Royal Mail has been fined £50m by Ofcom for a “serious” breach of competition law, in which it abused its dominant market position and deliberately targeted final mile delivery competitor Whistl.
Whistl, then TNT Post, was trialling final mile operations in London and Manchester when Royal Mail announced a hike in its wholesale prices in January 2014.
Its universal service meant Whistl had no choice but to use Royal Mail for final mile deliveries of mail everywhere it wasn’t able to, and the proposed charge increase would have seen Whistl pay 0.25p more for every letter Royal Mail.
Whistl filed an official complaint to Ofcom in February 2014. Though it opted to halt its expansion of final mile operations after the proposed changes, and the operation collapsed just over a year later.
After Ofcom concluded today (14 August) that Royal Mail did breach competition law in 2014, its competition group director Jonathan Oxley 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.”
Ofcom said that a review of internal Royal Mail communications from the time proved that the suggested price changes “were part of a deliberate strategy to limit competition in delivery as a direct response to the threat of competition from Whistl”.
Responding to Ofcom’s decision Royal Mail highlighted that the price changes in question were never implemented, and insisted the move was meant to protect its universal service from other operators “cherry picking” the easier areas to deliver to.
A statement from the business said it was “”very disappointed” by the decision and that it intends to appeal it.
Royal Mail said it believed the decision will be overturned: “For an allegation of abusive price discrimination to be established, the law is very clear. The relevant prices must be actually paid. And, the party paying such prices must be placed at a competitive disadvantage as a result. In this case neither of these essential elements exist.”
A spokesperson for Whistl said it would not attempt to re-enter the final mile market, and added: “We have to review the Ofcom findings in detail and establish the level of damages we can seek from Royal Mail. Initial advice is that Royal Mail is potentially liable to pay compensation for the significant damage that was caused to Whistl’s business, in addition to the fine imposed by Ofcom.”
