Ofcom issues Statement of Objections to Royal Mail
Ofcom has issued a Statement of Objections to Royal Mail in relation to wholesale charges – and Royal Mail has responded saying it will submit a “robust defence” of its position. The Statement of Objections, which was issued this morning (28 July), sets out Ofcom’s “provisional view” that Royal Mail “breached competition law by engaging in conduct that amounted to unlawful discrimination against postal operators competing with Royal Mail in delivery”.
As previously reported, Ofcom is currently conducting a fundamental review of the regulation of Royal Mail, for which the regulator issued a discussion document to stakeholders on 17 July.
Today’s Statement of Objections, meanwhile, is part of Ofcom’s investigation into a complaint brought to it by one of Royal Mail’s competitors, Whistl UK Ltd.
Whistl – formerly known as TNT Post UK – launched an end-to-end (E2E) mail delivery service in April 2012, but officially terminated the service in June this year.
In a media release issued this morning, Ofcom summarised the background to the Statement of Objections: “On 10 January 2014, Royal Mail announced changes to the prices, terms and conditions for bulk mail delivery services known as ‘access services’. These services enable other postal operators to hand over letters that they collect from large business customers (such as councils, banks and utility companies) to Royal Mail for final sorting and delivery.
“Whistl UK Ltd submitted a complaint to Ofcom in January 2014, alleging that the changes were anti-competitive.
“Ofcom opened an investigation on 21 February 2014. On 4 March 2014, Royal Mail suspended the planned changes, and on 11 March 2015 the company announced that it had withdrawn them.”
The regulator then explained its current position: “The Statement of Objections issued today sets out Ofcom’s provisional view that Royal Mail’s changes to the prices, terms and conditions for the provision of access services included unlawful price discrimination.
“Specifically, the Statement of Objections alleges that the changes to Royal Mail’s wholesale prices for bulk mail delivery services contained a differential in pricing which meant that, in practice, higher access prices would be charged to access customers that competed with Royal Mail in delivery than to those access customers that did not.
“The Statement alleges that these higher access prices would act as a strong disincentive against entry into the delivery market, further increasing barriers to expansion for postal operators seeking to compete with Royal Mail in this market, and leading to a potential distortion of competition against the interests of consumers.”
Ofcom’s media release did, however, point out that the Statement of Objections “represents one stage in Ofcom’s investigation, and no assumption should be made at this stage that there has been a breach of competition law”.
The regulator added: “Royal Mail can now make representations to Ofcom, which will be carefully considered before Ofcom takes a final decision.”
Royal Mail has already indicated that it will be making a “robust defence” of its position.
The postal operator issued the following statement this morning: “Royal Mail confirms that it has received today a Statement of Objections setting out Ofcom’s provisional, preliminary findings in relation to its investigation into the terms on which Royal Mail proposed to offer access to letter delivery services, alleging a potential distortion of competition.
“The investigation was launched in February 2014 following a complaint brought by TNT Post UK (now Whistl) about certain proposed changes to Royal Mail’s Access contracts. Royal Mail takes its compliance obligations very seriously and is disappointed by Ofcom’s announcement.
“The Company considers that the pricing changes proposed in 2014 were fully compliant with competition law. They were an important part of Royal Mail’s commercial response to both changing market conditions and to Ofcom’s statements in its March 2013 guidance document on end-to-end competition in the postal sector1.
“Under the terms of our access contracts, these pricing proposals were suspended following the opening of Ofcom’s investigation.
“Accordingly the pricing proposals were never implemented and were withdrawn altogether in March 2015.
“Royal Mail is considering carefully Ofcom’s provisional findings. It will submit a robust defence to Ofcom in due course.
“Royal Mail has cooperated fully with Ofcom throughout its investigation to date and will continue to do so.”
