Parcel companies admit breaking competition law

19 September 2019

Royal Mail and SaleGroup, which trades as Despatch Bay, have admitted being part of an illegal anti-competitive agreement.

In May 2018, Royal Mail reported that its ParcelForce division had an agreement with Despatch Bay that neither company would offer parcel delivery services to the other’s business customers.

As the regulator for postal services, Ofcom has investigated this agreement.

We have provisionally found that this agreement broke competition law because it aimed to restrict competition by sharing customers.

How the agreement worked

The SaleGroup, trading as Despatch Bay, is an online reseller of parcel delivery services. It arranges deliveries for small and medium-sized businesses by sourcing parcel operators, rather than carrying out deliveries itself.

Emails between Royal Mail and the SaleGroup showed they had an agreement in place to share customers, from August 2013 to May 2018.

The companies asked each other to withdraw quotes provided to certain customers. Some of these quotes were cheaper than customers were currently playing, which meant these customers were prevented from paying lower prices for the same parcel delivery services.

The SaleGroup also shared its customer list with ParcelForce, so each company could avoid offering services to the other’s customers.

Gaucho Rasmussen, Ofcom's Director of Investigations and Enforcement, said: “Anti-competitive agreements like the one between Royal Mail and the SaleGroup are designed to restrict competition, and they often lead to customers paying higher prices as a result.

“This kind of behaviour is a serious breach of competition law and unacceptable.”

Financial penalty

Under the Competition and Markets Authority (CMA)’s leniency policy, the first company involved in certain types of anti-competitive agreement to come forward about it may receive immunity from fines, so long as the conduct is not already being investigated.

So, Royal Mail will not be fined, provided it continues to cooperate with our investigation.

The SaleGroup has accepted a fine of £40,000. This is a significant fine given the small size of the company.