Ofcom has announced that it is carrying out a fundamental review of the regulation of Royal Mail in the light of the withdrawal by Whistl from the ‘direct deliver’ letters market. As Ofcom's press release points out, this significant change to the market leaves Royal Mail without any national competition for the direct delivery of letters.
This is in addition to Ofcom’s ongoing review (announced in December 2014) which relates to:
- assessing Royal Mail’s efficiency;
- considering its performance in the parcels market; and
- assessing Royal Mail’s potential ability to set wholesale prices in a way that might harm competition.
All of this, combined with the fact that the Government has announced its intention to release its remaining 15 per cent stake in Royal Mail, suggests that there may be a degree of tightening of regulation on Royal Mail in relation to certain of its activities: particularly direct delivery and wholesale pricing. Ofcom currently appears less concerned with activities where it considers competition to the Royal Mail to be strong: the parcels market and downstream access mail (where private mail companies collect and distribute mail but hand it over to Royal Mail for final processing and local delivery).
Ofcom states that it expects the review to be completed and a revised framework to be in place during 2016. This seems an ambitious timescale and whether this target is met remains to be seen. What is more certain, however, is that Royal Mail's activities will be very much under the spotlight and there is the distinct possibility of a tightening of regulatory controls.
There will be opportunities for others in the market to express their views and influence the process. These will start in July when Ofcom outlines its initial thoughts and seeks formal submissions from industry, consumer groups and other stakeholders.