2000 Chapter 26

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These notes refer to the Postal Services Act 2000
which received Royal Assent on 28 July 2000 (c.26)

Postal Services Act 2000

EXPLANATORY NOTES

INTRODUCTION

1. These explanatory notes relate to the Postal Services Act which received Royal Assent on 28 July 2000. They have been prepared by the Department of Trade and Industry in order to assist the reader of the Act and help inform debate on it. They do not form part of the Act and have not been endorsed by Parliament.

2. The notes need to be read in conjunction with the Act. They are not, and are not meant to be, a comprehensive description of the Act. So where a section or part of a section does not seem to require any explanation or comment, none is given.

SUMMARY

3. The Postal Services Act 2000 provides for the Post Office to be converted from a statutory corporation to a public limited company formed and registered under the Companies Act 1985, with ownership remaining with the Crown.

4. The Act introduces a new system of licensing and regulation for postal service operators/providers operating in the area of the market currently reserved largely as a monopoly for the Post Office. This is called the reserved (or licensed) area. The Act gives the independent regulator, the new Postal Services Commission (the Commission), new duties and powers to protect the interests of users of postal services. In particular, it enshrines the universal service obligation in primary legislation and makes it the duty of the Commission to ensure the delivery of this universal service at a uniform tariff. Subject to this duty, the Commission is required to further the interests of users, wherever appropriate by the promotion of greater competition in postal markets. The Commission will be able to promote competition through recommending changes to the scope of the reserved area and by permitting licensed competition within the reserved area. The Commission will also have responsibility for setting quality standards and regulating prices.

5. Consumers are given greater protection through replacing the Post Office Users' National Council with the Consumer Council for Postal Services. The creation of this body brings consumer representation in the postal services market into line with the provision for other utilities.

BACKGROUND

6. This Act implements measures proposed in the White Paper, Post Office Reform: a world class service for the 21st century, published on 8 July 1999. The White Paper sets out the Government's proposals to modernise the Post Office and postal services markets through a number of key reforms. The reforms are intended to:

• introduce a more arm's-length commercial relationship with Government, including the approval of a five year strategic plan within which the Post Office and the future Post Office company have greater freedom to develop new products and services; invest; price commercially; and borrow for growth investments;

• create a new independent regulator, the Postal Services Commission, to promote and protect customer interests, regulate prices, and promote competition;

• strengthen consumer representation through the restructuring of the Post Office Users' National Council which will become the Consumer Council for Postal Services;

• increase resources for the Post Office company, by more than doubling the proportion of post tax earnings which the Post Office company can use for investment;

• convert the Post Office to a plc to underline the commercialisation of the business;

• protect the universal service obligation and uniform tariff;

• maintain a commitment to a nationwide network of post offices with the Government for the first time setting minimum criteria for access to counters' services.

7. A number of these measures have been implemented already, through administrative action. These include giving greater commercial freedom to the Post Office Board to run the business within the terms of an agreed five-year strategic plan, increasing the proportion of profits that the Post Office can use for investment and giving the Post Office greater freedom to borrow. The Postal Services Regulations 1999 (SI 1999/2107) completed the implementation of the EU Directive into UK law and created a Postal Services Commission. The aim of the Postal Services Act 2000 is to enable Government to complete this package of reforms. The reforms comply with the requirements of the EU Postal Services Directive (97/67/EC). The Act will re-enact those obligations set out in the Regulations.

8. The Post Office is currently a publicly owned, statutory corporation, established under the Post Office Act 1969. That Act and the British Telecommunications Act 1981 set out the responsibilities of Government towards postal services and give the Post Office its powers and duties. Since the 1969 Act became law the postal services market has developed significantly, and the Postal Services Act 2000 redefines the roles of the Government and the Post Office to reflect those changes. The Postal Services Act 2000 will enable the Post Office to be transformed into a public limited company formed and registered under the Companies Act 1985 and subject to normal company law. The Memorandum and Articles of Association of the Post Office company will be published in the normal way. All the shares in the new company will be owned by the Crown. There can be no disposal of shares without further primary legislation, except in the case of a share sale or swap between the Post Office company and a partner to cement a commercial alliance, which will require approval from both Houses of Parliament. Similar restrictions apply to the disposal of shares in any subsidiary company directly engaged in providing the universal postal service.

