Postcomm lists five criteria for UK competition test

Postcomm on has set out five criteria that it proposes to use to measure the effectiveness of competition in mail services. As the criteria are met, Postcomm will look at whether it can reduce its regulation of the market in those areas.

The criteria are:

Barriers to entry. These will include legal constraints on new entrants, legal protection of the incumbent and economic barriers to new entrants. Barriers would also include the special privileges Royal Mail enjoys, such as exemption from VAT.

The scale and nature of competition. Postcomm will consider how markets are shared between competitors, the sustainability of competition and the number of Royal Mail’s competitors making commercial judgements to enter or leave the market. It will also take account of market growth and the effect of new technology.

Behaviour of Royal Mail. Postcomm will consider any anti-competitive behaviour by Royal Mail and in particular the company’s adherence to Condition 11 of its licence, which requires it to compete fairly in the market.

Customer awareness and behaviour. Postcomm will consider the extent to which customers are aware of alternative suppliers, the rate at which they change suppliers, and the degree of satisfaction they have with alternative providers of postal services.

Effectiveness of competition. In the light of the four other criteria, Postcomm will consider whether competition can be relied upon by itself to regulate the market. Before withdrawing from regulation, Postcomm would need to take account of special features – such as the need to provide a universal service –which might justify the continuation of some regulatory controls.

Postcomm is inviting views on the criteria which are published in a consultation document. Responses are requested by 9 January 2004.