On 12 November 2019, the Competition Appeal Tribunal ("Tribunal") upheld Ofcom’s decision against Royal Mail Plc (Royal Mail), finding Royal Mail’s pricing strategy in relation to bulk mail delivery services to be discriminatory and an abuse of dominance.
Royal Mail first announced the introduction of differential prices for bulk mail operators through contract change notices in January 2014. Whistl UK Limited (Whistl), one of Royal Mail’s major competitors in the UK postal sector, relied heavily on Royal Mail’s final delivery service for sending bulk business mail, such as gas and utility bills and bank statements. Whistl (formerly TNT Post) had planned to set up its own final delivery service in competition with Royal Mail, but alleged the new differential prices made its end-to-end operations and future plans uneconomic. Soon after Ofcom opened an investigation, Royal Mail suspended and then formally withdrew the new prices.
In August 2018, after a four year investigation, Ofcom found Royal Mail’s pricing scheme infringed the Chapter II prohibition under the Competition Act 1998 and issued its largest ever fine of £50m. Royal Mail appealed the decision, arguing that, among other things, the new prices were never applied in practice, were not improperly discriminatory, did not cause a competitive disadvantage, and in any case were objectively justified. Royal Mail also objected to an aspect of Ofcom’s procedure and to the principle and size of the penalty. The Tribunal unanimously dismissed Royal Mail’s arguments on all six grounds, finding that Royal Mail had abused its dominant position by pursuing a deliberately discriminatory pricing strategy to limit nascent competition from its only significant competitor in the delivery market, Whistl. Despite the price increases never being implemented, the Tribunal was not persuaded that Royal Mail’s contract change notices were merely preparatory. They were a formal, definitive and public step necessary for the adoption of the new prices and were intended to, and did, cause customers to make appropriate changes to their activities.
The Tribunal’s judgment is significant as it provides detailed guidance on whether conduct is an abuse of dominance and holds that it is not necessary to carry out an ‘as efficient competitor’ test before finding such pricing conduct to be abusive.
Royal Mail is currently considering seeking permission to appeal and Whistl is considering whether to seek damages.
Click here for a link to the full judgment.