Select Committee on Constitution Minutes of Evidence

Supplementary memorandum by Royal Mail Group plc


  At the hearing of the House of Lords Constitution Committee held on 11 June 2003, Royal Mail made several references to the powers of determination and direction contained within Royal Mail Group's Licence granted by Postcomm. These powers effectively provide Postcomm with the rights to make unilateral decisions that may have a significant effect on Royal Mail's operations and finances. As the Committee is aware, apart from the "nuclear options" of Competition Commission or Judicial Review, Royal Mail is unable to challenge these determinations or directions and in many cases, the option of Competition Commission is also not available. This leaves Royal Mail with only the limited option of Judicial Review, the use of this avenue itself being extremely difficult.

  Royal Mail has set out, for the Committee's information the details from the Licence where such powers exist. For ease of reference, however, the four key areas where the impact on the business is most significant are listed first. Within these four areas Postcomm can take major decisions on Royal Mail's future operations and costs. They deal with: Compensation Scheme; Complaints Handling Procedure; Access Arrangements; and, Postcode Address File Code of Practice. Moreover, Condition 19 relating to postal prices has within it many powers of determination and approval and issues relating to this Licence Condition are very significant.

  The remainder of the powers are largely concerned with relaxation of licence requirements, reliant upon the application of the licensee. In terms of significance, they range from the potentially very significant (for example paragraph 17 within Condition 19 where, although Royal Mail may be in extremely serious financial difficulties, Postcomm could refuse the relaxation of the controls and again Royal Mail would be unable to appeal), to more minor issues (Condition 3, allowing Postcomm to decide how Royal Mail's statement is published on why it has not implemented its contingency plan).

  In terms of the recommendation for a relevant independent appeals panel, as set out in Royal Mail's submission to the Committee, this would primarily be a means of providing relevant checks and balances on the four major issues, together with the right to challenge should Postcomm reject Royal Mail's request for relaxation of controls. The information is provided to inform the Committee of the wide-ranging powers that the regulatory body currently has.

  Under its Licence and with the current arrangements, once Postcomm has made its decision, Royal Mail has no right of appeal against it, save the Judicial Review route, as indicated, above.


Condition 4—Services standards of service and compensation

Para 13

  If agreement is not reached as to the Services Standards of Service Compensation scheme then Postcomm may determine the terms of this scheme.

  Potential Financial Impact—Very Significant.

Condition 5—Complaint handling

Para 3

  If no agreement exists as to a complaints handling procedure Postcomm may determine such a procedure in writing.

  Potential Financial Impact—Minor.

Condition 9—Access to the Licensee's postal facilities

Part 2, 1-7

  If access agreement cannot be reached between Royal Mail and other operators then Postcomm will determine the terms and conditions for this access to be secured.

  Potential Financial Impact—Extremely Significant.

Condition 20—Access to Postcode Address File

Para 4

  Postcomm may determine the terms of the PAF Code of Practice if there is no agreement between Royal Mail and Postwatch within 6 months of the commencement of the licence (there was not) and if they give at least 28 days notice during which time Royal Mail can make representations.

  Potential Financial Impact—Medium.


Condition 1—Interpretation and construction

Para 3

  Direct as to the geographical or other conditions that would lead to an exception to the Universal Service Obligation.

Condition 3—General universal service obligations

Para 1

  Postcomm may direct on the provision of post boxes and other access points so as to meet the reasonable needs of customers.

Para 7

  If Royal Mail does not implement its contingency plan to protect the provision of the Universal Service, it is obliged to publish a full statement of its reasons why it has not, and Postcomm will determine the manner in which this statement is published.

Condition 4—Services standards of service and compensation

Para 6

  Postcomm may revoke Royal Mail's obligation to use all reasonable endeavours to provide the scheduled services and meet the scheduled standards.

Para 20

  Amendment to the Services Standards of Services Compensation scheme may be determined by Postcomm if agreements are not reached.

Condition 14—Accounting separation

  The criteria for the preparation of accounting information to be presented to Postcomm shall be as laid out in Para 2, unless Postcomm determines otherwise in writing.

Condition 17—Provision of information to the Council

Para 4

  Postcomm may determine that information requested by Postwatch be delivered to Postwatch by the Licensee.

Condition 19—Prices for postal services

Para 1

  Postcomm may revoke Royal Mail's obligation to continue to offer and provide the Regulated Services and may decide whether the terms other than price on which Regulated Services were offered and provided are more or less beneficial to one date as compared with another.

Para 7(b)

  Postcomm may determine a representative price for any Controlled Service for year t=0 (bpprt=0) at which postal packets were conveyed for a price range.

Para 7(c)

  Postcomm may determine a representative price for any Controlled Service for year t=1 and subsequent years (rpprt) at which postal packets were conveyed for a price range.

Para 11

  Postcomm may approve Royal Mail's application to be exempted from the conditions regarding Tariff rebalancing and Price Range price variation for Controlled Services.

Para 13

  Postcomm may approve Royal Mail's application for a change to the criteria by which the price or prices for a Controlled Service are determined.

Para 15

  Postcomm may approve Royal Mail's application to change their obligation to provide Unpriced services.

Para 16

  Postcomm may approve Royal Mail's application to change their obligation to set the prices for Miscellaneous services so as to meet the conditions stated.

Para 17

  Postcomm may approve Royal Mail's application for the relaxation of Condition 19. [This is significant as should Royal Mail apply for relaxation and Postcomm reject then Royal Mail has no appeal, even though Royal Mail may be in extreme financial difficulties.]

Para 19

  Postcomm may approve Royal Mail's application to change their obligation to offer the Controlled Services at the prices shown in the pricing schedule.

Stephen Agar

Director of Regulation

Royal Mail Group plc

3 July 2003

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