Ofcom alleges that Royal Mail has abused its dominant position in breach of Chapter II of the Competition Act 1998 and the equivalent EU competition law prohibition in Article 102 of the Treaty on the Functioning of the EU. The crux of Ofcom’s concern is that Royal Mail has engaged in conduct that amounts to unlawful price discrimination against competitor postal operators.
Ofcom’s investigation focuses on allegations that the changes to Royal Mail’s wholesale prices for bulk mail delivery services, which were announced in January 2014, suspended in March 2014 and finally withdrawn in March this year amounted to differential pricing. This meant, in effect, that higher prices would be charged to those customers that competed with Royal Mail in delivery than those that did not.
Ofcom is concerned that the access pricing regime operated by Royal Mail would disincentivise new entry into the delivery market, and increase barriers to expansion for postal operators seeking to compete with Royal Mail in that market. Ofcom believes that the practices lead to a distortion of competition against the interests of consumers.
Discriminatory treatment of customers is a specific category of abuse under competition law. Price discrimination consists of charging different prices to customers in the same position without justification, or charging uniform prices to customers whose circumstances are different. However this does not necessarily imply a one-size-fits-all approach.
Royal Mail has an opportunity to make representations to Ofcom in response to the Statement of Objections. It would be open to it to establish that the differential pricing is objectively justified in the sense that there is a legitimate and not anti-competitive basis for the differential pricing as between the different categories of operator. It is fair to say that the debate among economists as to the circumstances in which the practice of discrimination by a dominant firm is anti-competitive and harmful to consumers is far from settled.
If Royal Mail is found to have infringed competition law it is potentially subject to penalties of up to 10 per cent of its turnover. However, this case is unusual in that the allegedly unlawful practices have not apparently been implemented and it remains to be seen whether that will be a mitigating factor.
If the outcome of Ofcom’s investigation is that Royal Mail is found to have infringed competition law this could support a follow-on action by a competitor or ultimate consumer harmed by the breach, based on that decision. The attraction of a follow-on action is that the claimant may rely on the fact of the decision against Royal Mail as evidence of an infringement of competition law. However, this is not the end of the issue as proving causation and quantifying loss can still be challenging for a claimant. In contrast, in a standalone action the claimant must first prove the existence of the competition law violation, through legal argument and evidence which means that such an action is likely to be more complex and expensive.
Ofcom’s investigation focuses on allegations that the changes to Royal Mail’s wholesale prices for bulk mail delivery services, which were announced in January 2014, suspended in March 2014 and finally withdrawn in March this year amounted to differential pricing. This meant, in effect, that higher prices would be charged to those customers that competed with Royal Mail in delivery than those that did not.
Ofcom is concerned that the access pricing regime operated by Royal Mail would disincentivise new entry into the delivery market, and increase barriers to expansion for postal operators seeking to compete with Royal Mail in that market. Ofcom believes that the practices lead to a distortion of competition against the interests of consumers.
Discriminatory treatment of customers is a specific category of abuse under competition law. Price discrimination consists of charging different prices to customers in the same position without justification, or charging uniform prices to customers whose circumstances are different. However this does not necessarily imply a one-size-fits-all approach.
Royal Mail has an opportunity to make representations to Ofcom in response to the Statement of Objections. It would be open to it to establish that the differential pricing is objectively justified in the sense that there is a legitimate and not anti-competitive basis for the differential pricing as between the different categories of operator. It is fair to say that the debate among economists as to the circumstances in which the practice of discrimination by a dominant firm is anti-competitive and harmful to consumers is far from settled.
If Royal Mail is found to have infringed competition law it is potentially subject to penalties of up to 10 per cent of its turnover. However, this case is unusual in that the allegedly unlawful practices have not apparently been implemented and it remains to be seen whether that will be a mitigating factor.
If the outcome of Ofcom’s investigation is that Royal Mail is found to have infringed competition law this could support a follow-on action by a competitor or ultimate consumer harmed by the breach, based on that decision. The attraction of a follow-on action is that the claimant may rely on the fact of the decision against Royal Mail as evidence of an infringement of competition law. However, this is not the end of the issue as proving causation and quantifying loss can still be challenging for a claimant. In contrast, in a standalone action the claimant must first prove the existence of the competition law violation, through legal argument and evidence which means that such an action is likely to be more complex and expensive.
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