Review of the second class safeguard caps 2019: Citizens Advice’s response to Ofcom’s consultation.
As the statutory consumer advocate for postal consumers in England and Wales, Citizens Advice welcomes the opportunity to respond to Ofcom’s consultation on the Second Class safeguard caps. Overall, we welcome Ofcom’s approach.
We consider the specific proposals on the safeguard caps to be proportionate and reasonable, and we have responded under to each question in the consultation under the headings in this document. Our key points are:
Post remains an essential service. Despite structural decline in letters volumes, consumers (particularly vulnerable groups) rely on post.
As an essential service, it is important that post remains affordable for all. This is particularly important for digitally excluded people who are unable to respond effectively to price increases by using digital alternatives.
We would welcome further work by Ofcom to establish whether a discount scheme (limited by specific criteria) would mitigate the risk of certain vulnerable consumer groups being excluded from using post.
As the near-monopolist in the letters market and the dominant player in the single piece parcels market, competitive constraints on Royal Mail are insufficient to protect vulnerable consumers from price increases.
In our view, the safeguard caps therefore remain essential. They can also help address perceptions that stamp prices are increasing excessively. Ofcom data shows that people routinely overestimate the cost of stamps.
We consider Ofcom’s specific proposals on the safeguard caps to be proportionate and reasonable.
However, we have concerns that under the proposed basket cap, Royal Mail could structure the pricing of its products to take advantage of segments of the small parcel market that may not be subject to significant competitive constraints due to factors outlined in Ofcom’s analysis.
We encourage Ofcom to monitor the prices of all products within the basket cap to assess whether consumers face unreasonable and unaffordable price increases for specific products for which there may be no reasonable competitive alternative.
As the regulator, Ofcom focuses on competition and consumer outcomes. Our recent research into Royal Mail’s redirection service (a monopoly, USO service) found that the price of the cheapest package has risen by 74% in the last 6 years - and the cost puts many poorer consumers off using it. We would welcome any further work by Ofcom to examine whether a similar price cap or further interventions could provide a solution for redirection and other USO products.