Royal Mail recently announced that it has set aside eighteen million pounds (€23m), this is against a possible fine imposed by the competition authority in France.
Back in July the FTSE100 Company warned that it may face a ‘material’ hit on its profits because a French subsidiary Company may have caused a breach of French antitrust rules. More recently, Royal Mail has said that by agreeing a settlement and giving commitment to compliance that they expect to receive a fine reduction.
The investigation into the possible antitrust breach is currently underway, with Royal Mail stating that they will not know the exact amount they will have to pay until the latter part of the 2015 – 2016 financial years.
Royal Mail Reserve Potential £18M Liability in Accounts
In preparation for the possibility of a fine, the company has put eighteen million pounds aside (up to 28th September), which includes twelve million pounds for the fine and six million pounds to cover the legal costs estimate.
The subsidiary that is being investigated is Royal Mail’s french parcel business called GLS. This operates across fourty two countries, including France. The breach of antitrust rules is only alleged at the moment and is thought to have occurred during the period just before the end of 2010.
Other Providers too under Investigation
It’s not just Royal Mail’s subsidiary that is currently under investigation though; a number of other parcel companies such as TNT Express, FedEx, SNCF, La Poste and DHL / Deutsche Post are also being investigated by the French competition authorities.
The competition authority in France has been the busiest regulator in the EU, opening two hundred and twenty eight investigations in the past ten years.
Whilst Royal Mail has put a significant sum aside as a provision for the fine, it could be much larger. Postal company TNT has made a provision for their own fine of fifty million euros.
The final fine for Royal Mail could be much larger
It is thought that Royal Mail’s fine could near one hundred and sixty million pounds, as French antitrust rules allow the authority to enforce penalties equivalent of 10% of a company’s sales. Last year GLS group’s revenues were £1.65 billion, suggesting that the fee could potentially be around the £160m mark or even more if they base the fines on Royal Mail’s group revenues, which were £9.5 billion last year.
Let’s hope that for Royal Mail’s sake that agreeing to settle and provide compliance commitments goes a long way in reducing the fine they have to pay.
For questions relating to print, mail and post , call Baker Goodchild on 0800 612 1972 today.
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