UK Royal Mail dismisses Postcomm fine as 'Monty Pythonesque'
Allan Leighton, Royal Mail chairman, has accused the postal regulator of "Monty Pythonesque" behaviour after it slapped a Pounds 2m fine on the company.
The decision by Postcomm, announced yesterday, followed an 14-month investigation into complaints from three rival operators that the state-owned company appeared able to exploit its dominant position to gain "an unfair commercial advantage".
The regulator said Royal Mail had failed to set up so-called "Chinese walls" between its various business areas to prevent conflicts of interest.
The fine of Pounds 2.16m comes only days after an Pounds 11.7m penalty because of lost or damaged post. Royal Mail, which has been grappling with the introduction in January of full competition in the postal services market, is seeking more than Pounds 1bn of government investment.
Nigel Stapleton, Postcomm chairman, said: "Competition is starting to offer abetter deal for customers but, given Royal Mail's dominant position, the full benefits will never be felt unless the playing field is made as level as possible for the new operators.
"We cannot allow any actions by Royal Mail that unfairly keep competitors out of the market."
But Mr Leighton hit back: "This is a shoddy report from a grandstanding regulator who is looking to micro-manage the entire postal industry. It is full of unsubstantiated and subjective views which are not based in fact.
"This huge and arbitrary penalty is illogical," he said. "It is regulation for the sake of regulation. This is almost Monty Pythonesque."
Royal Mail plans to appeal and is prepared to take legal action to overturn the fine.
Postcomm's report followed complaints by UK Mail, TNT Mail UK and Express. The companies alleged that Royal Mail had an unfair advantage by using information it had obtained through negotiations with operators on mail delivery to target customers likely to switch.
Under "access" agreements, private sector companies have been able to use Royal Mail's sorting and delivery network.
They also alleged that Royal Mail "was supplying, or offering to supply, downstream access on terms that were unduly discriminatory both against them and against customers who use other bulk mail products" and "had failed to properly notify and publish details" of some of its downstream offers.
The regulator, which has partly completed its investigation, found what it described as "shortcomings".
These included lack of physical separation between the company's retail and wholesale teams, a wholesale team that was based within Royal Mail's regulatory department until last December, a failure to involve its compliance officer properly and failure to carry out a "clear and thorough risk analysis".
Royal Mail, it concluded, had failed to develop a policy to deal with possible misuse of confidential information as a result of staff moves within the company. It had not addressed the "apparent conflict" arising from a decision that direct access to its post office facilities should be managed by a wholesale team, based in its regulatory department.
Postcomm said it was surprised Royal Mail felt it had not needed to set up "Chinese walls". But Mr Leighton said the report contained no evidence that Royal Mail had failed to fulfil its access agreements and that no customers or competitors had been disadvantaged.
Royal Mail Press Release
"A shoddy report from a grandstanding regulator" – Royal Mail denounces Postcomm fine
[17/02/2006]
Royal Mail today denounced a decision by the postal regulator, Postcomm, to impose a £2.16 million fine over the technical way it has structured its Downstream Access team – when no customers or competitors have been found to have been disadvantaged.
Royal Mail chairman Allan Leighton said: “This is a shoddy report from a grandstanding regulator who is looking to micro-manage the entire postal industry. It is full of unsubstantiated and subjective views, which are not based in fact.
“The simple truth is: no competitor has lost out, no customer has lost out, and Royal Mail has made no gain from the way in which we operate access services – so why any fine at all? This huge and arbitrary penalty is illogical – it is regulation for the sake of regulation.
“As Postcomm clearly says, there are no substantiated complaints and no examples of Royal Mail failing to fulfill its access agreements – which allow rivals to use Royal Mail’s sorting and delivery network in a way no other European postal company permits.”
Royal Mail said that downstream access services have become an incredibly successful market which has grown to more than one billion letters over the last year – four years ahead of forecasts by Postcomm, which had predicted an access market of this size in 2009/2010.
Mr Leighton said: “By any standard, Downstream Access services have been a success. The market is based on commercial agreements freely entered into between Royal Mail and its competitors – yet Postcomm’s response is to slap a fine of more than £2 million on Royal Mail.
“This is almost Monty Pythonesque – by Postcomm’s line of thinking I have absolutely no doubt that later this year the regulator will fine us for delivering the best quality of service ever due to the fact that they decide it’s anti-competitive.”
Mr Leighton added: “We have already taken independent legal advice as to how we should structure our wholesale team. We are implementing this and are fully satisfied it will be compliant with our licence. The regulator states that the ability of new entrants to gain market share is likely to have been hampered. But once again Postcomm has produced no evidence to substantiate this finding despite 14 months of costly and time-consuming investigations from a regulator which Royal Mail funds to the tune of £10 million a year.
“Our independent legal advice as to the strength of our case is extremely clear – and we will exhaust every possible route to ensure this ridiculous penalty is wiped out.”
