Royal Mail cut ‘is pricing its competitors out of market’

Plan to reduce cost of most popular direct mail tool by 3% provokes anger.

Debt laden: Competitors query the move given Royal Mail’s huge deficit
Debt laden: Competitors query the move given Royal Mail’s huge deficit

Royal Mail has been accused of being “anti-competitive” after it announced it would cut the rate of its most popular tariff, in a move that could price rivals out of the market.

Royal Mail informed the postal regulator PostComm on 26 July that it intends to reduce the rate of its “MailSort 3” tariff – the cheapest and most widely used tariff by companies that have large direct mail campaigns – by 3% as of 26 October.

But postal consultant Post-Switch.com says that Royal Mail rates, which are used as the benchmark for comparison for companies such as TNT Post, UK Mail and DHL, will see some of the more expensive operators priced out of the market.

Jonathan DeCarteret, the founder of Post-Switch.com, claims that according to its estimates, the rate reduction will result in a loss of income of over £150m a year for Royal Mail. He adds that given the question marks over Royal Mail’s future and its bulging pension deficit, the cut is hard to justify and is “anti-competitive”.

A PostComm spokesman has confirmed that it intends to evaluate the “implications of the price reduction”, but would put a timeframe to the investigation.

DeCarteret says the reality is that it does not expect any such action to commence until the next annual pricing review in April next year.

A Royal Mail spokesman says it “operates in a competitive marketplace” and is committed to offering its customers the “best value for money”.

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