Advances in Regulatory Economics series
Edited by Michael A. Crew and Paul R. Kleindorfer
* Stephen Gibson† and Nancy Race‡ 42 43 1 INTRODUCTION Market studies are widely used by UK economic regulators1 to assess the need for regulatory intervention and to support their regulatory proposals. Conducting a market study of the postal sector was one of the key recommendations of the independent review of the UK postal services sector (the Hooper Review).2 Postcomm has undertaken a series of market studies3 of the different markets in which Royal Mail is active as part of its work to establish the new regulatory framework to be in place from April 2012. This is (to the authors’ best knowledge) the first market study to be undertaken of any postal market and was a major two-year exercise utilizing a significant body of internal and external evidence and analysis. The packets and parcels services4 (PPS) market study is part of this wider study which includes wholesale and retail Letter and Large Letter markets and international mail markets. The overall objective is to inform the setting of appropriate regulation by: (a) formally defining a set of relevant markets and (b) determining the extent of Royal Mail’s market power in these markets. This chapter is organized as follows. Section 2 sets out the analytical framework and evidence base used in the market study. Section 3 sets out the analysis of market definition in the PPS market. Section 4 sets out the market power analysis. Section 5 sets out the regulatory consequences of the market definition and market power findings. Section 6...
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