Royal Mail share price: Group admits breaking competition law

Royal Mail Group (LON:RMG) and a reseller of its parcel delivery services have admitted breaking competition law by means of an anti-competitive agreement, industry regulator Ofcom has said. The news comes after the privatised postal operator reported performance in line with expectations in July.

Royal Mail’s share price has surged in London this Thursday, having gained 1.33 percent to 220.30p as of 10:50 BST. The stock is outperforming the FTSE 250 which has climbed marginally higher is currently 0.15 percent better off at 20,084.66 points. The group’s shares have given up more than 53 percent of their value over the past year, as compared with about a two-percent fall in the mid-cap index.

Royal Mail broke competition law

Ofcom announced in a statement this morning that Royal Mail and the SaleGroup, which trades as Despatch Bay, and is a reseller of the postal operator’s business parcel delivery services, had admitted being part of an illegal anti-competitive agreement. The FTSE 250 group  reported to the Competition and Markets Authority (CMA) last year that its ParcelForce division had an agreement with Despatch Bay which meant that neither company would offer parcel delivery services to each other’s business customers. The CMA handed the matter over to Ofcom which investigated the agreement.

“Anti-competitive agreements like the one between Royal Mail and the SaleGroup are designed to restrict competition, and they often lead to customers paying higher prices as a result,” Gaucho Rasmussen, Ofcom’s Director of Investigations and Enforcement, commented in the statement. “This kind of behaviour is a serious breach of competition law and unacceptable.”

The regulator, however, said that Royal Mail will not be fined over the breach, provided that it continues to cooperate fully with Ofcom’s investigation.

Analysts on mid-cap postal operator

The 14 analysts offering 12-month targets for the Royal Mail share price for the Financial Times have a median target of 240.00p, with a high estimate of 325.00p and a low estimate of 150.00p. As of September 13, the consensus forecast amongst 17 polled investment analysts covering the mid-cap company advises investors to hold their position in the company.