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Royal Mail freedom to set prices ‘could drive businesses to cheaper alternatives’

27 Mar 2012 2:16 BST Back
Royal Mail freedom to set prices ‘could drive businesses to cheaper alternatives’
DMA News

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Postal regulator Ofcom announced today that Royal Mail is free to set its prices for most of the letters and parcels it delivers under a new seven-year framework. 

Royal Mail has already announced significant prices rises to the cost of consumer products, including a 14-pence rise in the cost of first and second class stamps. 

Moya Greene, Royal Mail’s CEO, said:  

“We know how hard it is for households and businesses when our economy is as tough as it is now. No one likes to raise prices in the current economic climate but, regretfully, we have no option.”

The commercial direct mail sector has responded with dismay to Ofcom’s granting of pricing powers to Royal Mail.

In December, concerns about the potential impact of these changes prompted the DMA and the Postal Trade Association Forum to convene a summit for businesses and organisations affected by the proposals. Representatives at the summit reached agreement on a number of critical points in responding to the consultation. As well as voicing fears about the potential for abuse of market dominance and threats to competition, all doubted the projections for future mail volumes and Royal Mail’s ability to meet efficiency and cost reduction targets.

Mike Lordan, chief of operations for the DMA, said

“We’re very disappointed that Ofcom’s decision doesn’t reflect the concerns raised by the Direct Marketing Association and other respondents to their consultation to strengthen the necessary safeguards to give commercial bulk mail users continued confidence in using mail. 

“Royal Mail now has the freedom to change, prices and terms and conditions without any statutory notice requirement. Commercial users now have little in the way of power to dispute any changes that affect their business. 

“We hope that Royal Mail uses its new commercial freedom responsibly by consulting and listening to its customer before it implements any changes. Otherwise, granting Royal Mail the ability to raise its prices without consultation will drive more and more businesses away from mail to cheaper alternatives, which is concerning as mail volumes are already declining year on year.” 

 

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