France fine threat for Royal Mail

This Is Lancashire: Royal Mail faces being fined by the French competition watchdog over its parcels business GLS France Royal Mail faces being fined by the French competition watchdog over its parcels business GLS France

Royal Mail is facing a fine estimated by analysts at up to £160 million after it announced that its loss-making French parcels operation is being investigated by competition authorities.

The FTSE 100 firm, privatised last year, disclosed that it was facing allegations of "breaches of antitrust laws" by GLS France.

It said the notice from the Autorite de la Concurrence was in connection with a broader investigation into "alleged activities within the industry" in the country. Rival TNT Express issued a similar statement.

Royal Mail said: "We are currently considering the notice received from the French regulator. 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."

GLS is a Europe-wide parcel delivery service acquired by Royal Mail in 1999, that bought its French unit - which was originally founded in 1979 - the following year.

Results for the 12 months to the end of March this year showed that the wider GLS business reported operating profits of £108 million on revenue of £1.65 billion.

But they showed that GLS France, which is in the midst of a turnaround programme, made a 27 million euros (£21 million) loss, though this had been reduced by 3 million eu ros (£2.4 million) from the year before as the business cut costs.

Analysts at Espirito Santo Investment Bank said the worst-case scenario from the regulatory probe could see GLS fined 10% of turnover, or £160 million, but that this would still be "relatively insignificant" for the wider Royal Mail group.

TNT Express said it had received a statement of objections from the French competition authority in relation to alleged anti-competitive behaviour in the French parcels delivery sector, including TNT Express France.

The company said it had co-operated with the investigation since it started in 2010, and said it could not rule out being fined "for a material amount".

A spokesman for the French regulator confirmed that it was carrying out an "ongoing investigation" in the parcel delivery sector.

But he said he could not give the names of the companies involved nor details of the alleged practices being investigated.

Royal Mail shares - which soared to more than 600p after it was floated last year at 330p - have fallen back from that peak and dropped below 500p more recently. They slid again in the wake of the latest announcement.

Analysts at Shore Capital placed their "buy" recommendation under review.

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