Our response to Ofcom

Royal Mail will appeal following a decision from Ofcom to impose a fine of £50 million on the company.

The infringement decision, taken under Ofcom’s competition law powers, relates to an Access price change Royal Mail announced in 2014. This price change was never implemented or paid. It was automatically suspended about four weeks after it was proposed, before it was due to enter into effect.

Royal Mail is very disappointed by Ofcom’s decision. We strongly refute any suggestion that we have acted in breach of the Competition Act. We will lodge an appeal with the Competition Appeal Tribunal within the next two months. No fine is payable until the appeals process is exhausted.

What has happened?

In 2012, TNT Post (now Whistl) announced it would roll out end-to-end letters delivery, without using Royal Mail’s network, to about 42% of UK addresses. It would serve urban areas covering just 8.5% of the UK’s land mass.

We welcome competition if it’s on a level playing field. But, this unfair ‘cherry-picking’, would leave Royal Mail to pick up the more expensive, rural deliveries.

In 2014, after careful consideration and following the available Ofcom guidance, Royal Mail announced it would introduce a price difference when Access customers committed to advance monthly volume forecasts. This would have enabled us to plan at a local level and be more cost effective.

Those who chose not to commit to the approach would not benefit from the price difference. Whistl complained to Ofcom when the price changes were announced. This resulted in the suspension of the announced changes after Ofcom opened its investigation. The price change never came into effect.

Why are we appealing Ofcom’s decision?

The relevant prices must be actually paid. And, the party paying such prices must be placed at a competitive disadvantage as a result. In this case, neither of these essential elements existed.

Ofcom’s claim that the notification of the price changes itself had an anti-competitive effect is fundamentally flawed. There is no case in which a mere notification has been found to be anti-competitive. There is no basis on which it can be unlawful to notify a lawful price.

We believe Ofcom’s decision is without merit and is fundamentally flawed.