The Competition Appeal Tribunal has today dismissed Royal Mail’s appeal against a finding by Ofcom that it abused its dominant position to exclude a competitor. The Tribunal’s judgment provides guidance as to the approach for deciding whether conduct is an abuse of dominance. In particular, the Tribunal considered the CJEU judgment in Intel and decided that it is not always necessary to carry out an ‘as efficient competitor’ test before finding pricing conduct to be abusive.
The Ofcom decision against which Royal Mail appealed was taken in August 2018. It concerned changes, notified by Royal Mail to its customers in January 2014, to its pricing scheme for delivering ‘access mail’, i.e. letters collected and sorted by its competitors but handed over to Royal Mail for delivery to final addresses.
The notification of the pricing changes occurred at a time when there was nascent competition in letter delivery from Whistl (then known as TNT Post). Whistl was rolling out its own letter delivery operation, in order to compete with Royal Mail in ‘end-to-end’ delivery. Since Whistl was rolling out letter delivery in only some areas of the UK, it would continue to need to rely on Royal Mail’s letter delivery service in relation to other areas. The pricing changes notified by Royal Mail included the charging of higher prices to customers of its letter delivery service whose ‘profile’, in terms of geographical distribution of mail across all areas of the UK, did not match Royal Mail’s own geographic mail distribution profile.
Whistl put its plans to roll out delivery operations on hold. It ultimately withdrew from end-to-end competition.
Ofcom decided that Royal Mail’s conduct was not competition on the merits, it was liable to impede competition, and thus constituted an abuse of dominance. Ofcom imposed on Royal Mail a fine of £50m.
Royal Mail, in its appeal, contended that the finding of abuse should not have been made, among other matters since Ofcom had not properly considered an ‘as efficient competitor’ test. In that regard, Royal Mail argued that pricing conduct by a dominant enterprise should not be found abusive unless the conduct is shown to be liable to have exclusionary effects on a competitor that is ‘as efficient’ as the dominant enterprise. Royal Mail also contended that its notification of its new pricing structure could not be abusive in circumstances where the pricing changes were suspended, meaning that the new prices were never actually charged or paid.
Whistl, whose complaint triggered the investigation, was permitted by the Tribunal to intervene in the appeal proceedings in support of Ofcom.
By its judgment today, the Tribunal has dismissed Royal Mail’s appeal. The Tribunal also upheld the amount of the fine: the highest fine ever imposed by Ofcom.
All parties to the proceedings – Royal Mail, Ofcom and Whistl – were represented by leading and junior counsel from Monckton Chambers.