Ofcom has fined Royal Mail £50,000,000 for a serious breach of competition law, after the company abused its dominant position by discriminating against its only major competitor delivering letters.
The penalty is the result of an investigation into a complaint, made to Ofcom by Whistl (one of Royal Mail’s wholesale customers). The complaint was about changes Royal Mail made to its wholesale customers' contracts in early 2014, including wholesale price increases it was introducing.
At the time, Whistl was expanding its business to compete directly with Royal Mail by delivering business letters (known as ‘bulk mail’) to addresses in certain parts of the UK – becoming the first company to challenge Royal Mail’s monopoly in the large-scale delivery of bulk mail.
The 2014 wholesale price increases meant that any of Royal Mail’s wholesale customers seeking to compete with it by delivering letters in some parts of the country, as Whistl was, would have to pay higher prices in the remaining areas – where it used Royal Mail for delivery.
Following notification of these new prices, Whistl suspended plans to extend delivery services to new areas.
Ofcom’s investigation has found Royal Mail’s actions amounted to anti-competitive discrimination against customers, such as Whistl, who sought to deliver bulk mail.
Jonathan Oxley, Ofcom’s Competition Group Director, said: “Royal Mail broke the law by abusing its dominant position in bulk mail delivery.
“All companies must play by the rules. Royal Mail’s behaviour was unacceptable, and it denied postal users the potential benefits that come from effective competition.”
In January 2014, Royal Mail issued contractual notices to change its wholesale prices for other postal operators to access its delivery network and these services, known as ‘access mail’, are worth £1.5bn to Royal Mail each year.