Postcomm proposes to vary its penalty on Royal Mail for securing unfair commercial advantage

12 July 2006

Postcomm, the independent regulator, today proposed a reduced penalty on Royal Mail for breaching its licence. Royal Mail had failed to take adequate steps to ensure it did not gain an unfair commercial advantage over its competitors in the fast-growing ‘access to the last mile’ market.

The penalty – £1 million – has been reduced from the £2.16 million originally proposed, following Postcomm’s consideration of representations from Royal Mail and other interested parties. The original penalty, for licence contraventions, was proposed in a report published on 17 February this year.

Royal Mail currently has more than 96% of the postal market and since April 2004 has been charging some competitors a fee for its postmen and postwomen to deliver their mail. Royal Mail is currently delivering more than a billion of these items each year.

Postcomm began investigating these so-called downstream access arrangements last year after three of Royal Mail’s competitors – Express Ltd, TNT Mail UK Ltd and UK Mail Ltd – complained about various aspects of Royal Mail’s competitive behaviour.

Postcomm concluded that Royal Mail did not have adequate measures within its wholesale and retail divisions to prevent it obtaining an unfair advantage over its competitors. This could enable the retail arm to use information obtained by the wholesale section to attract business.

Postcomm had also proposed imposing a final order to make Royal Mail change its procedures. However, Royal Mail has since taken steps to remedy the contraventions, which is welcomed by Postcomm and the order has been removed. Instead, Postcomm has asked Royal Mail to voluntarily provide undertakings to ensure continued compliance. Postcomm may re-investigate if Royal Mail’s compliance obligations are not met.

Notes for editors

Downstream access is the part of the newly-liberalised mail market that is showing the biggest potential for new market entrants. Mail operators and some large mailers pay Royal Mail to deliver more than a billion letters for them each year. Users of this service pre-sort their post before taking it to a mail centre for onward delivery by Royal Mail postmen and postwomen.

Royal Mail’s wholesale division provides ‘access to the last mile’ of Royal Mail’s network and the retail division provides all other, non-access, services.

A Postcomm document: Royal Mail’s Offer of Zonal Downstream Access: Second Report and Decision of the Postal Services Commission, can be found in the consultation section of our website. Responses are requested in the next 14 days.