A £1.2bn class action claim accusing the owner of Royal Mail of abusing its “dominant position” in the market for sending bulk mail has been given the green light to proceed to trial by UK competition authorities.
Bulk Mail Claim Ltd (BMCL), a recently formed company representing an estimated 290,000 customers who allege they were overcharged as a result of Royal Mail’s behaviour, has won clearance to proceed with its legal challenge from the Competition Appeal Tribunal (CAT).
Under the UK competition regime, any class action must first secure approval from the CAT, which looks at issues including projected legal fees and the ability of the complainant to fund the case through to the end of the trial. It examined the claim over two days earlier this week.
International Distribution Services (IDS), which owns Royal Mail, will now face the prospect of a trial after the CAT issued what is known as a collective proceedings order.
Bulk mail is typically sent by businesses and organisations including retailers, utility companies, charities and publishers. It includes council tax and bank statements, charity fundraising appeals, weekly magazines and energy bills.
The action by BMCL argues that businesses and organisations that bought bulk mail services after 2014 suffered owing to anti-competitive behaviour by Royal Mail. It argues that Royal Mail prevented competition, pushing up prices for the collection, sorting and delivery of letters in bulk.
Andrew Wanambwa, a partner at Lewis Silkin, the law firm representing BMCL, said: “Royal Mail’s abuse of its dominant position in the bulk mail market resulted in the overcharging of hundreds of thousands of bulk mail customers, including local authorities, charities and small businesses. The granting of a collective proceedings order by the tribunal means that this claim can now proceed to trial and we are one step closer to securing compensation for those affected.”
In 2018, the industry regulator, Ofcom, fined Royal Mail £50m after it found the company “broke the law by abusing its dominant position in bulk mail delivery”. Ofcom said: “Royal Mail’s behaviour was unacceptable and it denied postal users the potential benefits that come from effective competition.”
Royal Mail has tried unsuccessfully to appeal against Ofcom’s decision.
A separate £600m claim brought by Whistl, which gave up on its attempt to create a rival service to Royal Mail in 2015 with the loss of 2,000 jobs, was settled last month.
A spokesperson for Royal Mail said: “Royal Mail believes Bulk Mail Claim Ltd’s claim is without merit and we will defend it robustly.”
Bulk Mail Claim has estimated that the value of the losses incurred by customers runs to £1.2bn, a figure contested by Royal Mail. The CAT will assess and decide in due course whether this estimate of loss is accurate.
The class action comes as the billionaire Czech energy tycoon Daniel Křetínský’s EP Group attempts to buy IDS in a £3.57bn deal. Clearance of the deal is being held up by regulators in Romania, where EP Group has investments.
The company had hoped to complete the takeover in the first quarter of this year. However, on Wednesday the company said that while discussions with Romanian authorities had been “progressing well” and there had been no indication of any substantive issues that might stop clearance, the deal was now likely to be completed in the second quarter.