Mail ‘broke competition law’ says OfcomComments Off on Royal Mail ‘broke competition law’ says Ofcom
Shares in Royal Mail fell by almost 3% to 489p today Ofcom issued a strongly-worded statement following an enquiry ignited by a complaint by rival Whistl, with which Royal Mail has a fractious relationship.
Ofcom said that when Royal Mail set access prices for bulk mail delivery services the cost of servicing rural areas was much greater than the cost of serving urban areas.
This meant that in practice “higher access prices be charged to access customers that competed with Royal Mail in delivery than to those access customers that did not”.
Ofcom’s statement alleges that these higher access prices would be a “strong disincentive” to new entrants to come into the market, while also making it tougher for existing postal operators to compete with Royal Mail.
Ofcom said this could lead to a potential “distortion of competition against the interests of consumers”.
The provisional Ofcom findings follow a complaint by rival postal operator Whistl, formerly TNT, which was made in February 2014 after Royal Mail announced proposed charges in January 2014.
Although the proposed charges were suspended and were never actually implemented, Ofcom argues that even publication of the proposals amounted to a breach of competition law.
Whistl, which began delivering mail to homes in London in 2012 and in Manchester and Liverpool in 2013, wanted to expand into 42% of addresses in the UK.
However, in May this year it dramatically pulled out of the end-to-end delivery market for mail entirely.
Retreat: A Whistl postie (Picture: PA)
Royal Mail said it would respond “robustly” to Ofcom in the next few months.
The postal group 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.”
Ofcom also launched a fundamental review into how Royal Mail sets charges a month ago.