Royal Mail admits breaking competition law

Royal Mail and a reseller of its business parcel delivery services – the SaleGroup, which trades as Despatch Bay – have admitted being part of an illegal anti-competitive agreement.

In May 2018, Royal Mail reported to the Competition and Markets Authority (CMA) that its ParcelForce division had an agreement with one of its resellers – Despatch Bay – that meant neither company would offer parcel delivery services to each other’s business customers.

The CMA handed the matter over to Ofcom, as the regulator for postal services, and Ofcom has investigated the two companies’ agreement.

OfCom says: “We have provisionally found that the agreement broke competition law because it aimed to restrict competition by sharing customers.”

The SaleGroup, trading as Despatch Bay, is an online reseller of parcel delivery services. It arranges deliveries for small and medium-sized business customers by sourcing multiple parcel operators, rather than carrying out deliveries itself. The company also offers its customers a single point of contact for administrative services such as billing and invoicing.

Ofcom gathered correspondence between Royal Mail and the SaleGroup, relating to at least 90 customers, which demonstrated that the two companies implemented, monitored and enforced an agreement to share customers, lasting from August 2013 to May 2018. The evidence shows this applied both to direct and indirect customers.

The two companies enforced the agreement through regular email correspondence, with one usually asking the other to withdraw a quote provided to certain customers. Some of these offers had undercut the price a customer was paying at the time. So when the quotes were withdrawn, this prevented customers from paying lower prices for the same parcel delivery services.

The SaleGroup also shared its customer list with ParcelForce, with the aim of making sure each company could avoid offering services to the other’s customers.

Gaucho Rasmussen, Ofcom’s Director of Investigations and Enforcement, said: “Anti-competitive agreements like the one between Royal Mail and the SaleGroup are designed to restrict competition, and they often lead to customers paying higher prices as a result.

“This kind of behaviour is a serious breach of competition law and unacceptable.”

Financial penalty

Under the CMA’s leniency policy, the first company involved in certain types of anti-competitive agreement to come forward about it may receive immunity from fines, so long as the conduct is not already being investigated.

Royal Mail has been granted immunity under this policy, which means it will not be fined, provided it continues to cooperate fully with Ofcom’s investigation.

The SaleGroup has accepted a fine of £40,000. This is a significant fine for the SaleGroup, given the small size of the company.

Next steps

Ofcom has issued its provisional decision to Royal Mail and the SaleGroup. Both companies have admitted to breaking competition law, and the SaleGroup has agreed to settle the case. We aim to issue and publish our final decision shortly.