Whistl claims £600m+ in damages from Royal Mail for anti-competitive behaviour

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Whistl claims £600m+ in damages from Royal Mail for harm caused by monopoly’s anti-competitive behaviour

Demand stems from Ofcom ruling Royal Mail abused market dominance to squeeze out challenger.

Concerns IDS investors left unaware about impact of successful claim.

Whistl UK Ltd (“Whistl”) this week announced it is seeking £600m-plus in damages from Royal Mail Group Limited (“Royal Mail”) and its parent company International Distributions Services plc (“IDS”) relating to Royal Mail’s anti-competitive behaviour towards Whistl.

Postal regulator Ofcom imposed a record £50m fine on Royal Mail in 2018 for breaching competition law when Whistl – then known as TNT Post – attempted to become its first end-to-end competitor in wholesale mail delivery.

The fine came after Whistl complained and following an investigation Ofcom ruled that Royal Mail abused its dominant market position in 2014 with price changes that specifically targeted competition from Whistl. The regulator found that Whistl would be hit with higher charges than its competitors in the areas where Whistl still relied on Royal Mail for deliveries.

Royal Mail made three failed attempts to challenge the outcome, including in the Supreme Court, before paying the fine.

Although Whistl has been – and remains – prepared to reach a settlement with Royal Mail, no such agreement has been achieved. Whistl is willing to negotiate a settlement, especially as it is one of Royal Mail’s largest trading partners. However, that can only happen if Royal Mail is prepared to negotiate seriously and agree to a realistic offer.

Nick Wells, Executive Chairman, Whistl, ‘We are very confident as to the merits of our claim against Royal Mail following its anti-competitive behaviour and the level of damages we expect, now in excess of £600m and accruing interest at £50m per year. Royal Mail’s behaviour is symptomatic of a historical culture within the organisation which has been prepared to deliberately abuse its dominant position and then brazenly deny any wrongdoing, regardless of the impact on its stakeholders including mail users, staff and shareholders. We are determined to pursue Royal Mail for fair compensation for the damage it has caused, and we hope that by doing so we may encourage Royal Mail to abandon its long-term culture of non-compliance and denial.’

‘Although Whistl’s Board remains open to serious discussions with Royal Mail, it seems increasingly likely that a court will now need to determine the award. Whistl is in no doubt as to the validity of its claim and the quantum of damages. The value of the claim is based on business planning documents which were stress-tested by multiple due diligence experts in 2013 and which have been further substantiated by actual market developments since then.

Whistl suspects that IDS’ shareholders and bondholders may not fully appreciate the financial consequences of Royal Mail’s refusal to accept responsibility for its actions. For example, the recent bond offerings by IDS in September failed to include a single reference to the claim.

Failure to agree a settlement will result in a lengthy and costly trial with the inevitable distraction for Royal Mail’s management team from delivering their turnaround plans. Whistl encourages IDS’ investors to seek answers from the company’s Board to the following questions in order to make their own assessment. If Royal Mail has failed to disclose a claim for more than £600m – a figure that continues to rise, as interest accrues at £50m per year – what else is Royal Mail failing to disclose to the market and IDS shareholders?

Even after the Supreme Court decision on 7 June 2022, the stated materiality of risk reported remained unchanged. How can that be correct in light of that ruling?
How much has the Board spent in legal fees relating to its anti-competitive behaviour to date?
How much additional cost and time could a protracted litigation process cost and ultimately impact on the profitability of the business?
What is management doing to change an entrenched culture across Royal Mail which has led to this situation?

Background on Whistl’s Damages Claim - Whistl commenced a final-mile delivery trial in London in 2012, recognising an attractive market at that time in which it could compete directly with Royal Mail. In 2013, Whistl reached an agreement with LDC to fund the expansion of final-mile delivery operations to other urban areas across the UK – becoming the first company to challenge Royal Mail’s monopoly in the large-scale delivery of bulk mail. In January 2014, aware of Whist’s intentions, Royal Mail notified the market of its intention to introduce differential pricing and changes to zonal tilt. These actions led to LDC withdrawing its funding for Whistl’s investment. This withdrawal of funding meant Whistl was forced to suspend its rollout and ultimately discontinue its final-mile delivery operations in May 2015. Whistl was forced to write off the investment it had already made and close a number of operations and premises associated with its final-mile delivery plans.

Whistl made a formal complaint to Ofcom in January 2014 claiming that Royal Mail’s actions constituted an abuse of its dominant position within the market. In 2018, Ofcom upheld Whistl’s complaint and fined Royal Mail a record £50m for a serious breach of competition law. This fine, the highest ever imposed by the regulator, was eventually paid in August 2022 (totalling c. £52m, with interest) after the conclusion of a lengthy and unsuccessful appeal process in the Competition Appeal Tribunal, the Court of Appeal and the Supreme Court.

In light of Ofcom’s ruling in 2018, Whistl filed a damages claim for the significant financial impact on its business as a direct result of Royal Mail’s anti-competitive actions. The claim was put on hold until 2022 while Royal Mail attempted to appeal. Whistl remains willing to engage constructively with Royal Mail to conclude an out-of-court settlement, a process which courts typically encourage prior to proceedings commencing.

The trial is expected to begin in 2024 following a case management hearing.