Back in November, you may remember us reporting that Royal Mail had complained to Ofcom about increased competition affecting its ability to deliver a nationwide service.
However recent developments in the inquiry have suggested that Royal Mail has not achieved the results it was hoping for.
Ofcom will not be taking any action against Royal Mail’s competitors or implementing any new rules regarding direct mail delivery competition.
Ofcom rejects Royal Mail
Ofcom has rejected Royal Mail’s competition concerns and stated that it is not going to change the rules for competition in direct mail delivery, as it had no reason to believe that the newly privatised postal service was under any threat from its competitors.
By law, Royal Mail is required to provide a six days per week mail delivery service at fixed prices. However it was claiming that increased competition from the likes of Whistl were jeopardising its ability to carry out the universal service, due to their ‘cherry picking’ of densely populated, highest profitability areas only.
Royal Mail’s problem with Whistl
Since April 2012, Whistl (previously called TNT Post UK) has delivered mail in London and Manchester, without any use of Royal Mail’s infrastructure. In 2013 – 2014 the company delivered 1 in 200 addressed letters in the UK (0.5%) and is planning to deliver to around 42% of UK addresses by 2019.
Like other companies, Whistl also sorts and collects mail in agreed UK areas prior to passing to Royal Mail for onward delivery. This approach is labelled as ‘cherry picking’ by Royal Mail and unfair competition, which it believes is affecting its ability to generate revenue.
Ofcom rules Whistl not causing Royal Mail to not meet universal delivery obligation
However after reviewing the market and business plans of both Royal Mail and Whistl, Ofcom said it believed that rather than impeding Royal Mail’s ability to meet its obligation, Whistl was actually giving it an incentive to become more efficient.
Along with the increased pressure Royal Mail has from the likes of Whistl, they also have to deal with declining volumes of letters/mail in the digital age and rising competition in the parcel sector.
Although Ofcom will not be taking any action regarding the dispute between Royal Mail and Whistl , it has stated that it will be carrying out a wide sweeping review of all associated factors which impact Royal Mail’s ability to deliver a profitable and universal service sometime this year. This will involve reviewing the company’s efficiency and delivery performance.
We hope you enjoyed this article, to discuss any aspects of the direct mail industry contact a member of the Baker Goodchild team on 0800 612 1972 today .
Image Credit: Ell Brown