9. Decisions relating to the Post Office monopoly are currently taken by the Secretary of State for Trade and Industry under provisions in the British Telecommunications Act 1981. The Postal Services Regulations 1999, tabled on 26th July 1999, designated the Postal Services Commission as a new independent regulator for postal services, responsible for advising the Secretary of State on postal issues. Provisions in the Act replace this advisory body with a new fully independent regulatory body, along the lines of those in the privatised utility industries (e.g. Office of Telecommunications), by giving the Commission statutory duties and powers to issue licences, to regulate prices, to enforce the monopoly, to introduce greater competition and to maintain a universal service at a uniform tariff.

10. At present, the Post Office has the exclusive privilege of delivering mail costing less than £1 (or weighing less than 350 grams) within the UK, subject only to a handful of exceptions provided through niche and class licences. The Act makes it necessary for any person operating in the reserved area, including the Post Office company, to be licensed by the Postal Services Commission. The Commission will be responsible for recommending the level of the reserved area in future and judging how far to open up the market to further competition. It will also be given powers of investigation and enforcement, including the power to impose monetary penalties for breach of licence conditions.

11. The Post Office Users' National Council, which represents consumer interests, is replaced by the Consumer Council for Postal Services. The Bill provides this new body with a central role in the new regulatory framework, monitoring service standards that users can expect and acting as a focus for consumer issues and complaints. Its powers are strengthened, in particular through wider access to relevant information from the Post Office company and other licence holders.

12. The main pieces of legislation currently governing the Post Office are the Post Office Acts 1953 and 1969 and the British Telecommunications Act 1981. This Act seeks to consolidate the postal services provisions in these Acts, by repealing or redrafting relevant sections, to provide a more simple and modern legal framework in which the Post Office company and other licensed persons can operate.

COMMENTARY ON SECTIONS

Part I Introductory

Section 1: The Postal Services Commission

13. Section 1 creates the Postal Services Commission. This body will be the independent regulator of licensed postal operators and replaces the advisory body, also called the Postal Services Commission, which is abolished by the Act. In these Notes, references to "the Commission" are to the Commission established by section 1.

Section 2: The Consumer Council for Postal Services

14. Section 2 creates a new consumer body to be known as the Consumer Council for Postal Services. The existing user-representative bodies in the UK, which are limited in their scope to representing users of Post Office services, are abolished. In these notes, references to "the Council" are to this Council.

Section 3: Duty of the Commission to ensure provision of a universal postal service

15. Section 3 sets out the primary duty of the Commission, which is to exercise its functions in a manner best calculated to ensure the provision of a universal postal service. In pursuance of this duty it has power to require a person licensed to provide postal services under Part II of the Act ("a licence holder") to provide a universal service or part of such a service. This is to be read with section 5 which sets out other duties of the Commission.

Section 4: Provision of a universal postal service: meaning

16. Section 4 sets out the meanings of a universal postal service and of a universal service provider. These definitions comply with those required under the EU Postal Services Directive (97/67/EC). A universal service provider is described for the purposes of this Act as any person who the Secretary of State has notified to the European Commission as being a provider of universal postal services in the UK and on whom the Secretary of State has served a notice informing him of that fact. It also provides that in the event that the Directive lapses (and with it the requirement to notify the Commission of universal service providers) that references in the Act to a universal service provider are to be construed as references to any person who is treated by the Secretary of State as a universal service provider for the purposes of the Act and on whom the Secretary of State has served a notice informing him of that fact.

