Postcomm issued a £2.16m fine and an enforcement order, claiming the company is not opening up to competition quickly enough.
Royal Mail has a duty to allow rivals access to the "last mile" delivery market, an area in which it remains hugely dominant, Postcomm said. The watchdog believes Royal Mail is exploiting its monopoly after complaints by three competitors - Express Ltd, TNT Mail UK and UK Mail.
Postcomm's chairman, Nigel Stapleton, said: "We cannot allow any action by Royal Mail that unfairly keeps competitors out of the market."
Royal Mail was hit with a £11.7m fine for late and lost post last week. Its chairman, Allan Leighton, said yesterday: "This is a shoddy report from a grandstanding regulator looking to micro-manage the entire postal industry. It is full of unsubstantiated and subjective views, which are not based in fact."
Royal Mail feels it is being punished unfairly for being a successful business. It charges fees to competitors for delivering their post - deals entered into freely by rivals, Mr Leighton said. He added: "This is almost Pythonesque. By Postcomm's line of thinking, I have absolutely no doubt that later this year the regulator will fine us for delivering the best quality of service ever, due to the fact that they decide it's anti-competitive.
"We will exhaust every possible route to ensure this ridiculous penalty is wiped out."
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