Court of Appeal rejects Royal Mail’s pricing changes appeal

Court of Appeal rejects Royal Mail’s pricing changes appeal

The Court of Appeal has rejected Royal Mail’s appeal against the Competition Appeal Tribunal’s (CAT) decision to uphold Ofcom’s finding that Royal Mail abused its dominant position in the wholesale market for bulk mail delivery services by issuing Contract Change Notices (CCNs) which introduced prices that would discriminate against competitors.

The full Judgment is here.

Whistl was an “access operator” which purchased access services from Royal Mail in order to provide the final stage of the process in the delivery of bulk mail to individual addresses. Whistl purchased bulk mail delivery services from Royal Mail. Royal Mail, in the CCNs, proposed pricing changes that would have led to Whistl facing significantly higher access prices if it chose to enter delivery services in competition with Royal Mail. Whistl complained to Ofcom about the pricing changes in the CCNs. Ofcom found that Royal Mail had abused its dominant position and imposed a fine of £50 million on Royal Mail. Royal Mail appealed Ofcom’s findings to the CAT but the CAT rejected this appeal. See our previous news item on that Judgment here.

Royal Mail appealed the CAT’s Judgment to the Court of Appeal on two grounds. Both related to whether and how an authority should use the “As Efficient Competitor” (AEC) test as a way of determining whether pricing conduct was anti-competitive.

First, Royal Mail argued that the CAT should have found that an AEC test was a necessary part of the analysis. The Court of Appeal found that the CAT made no error of law in this regard, for reasons including that (i) this ground of appeal was based on an “inaccurate characterisation” of the CAT’s reasoning, and (ii) it was within the CAT’s expertise to find that the pricing differential could not easily be put into a category for which an AEC test would be an appropriate way of determining anti-competitive behaviour.

Second, Royal Mail argued that the CAT should have concluded that Ofcom had not given enough consideration to the AEC analysis submitted by Royal Mail (on the assumption that the first ground held). The Court of Appeal rejected this ground, finding that Ofcom had considered the AEC test and had provided its conclusions. The Court of Appeal noted that Ofcom “was not required as a matter of law to treat the AEC test as either determinative or highly relevant” and it had therefore given sufficient consideration to the AEC analysis Royal Mail put forward.

The Court of Appeal therefore rejected Royal Mail’s appeal in its entirety.

Frontier’s David Parker is the economic expert for Whistl.