Section 5: Other duties of the Commission in the consumer interest

17. Subject to the duty to ensure the provision of a universal postal service as set out in section 3, section 5 places a duty on the Commission to exercise its functions in a manner which will further the interests of users of postal services, wherever appropriate by promoting competition.

18. In performing these duties the Commission is to have regard to, amongst other things, the interests of the disabled or chronically sick, pensioners, those on low incomes, and those located in rural areas. It also provides for the Commission to have regard to the promotion of efficiency and economy on the part of postal operators; and the need to ensure that they are able to finance activities authorised or required by their licences.

Part II Licences for Postal Services

Section 6: Restriction on provision of postal services

19. The Post Office currently has the exclusive privilege of delivering letters within the United Kingdom with a value of less than £1 or weighing less than 350 grams and it is an offence to infringe the privilege.

20. Under the Act, the monopoly will be replaced by a system of licensing. Licence holders will be able to convey, in accordance with the terms of their licence, letters worth less than £1 or weighing less than 350 grams (see section 7). Subsection (2) makes it an offence to convey letters without the necessary licence.

21. Subsection (1) establishes that no person shall convey a letter without a licence granted by the Commission. Exceptions to this prohibition are set out at section 7.

22. Subsections (2) to (5) create three methods of enforcing the prohibition in subsection (1). The first is to bring criminal proceedings for an offence under subsection (2). The second is to bring civil proceedings for an injunction interdict or other appropriate relief or remedy under subsection (4). Criminal prosecutions can only be instituted by or on behalf of the Commission or the Secretary of State or, in Scotland, will be dealt with by the Lord Advocate. (The Lord Advocate generally controls prosecutions in Scotland.) Civil proceedings under subsection (4) may be brought by, or on behalf of, the Commission or the Secretary of State. There is also provision in subsection (5) enabling civil proceedings to be brought by any person who suffers loss or damage.

23. Subsection (6) makes clear that conveyance for the purposes of section 6 and section 7(1) includes the incidental acts of receiving the letter, collecting or delivering it.

Section 7: Exceptions from section 6

24. Section 7 sets out exceptions from the general prohibition in section 6(1).

25. Subsection (1) exempts letters conveyed for a payment of not less than £1 or weighing not less than 350 grams.

26. Subsection (2) sets out further detailed exceptions. They include activities currently exempted as "class licences", such as the document exchange system used by lawyers and other professionals. The section then defines exactly what is meant by these exceptions.

Section 8: Power to modify section 7 by order

27. Section 8 allows the Secretary of State acting on the recommendation of the Commission to modify by order section 7. This could, for example, be used to add a further exception to the general prohibition or modify the value or weight specified at section 7(1)(a) and (b). Such an order would be subject to approval by a resolution of both Houses of Parliament. Where the Secretary of State has received a recommendation from the Commission to amend the reserved area and the Secretary of State does not act upon it, he must place a report containing his reasons before Parliament.

Section 9: General power to suspend the restriction

28. Under section 9 the Secretary of State may, on the recommendation of the Commission, suspend the operation of section 6 and allow any person to convey letters.

Section 10: Emergency power to suspend the restriction

29. Under section 10 the Secretary of State may in the national interest suspend the licensing regime for a time-limited period not exceeding six months. Non-licensed persons would then be able to convey letters within the reserved area without penalty.

Section 11: Licences: general

30. Section 11 allows the Commission to grant licences authorising the licence holder to carry out the activities described by the licence. To that extent the general prohibition in section 6(1) does not apply to him.

Section 12: Licences: grant

31. Section 12 details the procedures that must be followed before a licence is issued including provisions about giving notice and receiving representations.

Section 13: Licences: conditions and other provisions

32. Section 13 gives the Commission the authority to include in a licence such provisions as it considers appropriate, including provisions which do not relate to anything authorised by the licence (including, for example, the provision of all or part of a universal postal service). Under subsection (4) the Commission must consult a person who is to be granted a licence about the conditions it intends to include in their licence.

