Packets investigation
On 24th March 2009, Postcomm opened an investigation into the way Royal Mail prices access and retail packets services for business users.
This issue was highlighted to Postcomm through two complaints from the Mail Competition Forum and TNT Post Group, submitted in January and May 2008. They both alleged that margin squeeze was occurring for some 2nd class packets services.
The investigation is examining the margin allowed between the retail and access prices between 0-2kgs, whether it is sufficient for other operators to be able to access Royal Mail’s wholesale network profitably, and whether they are able to compete in the retail market. It will also look at the allegedly unfair differential pricing structures which exist between some Royal Mail retail and wholesale packets services.
If proven, the allegations could potentially contravene Condition 10 and 11 of Royal Mail’s Licence which prevent Royal Mail from gaining any unfair commercial advantage from access arrangements, and which forbid undue preference or undue discrimination in a market where there is no effective competition.
Postcomm undertook a preliminary market assessment, and requested costing information from Royal Mail in October 2008. Postcomm also undertook its own costing exercise to help establish whether there were reasonable grounds for suspecting an infringement of the Licence.
Postcomm has found that there is sufficient information to open a full investigation for potential breaches of Condition 10 and 11 of the Licence from 2006/07 to date. Any breaches which may be proved through the investigation could, if uncorrected, harm the future development of competitor retail packets delivery services.
Please contact Philip Groves (email link) or Essie Barnett (email link) if you wish to discuss the investigation.
The retail services that are being investigated are as follows:
- Packetpost Second Class - This rewards customers with lower prices if they send large volumes of large letters and packets. A Packetpost daily rate applies for a minimum mailing volume of 5,000 items per year while a Packetpost Flat rate applies for a minimum mailing volume of 10,000 items per year. The daily rate is charged according to the average weight and format of each day’s posting. The flat rate is a pre-agreed price which is regularly reviewed. The service is available for items weighing between 0 and 2kg.
- Packetsort 8 Second Class – This offers discounts of up to 4 per cent on Packetpost and is applicable to customers who send more than 250 packets or large letters in each posting and over 5,000 packet items each year (up to 2 kg) from a single site on each of the service speeds available. Customers also need to sort their mail into eight postcode groups and present each of these eight selections in separate containers (bags or cages) with labels to help identify them. If a customer sends more than 5,000 items a year, it can use the daily rate service which gives a price based on average weight, format and class of all the items for that posting. If a customer sends more than 10,000 items a year then Royal Mail can pre-agree an average weight to set their price.
- Packetsort Plus – If a customer sends more than 1,000 packets a day and can sort over nine ways, it can earn discounts of up to 9 per cent on Packetpost prices.
- Mailsort 2 1400 Packets – Mailsort 1400 offers discounts in return for customers sorting their items to Delivery offices (between 1400 and 1600 selections) before handing them to Royal Mail. A customer needs to mail at least 1,000 large letters, A3 packets or packets in a single posting to qualify for the discount.
- Walksort 2 A3 Packets - The minimum mailing size for Walksort is 4,000 letters (1,000 large letters or A3 packets) for national mailings. It is designed for mailings where all the addresses have accurate postcodes and where the mailer sorts the items down to delivery walk level. Delivery is normally within three working days.
