Postal regulator threatens action if UK Royal Mail resists changes
The postal regulator has threatened disciplinary action against Royal Mail, including the forced break-up of the group, if it uses anti-competitive practices to resist liberalisation in the market.
Royal Mail’s 300-year-old monopoly on delivering letters ended this year when private sector rivals including UK Mail, TNT Mail and Deutsche Post launched services for business customers. The postal market is due to be fully liberalised by 2006.
Speaking at a mail conference in London, Nigel Stapleton, chairman of Postcomm, said the aim of liberalisation was to deliver better value and more innovative services to customers.
He warned that in the past other monopoly providers in the process of deregulation “have indulged in anti-competitive practices, often by accident rather than by design, such as predatory pricing or discrimination between customers”.
Mr Stapleton said that so far there had been only one case of alleged anti-competitive behaviour at Royal Mail, when it was accused last year of offering preferential rates to certain business customers, although no action was taken. But the regulator would watch out for any abuses at Royal Mail, and act quickly to punish them.
“We have a number of tactical weapons with which to rebut anti-competitive practices,” said Mr Stapleton. “The nuclear option would be aseparation of Royal Mail’s business into upstream and downstream activities.”
Postwatch, the consumer body, already thinks that a separation of Royal Mail’s delivery business from its sales and marketing functions would encourage greater competition in the postal market.
Mr Stapleton also said the government should tackle the issue of Royal Mail’s exemption from value added tax in order to create a level playing field for other postal companies.
At the moment private sector groups have to charge their customers 17.5 per cent VAT while Royal Mail does not, making it easier for the state-owned group to offer lower prices. Any change would have to be made by the Treasury, which was unlikely to happen before the general election, he said.
At the same conference, Gerry Sutcliffe, postal services minister, said the cost of stamps might have to rise to preserve Royal Mail’s ability to deliver to all parts of the country for the same price.
Mr Sutcliffe said: “Clearly there is a need for a commercial rate that meets the cost of the services provided, this is a difficult question that we will have to face.”
In the past Royal Mail has said that it loses money on domestic post and subsidises the stamp price with higher rates for business customers.
