Royal Mail facing fine of up to £160M as subsidiary investigated by French competition authorities

The French arm of its GLS business is one of Europe’s largest ground-based parcel delivery services

Royal Mail was today facing a fine of up to £160 million after its parcels operation in France was caught up in a French competition probe.

The delivery giant revealed it had received a notice from the French competition authority — Autorité de la Concurrence — regarding an alleged breach by the French arm of its GLS business, one of Europe’s largest ground-based parcel delivery services.

GLS contributed about 17 per cent of Royal Mail’s £9.45 billion revenue for the year to March 30. The network covers 37 countries but its main markets are Germany, Italy and France. “We are currently considering the notice received from the French regulator,” it said. “Given the early stage of this matter, we cannot yet determine the amount or range of potential loss; however, it is possible that it could be material.”

Both FedEX and TNT Express have also been named in the investigation, the latter admitting it has been co-operating with French authorities since the probe began in 2010.

A spokesman for Royal Mail would not comment on how long the company has been aware of the investigation but said details were not included in the prospectus for its controversial stock market flotation last year.   Analysts at Espirito Santo said any fine would be relatively insignificant for Royal Mail but would represent worse news for TNT Express.

“French antitrust law permits a maximum fine of 10 per cent of worldwide turnover. This would lead to a worst-case scenario of around a £160 million fine for Royal Mail (10 per cent of GLS revenue) and about a €670 million (£529.5 million) fine for TNT Express (group revenue of €6.7 billion).” Shares in the company fell 5.1p to 483.6p today following news of the probe.

Last week, a committee of MPs said taxpayers may have lost out on about £1 billion from its flotation. Royal Mail shares were priced at 330p, but jumped as high as 618p shortly after.

The Business, Innovation and Skills Committee criticised Mr Cable and his department for relying too much on its City adviser, Lazard, which it said gave poor guidance to the Government and was too focused on getting the share sale done and not enough on gaining maximum value for the taxpayer.

Adrian Bailey, the Labour MP who chairs the committee said: “The Government cannot blithely dismiss as ‘froth’ our committee’s concern that the low issue price of this prime public asset has cost the taxpayer around a billion pounds.”

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