The communications regulator has fined Royal Mail £50 million for a “serious breach” of competition law.
Ofcom said the company abused its dominant position by discriminating against its only major competitor for delivering letters, Whistl.
The penalty follows an investigation into a complaint by Whistl, one of Royal Mail’s wholesale customers.
The complaint was linked to changes Royal Mail made to its wholesale customers’ contracts in 2014, including price increases.
The price rises meant that any of Royal Mail’s wholesale customers seeking to compete with it by delivering letters in some parts of the country, as Whistl was, would have to pay higher prices in the remaining areas - where it used Royal Mail for delivery.
Following notification of these new prices, Whistl suspended plans to extend delivery services to new parts of the UK.
Ofcom’s investigation found Royal Mail’s actions amounted to “anti-competitive discrimination against customers, such as Whistl, who sought to deliver bulk mail”.
Jonathan Oxley, Ofcom’s competition director, said: “Royal Mail broke the law by abusing its dominant position in bulk mail delivery.
“All companies must play by the rules. Royal Mail’s behaviour was unacceptable, and it denied postal users the potential benefits that come from effective competition.”
The regulator added that Royal Mail’s conduct was “reasonably likely” to put other companies at a competitive disadvantage and restrict competition.
It found Royal Mail in breach of Section 18 of the Competition Act and Article 102 of the Treaty for the Functioning of the European Union, which prohibits a firm from abusing its dominant position.
Royal Mail said it will appeal against Ofcom’s decision, claiming its price changes were “never implemented or paid”.
The firm said in a statement: “Royal Mail is very disappointed by Ofcom’s decision to impose a fine of £50 million. Royal Mail strongly refutes any suggestion that it has acted in breach of the Competition Act, and considers that the decision is without merit and fundamentally flawed.
“The company will now lodge an appeal with the Competition Appeal Tribunal within the next two months. No fine is payable until the appeals process is exhausted.”