Ofcom issues Statement of Objections to Royal Mail alleging abuse of dominance

28 Jul 2015

Ofcom has today issued a Statement of Objections to Royal Mail alleging that it abused its dominant position in the market in which it supplies letter delivery services to competing postal operators.

As the former monopoly supplier of letter post services in the UK, Royal Mail is obliged by regulatory conditions to offer rival postal operators access to its letter delivery network consisting of local delivery offices and postmen/women covering every address in the UK.  There are a number of rival operators that compete with Royal Mail by supplying bulk mail services to businesses sending large volumes of mail.  Such operators compete with Royal Mail in the ‘upstream’ market by collecting mail from their customers, sorting that mail, and transporting it to the localities where the end-recipients’ addresses are located.  However, they then rely on Royal Mail’s ‘downstream access’ service to deliver the mail to individual addresses.  Such competing operators hand over the mail to Royal Mail’s local delivery offices for delivery by Royal Mail postmen.

Ofcom’s investigation arises from a complaint made by rival operator Whistl (formerly known as TNT Post UK), which had planned to compete with Royal Mail in the downstream market and had already begun delivering to postcode areas in parts of London and other areas of the country, using its own uniformed posties.  Whistl remained reliant on Royal Mail’s downstream access for being able to deliver mail to other postcode areas.

In November 2013 and January 2014 Royal Mail announced certain changes to its prices and other terms and conditions on which it would offer its downstream access service.  Whistl considered that these changes were anti-competitive, being directed at responding to the threat of competition in letter delivery by making it unviable for Whistl, or any other postal operator in the upstream market, to compete with Royal Mail’s delivery network and offer customers ‘end-to-end’ letter delivery services.

The Statement of Objections sets out Ofcom’s provisional view that Royal Mail breached competition law by engaging in conduct that amounted to unlawful discrimination against postal operators competing with Royal Mail in letter delivery.  Specifically, the Statement of Objections alleges that the changes to Royal Mail’s wholesale prices for bulk mail delivery services contained a differential in pricing which meant that, in practice, higher access prices would be charged to access customers (i.e. rival operators) that competed with Royal Mail in delivery than to those access customers that did not.

Ofcom’s press release announcing the issue of the Statement of Objections (which has not yet been published) alleges that these higher access prices “would act as a strong disincentive against entry into the delivery market, further increasing barriers to expansion for postal operators seeking to compete with Royal Mail in this market, and leading to a potential distortion of competition against the interests of consumers”.

The Statement of Objections states the facts on which Ofcom relies; the objections it has raised; the actions it proposes to take; and its reasons for proposing to take those actions.  Royal Mail can now make representations to Ofcom, which Ofcom will consider before taking a final decision.

Monckton barrister Alan Bates is advising Whistl.