Royal Mail fined record £50m by Ofcom

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Ofcom has fined Royal Mail £50 million for a serious breach of competition law. The regulator ruled that 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 and then known as TNT). 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.

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.
– Jonathan Oxley, competition director, Ofcom

Needless to say, Royal Mail has criticised the ruling and said it will be appealing the decision and fully expects it to be overturned. Whistl has welcomed the decision and says it believes that Royal Mail is not only liable for the fine but should also be paying them damages for the business lost. However, no such damages could be considered or payable until the appeals process has been exhausted. And that could take many months, even years.

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