Royal Mail could be hit with a fine of up to 10% of its “relevant turnover” if an investigation into final mile pricing finds it has breached competition law.
Ofcom, which last week concluded that competition from rivals is not a threat to Royal Mail’s ability to provide a universal delivery service, announced it would be looking into whether proposed increases in the amount the recently privatised company charges rivals for final mile deliveries was unlawful under the Competition Act.
Royal Mail suspended proposed price increases for final mile deliveries ahead of their April 2014 start date after a complaint to Ofcom by Whistl (then TNT Post) earlier this year.
The regulator has since stated it is concerned the proposed price increases “could have adversely affected operators who also compete with Royal Mail in delivery services”.
If Royal Mail is found to have breached the Competition Act, Ofcom has the power to impose a fine of up to 10% of relevant turnover.
According to the MT Top 100, Royal Mail’s UK Parcels, International and Letters business had a turnover of £7.7bn last year.
Separately, Ofcom has also launched a consultation to explore alternative final mile pricing, such as pricing variation based on the geographical area the delivery is being made in.
In a statement, Royal Mail said it was “disappointed that Ofcom does not share the company’s view on the threat that unfettered direct delivery poses to the future sustainability of the universal service”.
It said it would provide a “detailed response” to the consultation, planning to highlight the benefits of flexibility in setting its own zonal prices for final mile delivery.
A spokesman for competitor Whistl did not comment on the investigation, but said: “Following the announcement of Ofcom’s consultation, which is detailed and complex, we will review the details in conjunction with our stakeholders.
“The day-to-day business of Whistl continues and the management team and colleagues’ hard work and dedication to our customers will continue as usual.”
