Ofcom has ruled that in order to maintain competition in the parcels sector,  the cap on Royal Mail's second-class stamp parcel service must remain.

In its Review of the Regulation of Royal Mail, Ofcom said the post and parcel company “retains a strong position in single piece and light-weight bulk parcels”, and that maintaining the cap on second class stamp parcel prices would “ensure vulnerable consumers can access a basic universal service”.

Ofcom found introducing a tracked standard parcel service would give Royal Mail an “unfair advantage” since, unlike its competitors in the parcels market, Royal Mail’s products are exempt from VAT.

It added: “Royal Mail would therefore benefit from a price advantage for tracked parcels which could harm competition in the parcels sector.”

The regulator, however, decided not to impose price controls on Royal Mail’s postal services.

Whistl’s withdrawal as Royal Mail’s only competitor in door-to-door postal services had raised concerns that it would be left with a competitive advantage, but Ofcom ruled that the market conditions and shareholder discipline that Royal Mail is subject to as a privatised company would better secure “an efficient and financially sustainable universal postal service than the imposition of additional regulation".

Ofcom also reduced the advance notice period for specified collection times to one month and removed the advance notice period for latest delivery times with the aim of cutting regulations that “impose an undue burden on postal operators.”

Royal Mail said: "Royal Mail notes that Ofcom continues to find high levels of customer satisfaction and value for money with postal services. Ofcom has stated that there is strong competition in the access market. Ofcom has also recognised our progress on efficiency.

"We are disappointed that Ofcom does not agree with us that there is a pressing need for a pro-active framework to help sustain the universal service. We will continue to focus on delivering a high quality, value for money service for our customers across the UK."

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