Royal Mail Fined a Record £50 million for Anti-Competitive Practices


Today’s post responds to the news today that a long-running 5-year saga has finally come to an end with the Competition Appeal Tribunal has dismissed the Royal Mail’s challenge to a £50m Ofcom fine for abusing its position. In this post we will review the origins of the fine and the legal developments of the case, up to today’s ruling.

In August 2018, the British communications regulator Ofcom announced that it was fining Royal Mail a record £50 million for practices that it undertook to squash the competition being offered by Whistl. Whistl is a delivery management company and was aiming to break into the wholesale mail delivery market in the UK. Whistl had alleged that Royal Mail, in its position as the market leader, had altered its pricing for firms who act as a go-between between businesses and the Royal Mail. Crucially, the Royal Mail had proposed a different set of charges for companies that also wanted to deliver the mail themselves, as well as act as the go-between. Whistl complained that this practice was discriminatory and, as such, ended plans to implement an expanded delivery network. Ofcom subsequently agreed and declared that the practices did account to ‘unlawful price discrimination’. After investigation, Ofcom found that Royal Mail had increased its prices for competitors ‘that did not reach volume targets for the whole of the UK’. The effect of this was to penalise any company who had its own delivery workers in certain parts of the country, and this included Whistl primarily. This process is a lucrative one for Royal Mail, with The Guardian suggesting that it is a £1.5 billion a year process (of delivering ‘access mail’ that is collected by other companies) but that with the proposed price changes, would have led to Whistl paying 0.25p per letter more than anybody else.

In fining the company, Ofcom’s competition director stated that ‘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’. The record fine was based upon these practices, but also that documentary analysis revealed that the price changes were part of a purposeful strategy to restrict the growth of competitors, namely Whistl. Royal Mail responded to the initial fine by saying that the decision was ‘without merit and fundamentally flawed’, primarily because the price change was never actually implemented, only proposed. They stated that there would be an appeal, and that appeal was concluded today. Upon hearing that the appeal had been dismissed, an Ofcom spokesperson stated ‘Royal Mail had a special responsibility to ensure its behaviour was not anti-competitive… we hope our fine, which has been upheld in full by the Tribunal, will ensure that Royal Mail and other powerful companies take their legal duties very seriously’.

Though £50 million will not bring Royal Mail to its knees, it is statement of intent from the regulator. In many monopolies, the regulator will pay lip service to the concept of competition, so as to protect the underlying monopoly from criticism and action. However, the actions of Royal Mail, in this instance, were seen to be overly punitive and reflective of their position, which is probably the starting point of what has become the largest fine for the regulator. It will be interesting to see how Royal Mail moves forward in its position as the market leader, both in light of this fine but also the fact that their commitments to its ‘universal service’, as dictated by its privatisation, will come to an end in 2021. The company is a private company that still has obvious ties to the public sector, but the more the company moves away from that, the more it will be inclined to act in its own interest. The company is currently engaging in further legal action in attempting to block strikes that are due for the General Election and Christmas, on the grounds that Union officials have been breaching their legal duties. It is becoming evident that the Royal Mail is slowly but surely morphing into an entirely new and different entity, one which regulators may need to pay particular attention to.

Keywords – Royal Mail, Post, Britain, Business, @finregmatters

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