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Royal Mail's request to suspend bulk mail compensation during industrial action PDF Print E-mail
Wednesday, 27 June 2007

Postcomm has agreed to Royal Mail’s request to suspend until the end of its current financial year the payment of compensation to bulk mail customers, and to ensure that the company is not subject to a downward adjustment to its allowed revenues (known as the ‘C factor’), where industrial action has taken place and quality of service figures have dropped.

The reason for this decision is that Postcomm wishes to ensure that - against a background of Royal Mail’s current financial position, including its substantial pension deficit - the possibility of having to pay compensation and/or earning reduced revenue next year does not discourage the company from taking the steps needed to modernise its business, which will be to the benefit of all mail users.

Postcomm’s agreement to these suspensions is subject to some important safeguards for customers:

  • a final decision on the amount of any relief will not be made until after the end of this financial year (31 March 2008) when Royal Mail’s final quality of service figures will be known. In making its decision at that point, Postcomm will expect Royal Mail to be able to demonstrate that the industrial action (a)arose as a result of carrying out its transformation plans and not for some other reason, and (b) had a direct causal link to quality of service failures.
  • after the end of the financial year, Postcomm will convene an open meeting at which Royal Mail will present the main points in its application. Participants will be able to ask for further explanation of the justification for agreement by Postcomm to Royal Mail’s request.

It is important to note that this money is not a ‘fine’ payable to the Treasury; it is money that would otherwise have benefited Royal Mail’s customers.

  • In the case of bulk compensation, it is money that would have been payable to companies who use Royal Mail’s bulk mail products.
  • The ‘C factor’, meanwhile, is any adjustment to Royal Mail’s allowable revenue under the price control that would – for some products, including stamps - result in lower prices next year than would otherwise be the case.

Royal Mail says that the total amount of money at issue could be as much as £300m.

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