Communications regulator Ofcom has fined Royal Mail £50 million for breaching competition law.
Ofcom said that the company abused its dominant position by discriminating against its only major competitor delivering letters.
The penalty is the result of an investigation into a complaint made to Ofcom by Whistl, which is one of Royal Mail’s wholesale customers.
The complaint was about changes Royal Mail made to its wholesale customers’ contracts in early 2014, including wholesale price increases it was introducing.
The price increases meant that any of Royal Mail’s wholesale customers seeking to compete with it by delivering letters in some parts of the country, as Whistl was, would have to pay higher prices in the remaining areas – where it used Royal Mail for delivery.
Following notification of these new prices, Whistl suspended plans to extend delivery services to new parts of the UK.
Ofcom’s investigation found Royal Mail’s actions amounted to “anti-competitive discrimination against customers, such as Whistl, who sought to deliver bulk mail”.
Jonathan Oxley, Ofcom’s competition director, said: “Royal Mail broke the law by abusing its dominant position in bulk mail delivery.
“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 will appeal Ofcom’s decision, claiming its price changes were “never implemented or paid”.
The firm said in a statement: “Royal Mail is very disappointed by Ofcom’s decision to impose a fine of £50 million. 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.
“The company will now lodge an appeal with the Competition Appeal Tribunal within the next two months. No fine is payable until the appeals process is exhausted.”