Licensed operators’ complain about Royal Mail’s zonal pricing for access

LICENSED OPERATORS’ COMPLAINT ABOUT ROYAL MAIL’S ZONAL PRICING
FOR DOWNSTREAM ACCESS
Complainants: Express Limited
TPG Post UK Limited
UK Mail Ltd
Full Investigation Started: 7 January 2005
ISSUE
Postcomm has received a complaint from Express Limited, TPG Post UK
Limited and UK Mail Ltd (“the Complainants”) about Royal Mail’s offer of
zonal pricing on direct access to its downstream facilities. The complaint
received is that the offer of zonal pricing on access contravenes one or
more of Royal Mail’s licence conditions.
BACKGROUND
On 10 February 2004, Royal Mail and UK Mail Ltd announced that they
had agreed commercial terms for downstream access to Royal Mail’s
network. On 7 April 2004 Royal Mail concluded a similar agreement with
TPG Post UK Limited.
A condition of both agreements was that mail must be presented to Royal
Mail with a geographic mix that reflected Royal Mail’s national mailing
profile. The agreements also required that mail must be presented at a
minimum number of access points each day (with access in some
postcode areas being mandatory). The reason for these conditions was
that the price charged for access by Royal Mail was set at a
geographically averaged level, ie, the price was the same for delivery
anywhere in the UK consistent with Royal Mail’s retail tariffs.
On 14 October 2004, Royal Mail agreed commercial terms for
downstream access with another party, which was not a licensed
operator. Unlike the agreement reached with UK Mail and TPG, the
access price was geographically de-averaged, ie, the price varied
depending on the customer mail profile (referred to as “zonal pricing”).
The agreement also contained other conditions that differed from the
agreement Royal Mail reached with UK Mail and TPG.
Preliminary Assessment
In line with Postcomm’s procedures, the complaint was first subject to a
preliminary assessment, the aims of which were to establish whether there
was a potential case to investigate, whether there was sufficient reason to
conduct a full investigation and whether, given the nature of any
evidence supporting the complaint, a Provisional Order should be made.
Comments were received from the Complainants and from Royal Mail.
Postcomm believes that there is a potential case to investigate and it has
sufficient reason to proceed to a full investigation, the scope of which is
set out below. Postcomm does not believe that, at this stage, it has
sufficient evidence to issue a Provisional Order.
Full Investigation
A full investigation will consider whether Royal Mail has contravened, or is
likely to contravene, one or more of its licence conditions. Depending on
the outcome of the investigation, Postcomm may take enforcement
action, and/or impose a financial penalty, and/or take other appropriate
action using the powers it has under the Postal Services Act 2000, or
decide that no action is required. At the end of the investigation,
Postcomm will publish its findings.
SCOPE OF THE FULL INVESTIGATION
Based on the allegations made by the Complainants, Postcomm’s
investigation will consider whether Royal Mail’s offer of zonal access prices
to non-licensed parties, and associated conduct, contravenes or is likely
to contravene Royal Mail’s licence obligations relating to the promotion
of effective competition.
The main focus of Postcomm’s investigation will be on whether:
• Royal Mail, or any other person, has obtained an unfair commercial
advantage through the provision of downstream access services
based on zonal prices or through the disclosure of information in
Royal Mail’s possession as a result of giving downstream access to
any licensed operator;
• The terms on which Royal Mail has access to its own facilities are
any more or any less favourable than the terms on which those
facilities are made available to other persons;
• The basis on which Royal Mail is supplying, or offering to supply,
zonal prices on downstream access services will result in any undue
preference to and/or any undue discrimination against and/or any
undue restriction on a person or class of persons;
• Royal Mail has properly complied with the requirement to notify and
publish details of any offer of a zonal access price.
Postcomm is investigating these allegations under Conditions 7, 9, 10, 11
and 13 of Royal Mail’s licence.