Royal Mail agrees to tighten its internal procedures following Postcomm’s investigation into anti-competitive practices

Royal Mail has agreed to tighten its internal compliance procedures following an investigation by Postcomm into allegations that two of the company’s promotion schemes were anti-competitive.

The schemes were designed by Royal Mail to encourage customers to use mail as part of their marketing activities. The complainant – another postal operator – alleged that, in encouraging customers to switch to Royal Mail, the company was intending to remove competition from the market.

Postcomm has concluded that Royal Mail appears to have contravened two conditions in its licence designed to facilitate competition. As a result, the company has given several undertakings to Postcomm on the way it will in future conduct any promotional offers and special deals with non standard terms.

Postcomm will monitor compliance with these undertakings to confirm that this approach has the desired effects. If not, and if similar conduct arises in the future, other forms of enforcement action will be considered, including financial penalties.

Nigel Stapleton, chairman of Postcomm, said:

“Competition in postal services has only just begun. Postcomm is being very watchful that Royal Mail – which currently has over 99% of the letters market – is not using its dominance, perhaps unwittingly, to freeze out competitors. We have extensive powers to deal with anti-competitive behaviour, which we will not hesitate to use in any future case, if appropriate. We will continue to investigate complaints from competitors who feel their business is being threatened by unfair Royal Mail actions, and have recently announced another investigation, which is looking at Royal Mail’s offer of zonal prices for access.”

Notes

The two Royal Mail promotion schemes Postcomm investigated were the Catalogue Customer Reactivation and Acquisition Test, introduced in July 2003, and the Mailsort 3 1400 Incremental Advertising Promotion, introduced in October 2003. Both schemes gave a discount on “incremental” mailings posted by eligible catalogue and advertising mailers.

The two licence conditions that Royal Mail appears to have contravened are conditions 11 (“Promotion of effective competition”) and 13 (“Appointment of compliance officer”).

Postcomm has now closed its investigation. The key undertakings given by Royal Mail seek to ensure that:
• Any new promotions launched by Royal Mail are first subjected to its promotion approval process, which will include regulatory and competition law approval at a senior level;
• Royal Mail’s compliance officer becomes more proactive in approving new promotional activity;
• Royal Mail trains all its sales staff on UK and European competition law, as well as the obligations contained within its licence.