On Monday, July 18, 2022, the Office of Communications (OFCOM), the United Kingdom’s (U.K.’s) postal services regulating body, issued a statement regarding its 2022 Review of Postal Regulation. The statement delineated OFCOM’s decisions on the regulation of postal services from 2022 to 2027, which included tightening requirements on Royal Mail, a British postal service and courier company comparable to the United States Postal Service. Royal Mail immediately issued a press release in response, expressing concern about the ban on tracking facilities for Royal Mail parcels. Royal Mail noted that “tracking is no longer seen as an optional extra or premium offer, [but as] a necessity” and urged OFCOM to reconsider its guidance in this area.
OFCOM’s Scrutiny of Royal Mail
OFCOM’s updated regulations compounded the basic statutory requirements on Royal Mail to deliver mail. The updates include (1) retaining existing price caps on second class Royal Mail mailing services and (2) banning Royal Mail from providing tracking facilities on first and second class parcel services. These updates are introduced under Royal Mail’s statutory duty under section 31 of the Postal Services Act: to deliver letters six days a week at an affordable and geographically uniform price to all addresses in the U.K.
OFCOM introduced the regulation update imposing further restrictions on Royal Mail on the basis of section 3(1) of the Communication Act 2003, which requires OFCOM to promote competition:
The market for postal services – including Royal Mail’s non-USO [Universal Service Obligation] services and services provided by other parcel operators – offers a range of tracked parcel services which compete on a ‘level-playing field’, and competition has the potential to develop further in the future. USO services are currently VAT [value-added tax] exempt, meaning that regulatory intervention to extend the scope of USO services would give Royal Mail a material advantage over competitors’ C2X [Consumer to Anywhere] services. Royal Mail has the option to compete using its commercial tracked parcel products outside of the USO.
This tightening of restrictions was the latest in OFCOM’s increased scrutiny of Royal Mail. OFCOM is also separately investigating Royal Mail’s inability to meet delivery standards in the year 2021–2022. Under OFCOM rules, Royal Mail is required to deliver 93% of first-class mail within one working day of collection, and 98.5% of second-class mail within three working days of collection; however, in 2021–2022, only 81.8% of first-class mail was delivered within one working day of collection, and 95.4% of second-class mail was delivered within three working days of collection.
OFCOM’s Statutory Duties
OFCOM possesses the statutory duties and abilities to impose such restrictions and enact such investigations under U.K. law.
Under the Postal Services Act 2011 and the Communications Act 2003, OFCOM has statutory duties to oversee and maintain postal functions in the U.K. Section 29 of the Postal Services Act 2011 provides that:
(1) OFCOM must carry out their functions in relation to postal services in a way that they consider will secure the provision of a universal postal service. …(3) In performing their duty under subsection (1) OFCOM must have regard to –
(a) the need for the provision of a universal postal service to be financially sustainable, and
(b) the need for the provision of a universal postal service to be efficient before the end of a reasonable period and for its provision to continue to be efficient at all subsequent times.
Furthermore, section 3(1) of the Communication Act 2003 provides that:
It shall be the principal duty of OFCOM, in carrying out their functions –
(a) to further the interests of citizens in relation to communications matters; and
(b) to further the interests of consumers in relevant markets, where appropriate by promoting competition.
Lindsey Fussell, OFCOM’s Networks and Communications Group director, has further noted that in the future, OFCOM will likely strengthen its regulations for consumer welfare reasons, and if it is dissatisfied with parcel companies’ performances, the companies could face enforcement action or even tighter rules, such as mandatory improving of their complaints submission processes and strengthening of OFCOM’s monitoring over their Universal Service Obligations.
Prepared by Hillary Woo, Law Library intern, under the supervision of Clare Feikert-Ahalt, Senior Foreign Law Specialist