LONDON (Reuters) - The Royal Mail has been fined 50 million pounds for discriminating against Whistl, its only major competitor delivering letters, regulator Ofcom said on Tuesday.
Royal Mail changed wholesale customers' contracts in early 2014 when Whistl was set to become the first company to challenge its monopoly in the large-scale delivery of bulk mail. As a result, Whistl suspended plans to extend delivery services to new parts of the UK, Ofcom said.
"Royal Mail broke the law by abusing its dominant position in bulk mail delivery," said Jonathan Oxley, Ofcom's Competition Group Director.
"All companies must play by the rules. Royal Mail's behaviour was unacceptable, and it denied postal users the potential benefits that come from effective competition."
Royal Mail said it would appeal the fine, which is the biggest ever imposed by the regulator.
"Royal Mail strongly refutes any suggestion that it has acted in breach of the Competition Act, and considers that the decision is without merit and fundamentally flawed," it said.
Royal Mail, which was privatised in 2013, said the wholesale price changes were designed to support the sustainability of the Universal Service - its obligation to deliver to all UK destinations for the same charge - as competitors cherry picked profitable urban areas for end-to-end delivery.
Whistl had been trying to compete with Royal Mail in delivering bulk mail, such as utility bills and bank statements, direct to addresses in some urban areas while still using Royal Mail for final deliveries elsewhere.
Royal Mail also said it would challenge the ruling on the basis that for an allegation of abusive price discrimination to be established, the relevant prices must actually be paid.
And it said the party paying such prices must be placed at a competitive disadvantage as a result, an essential element that didn't exist in this case.
Analyst Gerald Khoo at Liberum said that although the fine itself was not material and Whistl has long since ended its attempts at competing with Royal Mail through direct delivery, there were broader potential implications.
"We believe this is a reminder that Royal Mail must act with restraint given its dominant market shares in both letters and parcels, and this limits the group's ability to grow parcels revenue over the long term," he said.
Shares in Royal Mail were trading down 0.5 percent at 460 pence at 0925 GMT.
(Reporting by Paul Sandle, editing by James Davey and David Evans)
