Royal Mail to appeal in fight with Postcomm

THE ROYAL Mail is preparing to launch an appeal to the Competition Commission, the senior competition watchdog, over price controls on its services drawn up by the regulator, Postcomm. The watchdog will deliver its final verdict on the new price control regime this week and has refused to make some of the compromises demanded by the Royal Mail. Postcomm is thought to have resisted lobbying by the company for the ability to “rebalance” prices by raising its charges for some services while lowering others. The regulator has also balked at demands by the Royal Mail that the price control formula be renegotiated in the future if the business is faced with extra costs, including a potential pounds 330m bill to plug a pensions black hole. Postcomm is expected to approve a 1p increase in the price of first and second class stamps, starting from April. The regulator is also believed to have backed down in part on proposals for a subsequent price freeze on a “basket” of prices which the Royal Mail said would have cost it pounds 460m. Royal Mail, which is losing more than pounds 1m a day, is expected to be given a month to respond and is unlikely to launch the formal appeals process this week. Adam Crozier, its newly appointed chief executive, joins the group tomorrow and will be closely involved in the decision. According to one industry executive: “This is a close call but on balance it will end up at the Competition Commission. The regulator is giving some ground but not enough given the risk element is so great.” In December the company warned Postcomm that it faces the threat of huge extra costs including a pension fund payment, a pounds 120m bill to cover increases in National Insurance contributions and pounds 280m in potential increases in interest payments on Government loans. Allan Leighton, the Royal Mail chairman, believes his three-year revival plan for the struggling company is being threatened by the heavy hand of the regulator.