February 21, 2014 / 6:16 PM / in 4 years

UPDATE 1-UK'S Ofcom investigating TNT Post complaint against Royal Mail

Feb 21 (Reuters) - Britain’s Office of Communications (Ofcom) is investigating a complaint by the country’s second-largest postal firm, TNT Post UK, against price increases planned by Royal Mail Plc for its wholesale mail contracts.

Royal Mail said in January that it would increase tariffs on the contracts, used by 31 of its biggest wholesale customers, because of a decline in letter volumes. ()

TNT Post, a unit of Dutch mail group PostNL, collects and sorts mail in certain parts of Britain before handing it over to Royal Mail for delivery through an agreement known as an Access contract.

“Royal Mail believes TNT Post UK’s complaint is unfounded,” the recently privatised company said in a statement, adding that it would cooperate fully with the regulator’s investigation.

The price rises of between 0.3 percent and 1.0 percent above the inflation rate are set to go into effect from March 31.

Royal Mail said on Friday the increases were in keeping with Ofcom’s guidelines from March 2013 stipulating that Royal Mail could amend the pricing of Access contracts to ensure they reflected market costs.

A Post NL spokesman confirmed that the complaint had been made, but declined to provide details.

The contracts account for about half of the UK’s inland-addressed mail and more than 70 percent of business mail, according to Royal Mail’s website.

In April 2012, TNT Post began to sort and deliver mail in Manchester and some parts of London without using Royal Mail’s network.

Royal Mail, which traces its origins back to 1516, says such competition could threaten its ability to sustain a six-days-a-week universal service.

TNT Post, it says, could target only the most profitable parts of the market and ignore the rest.

News of the Ofcom investigation comes after TNT Post said on Wednesday that it would double its London workforce to 2,000 this year, further challenging Royal Mail’s market dominance.

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