UK postal watchdog in Royal Mail legal challenge
Postwatch, the consumer body for postal services, has mounted a legal challenge in London’s High Court over a refusal by Postcomm, the postal regulator, to force Royal Mail to pay millions of pounds of compensation to business customers.
The case is being brought as a judicial review challenge, with Postwatch arguing that the regulator’s interpretation of a clause in the statutory compensation scheme has allowed Royal Mail to undercompensate users of bulk mail services by up to Pounds 35m.
“There is no doubt that in the financial year 2003-4, the first year for which the scheme applies, Royal Mail failed to meet any of the quality of service targets under their licence,” David Pannick QC, representing Postwatch, said yesterday.
“We estimate that what would otherwise be compensation of Pounds 70m for the aggrieved customers of the inadequate service has been reduced to compensation of Pounds 35m by reason of the disputed interpretation adopted by Postcomm.”
The dispute over howthe compensation scheme should be interpreted centres on an exclusion clause that says Royal Mail is under no obligation to provide compensation if a sender is “in default of credit terms” and does not have a reasonable excuse.
Postwatch says the regulator has interpreted this too broadly, to include customers who have failed to meet Royal Mail’s credit terms at any time during the year, regardless of the extent of the default.
According to officials, Royal Mail’s customers and Postwatch began to become aware of the problem in autumn last year, leading to discussions between the regulator and watchdog, but no final agreement.
Mr Pannick said yesterday that if Postwatch’s challenge succeeded, Postcomm and Royal Mail were likely to argue that compensation should not be paid for the past financial period because of the need for “regulatory fairness” and to “promote confidence in the integrity of the regulatory regime”.
But, he said, Postwatch would submit that it had difficulty understanding how confidence would be promoted by allowing Royal Mail to keep a Pounds 35m windfall resulting from an erroneous interpretation of the scheme.
According to the Postwatch website, in 2004-05 Royal Mail met just four of the 15 annual service standards agreed with Postcomm and Postwatch.
“Although this level of performance is still unacceptable,” the watchdog said, “it does represent a significant improvement on the previous year when Royal Mail failed every one of its targets. Encouragingly, during the second half of the year (October 2004 – March 2005), 1st class stamped and metered mail performed above target levels.”
The case continues today.
