Ofcom accuses Royal Mail of anti-competitive behaviour

Simon Nias
Tuesday, December 2, 2014

Ofcom has accused Royal Mail of setting its access prices in such a way as to "discourage or even prevent competition in bulk mail delivery".

Ofcom has now launched a consultation on the rules governing the prices Royal Mail can charge downstream access providers, following a complaint from Whistl (formerly TNT Post UK) in response to changes to Royal Mail's access prices in April.

At the same time the regulator has dismissed Royal Mail's June complaint that competition from entrants to the end-to-end delivery market, of which Whistl is by far the largest, is a threat to its Universal Service Obligation (USO).

In a raft of documents published this morning, Ofcom concluded that "the universal postal service is not currently under threat" from competition in the end-to-end delivery market and that it would not therefore impose new regulations on Royal Mail's competitors.

However, in a reversal of the soft-touch approach it has taken to regulation since taking over from Postcomm in 2011, Ofcom criticised Royal Mail for potentially anti-competitive behaviour in setting its access prices.

"We do not consider that Royal Mail's ability to provide the universal service is under threat from end-to-end competition," the regulator said. "On the other hand, we provisionally consider that there is evidence of a real and current threat to competition [in bulk mail delivery]."

Ofcom appeared to accept that the existing Universal Service Provider Access (USPA) condition it imposed in 2012 was not working and admitted that it "may not promote efficiency [or] effective competition".

It noted a number of factors that were affecting competition, the main being that Royal Mail has changed its zonal access pricing to discourage competition in London and urban zones, where the likes of Whistl have launched rival services.

Ofcom cited changes to Royal Mail's access prices proposed in January 2014, in which it dramatically cut the cost of its zonal access pricing for large letters in London (from +10.9% of the uniform national access charge to -25%) and Urban (-12.9% to -25%) zones, while increasing it for Suburban (-0.6% to +10.4%) and Rural (+15% to +44.1%) zones.

Ofcom has now launched a consultation centred on the proposal that the ratio of zonal charges should equal the ratio of zonal costs. It has also begun a broader review of the factors affecting Royal Mail's ability to meet the USO, which will consider Royal Mail's efficiency and its parcel delivery performance, concluding next year.

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