Section 14: Modification of licences by agreement

33. Sections 14 - 21 provide a system for licence modification, similar to that seen in utilities regulation. Section 14 allows for licence modifications to be made by agreement between the licence holder and the Postal Services Commission. Before making any such modification the Postal Services Commission must publish a notice stating what the modifications are, the effect of them and the reasons for them and serve copies on the Secretary of State, the licence holder and the Council. Under subsection (5) the Secretary of State may direct the Postal Services Commission not to make a proposed modification if he considers that the modification should be made, if at all, following a Competition Commission reference under the procedures in this Part.

Section 15: References to the Competition Commission

34. Section 15 allows the Postal Services Commission to make references to the Competition Commission requiring the latter to investigate and report on whether:-

• matters specified in the reference and which relate to the provision of postal services whose provision is authorised or required by a licence operate against the public interest or may be expected to do so; and

• if so, whether the effects adverse to the public interest which the matters have or may be expected to have could be remedied or prevented by modifying conditions of the licence.

35. The Postal Services Commission may vary the terms of a reference. They may also specify what adverse effects they believe matters specified in the reference may be expected to have and any modifications of the licence by which it considers that those effects could be remedied or prevented. The Postal Services Commission shall give the Competition Commission any related information or assistance that it considers appropriate or which has been requested by the Commission.

Section 16: Reports on references

36. Section 16 provides that the Competition Commission shall make definite conclusions on the matters referred to it, and specify remedies where appropriate. The Competition Commission's report shall be made to the Postal Services Commission who shall, if required to do so by the Secretary of State, exclude from the published report such matters he believes may be against the public interest or the commercial interest of a person.

Section 17: Modification following report

37. Under this section, where the Competition Commission has identified matters operating against the public interest and concluded that remedies could be made by licence modifications, the Postal Services Commission shall make such modifications to the licence conditions as it considers appropriate for the purpose of remedying or preventing the adverse effects specified in the report.

38. The Postal Services Commission shall give notice of its intended modifications. After this the Postal Services Commission shall make such modifications if after four weeks the Competition Commission has not issued a direction under section 18.

Section 18: Power of intervention of the Competition Commission

39. This section allows the Competition Commission the power to direct the Postal Services Commission not to make modifications under section 17 if it considers that the modifications proposed by the Postal Services Commission are not appropriate for the purpose of remedying or preventing all or any of the adverse effects specified by its report. Under subsection (5) of this section the Competition Commission may make its own licence modifications.

Section 19: Procedural requirements in relation to modifications

40. Section 19 sets out the procedural requirements for licence modifications following a report by the Competition Commission.

Section 20: Application of competition legislation to references etc.

41. Section 20 provides for the application of competition legislation to references. The purpose and effect of this section is to ensure consistency between the Competition Commission's procedures in relation to a reference under this Part of the Act and with its procedures in relation to its (relevant) functions under competition legislation. For example, it deals with the treatment of witnesses and documents, time limits on reports and penalties for false and misleading information. Details of these provisions are set out in the relevant legislation and not in this Act.

Section 21: Modification by order under other enactments

42. Section 21 allows for the modification of licences as a result of investigations and reports under the Fair Trading Act 1973.

Section 22: Final orders

43. Sections 22-29 lay down the powers of the Commission to make final and provisional enforcement orders in relation to breaches of licence conditions, and the procedures to be followed. Under section 22, final orders may be issued where the Commission is satisfied that a licence holder is contravening any condition of his licence or is likely to do so. An order makes such provision as is needed to secure compliance with the licence condition and shall require the licence holder to do, or not to do, such things as specified.

Sections 23 and 24: Provisional orders

44. Where the Commission is not satisfied, but nonetheless it appears to the Commission that there is or is likely to be a contravention and that an order should be made, it may impose a provisional order lasting up to 3 months. If the Commission is subsequently satisfied, it shall confirm the provisional order.

Section 25: Exceptions from the duty to make or confirm enforcement orders

45. This section provides that the duty to make orders does not apply where the duties imposed under sections 3 and 5 on the Commission preclude it from doing so, the licence holder has agreed to take and is taking all the steps that the Commission considers appropriate, or the contraventions are trivial.

Sections 26 and 27: Procedural requirements

46. These sections set out the steps the Commission must follow when making orders, such as notice provisions.

Section 28: Validity of enforcement orders

47. This section allows a licence holder to whom a final or provisional order relates to appeal to the court on the grounds that the making of the order by the Commission was not within their powers under sections 22, 23 or 24 or that any of the requirements of sections 26 and 27 were not met. The court may quash the order.

Section 29: Effect of enforcement orders

48. Section 29(1) makes it a duty of licence holders to comply with a final or provisional order.

49. Section 29(6) makes it clear that if the Commission brings civil proceedings to enforce a final or provisional order, it shall not prevent others with a right to claim from bringing their own actions against the licence holder.

Section 30: Financial penalties

50. Section 30 gives the Commission power, where it is satisfied that a licence holder has contravened or is contravening a condition of his licence, to impose a penalty on the licence holder. The penalty must be of such amount as is reasonable and is limited to a maximum of 10% of the turnover of the licence holder determined in accordance with provisions to be specified in an order made by the Secretary of State.

Section 31: Statement of policy in relation to penalties

51. Section 31 provides that the Commission shall after consulting the Council and others prepare and publish a statement of their policy in relation to the imposition of penalties and the determination of their amount.

Sections 32 and 33: Penalties

52. Sections 32 and 33 lay down the procedures the Commission must follow before imposing a financial penalty including giving notice and allowing for representations, and procedures that may follow from the notice including variation of penalties.

Section 34: Time-limits on the imposition of penalties

53. Section 34 sets out time limits on the Commission's ability to impose financial penalties.

Sections 35 and 37: Interest and payments by instalments; recovery of penalties

54. Sections 35 and 37 cover the payment of interest on unpaid penalties and the recovery of unpaid penalty payments.

Section 36: Appeals

55. Section 36 allows licence holders to appeal against penalties to the court (the High Court in England and Wales or Northern Ireland or the Court of Session in Scotland). The court may quash the penalty or order a reduction in the penalty or in certain cases substitute a different date for payment of the penalty.

Section 38: Register

56. Section 38 requires the Commission to keep a register of licences, licence modifications, revocations and surrenders, directions, determinations, consents and approvals given under a licence, the terms of final and provisional orders and revocations, and penalties imposed. Safeguards are provided to ensure that as far as practicable matters relating to the affairs of a person are not entered in the register if that could be seriously prejudicial to that person's interests. In addition, the Secretary of State may direct the Commission not to make an entry where it would in his view be against the public interest or a person's commercial interests to do so. The register is to be available to public inspection, and copies may be obtained, subject to a reasonable fee.

Section 39: Recovery of costs of the Council etc.

57. Section 39 enables the Secretary of State to direct that licence conditions shall include paying for the Consumer Council and its start up costs. It also enables the Secretary of State to direct the Commission in any matter falling to be determined under such a licence condition.

Section 40: Directors' remuneration

58. Section 40 requires companies which are also licence holders under the Act to disclose the links, if any, between the achievement of service standards in the activities covered by their licence and the remuneration of their directors. If no such links exist, this must also be disclosed. The section sets out the criteria for determining whether a licence holder must comply with the provisions of the section and the disclosure requirements which then apply. The requirement to disclose what links, if any, exist between service standards and remuneration is intended to encourage companies to establish and strengthen such links and to stimulate improvement to service standards.

Section 41: Free services for the blind and partially sighted

59. Section 41 gives the Secretary of State powers to direct the Commission to impose a licence condition requiring the licensee to provide free postal services for blind or partially sighted people. The Secretary of State shall consult the Commission and the Council before giving any directions. The section is designed to ensure the continuation of existing non-statutory practice by the Post Office who convey certain items, known as Articles for the Blind, free of charge for blind and partially sighted people.