The communications regulator said the penalty was because the Royal Mail had abused its dominant position by discriminating against its only major letter delivering competitor.

One of Royal Mail’s wholesale customers, Whistl, had complained to Ofcom about changes Royal Mail made to its wholesale customers’ contracts in early 2014, including wholesale price increases it was introducing.

Whistl was then expanding its business to compete directly with Royal Mail by delivering business letters to addresses in parts of the UK – making it the first company to challenge Royal Mail’s monopoly in the large-scale delivery of bulk mail.

The 2014 wholesale price increases meant that any of Royal Mail’s wholesale customers looking to compete with it by delivering letters in some parts of the country – as Whistl was – would have to pay higher prices in the remaining areas where it used Royal Mail for delivery.

Whistl suspended plans to extend delivery services to new areas when it was told of these new prices.

Ofcom said its investigation found Royal Mail’s actions amounted to anti-competitive discrimination against customers who sought to deliver bulk mail. It analysed Royal Mail’s internal documents on the price changes which showed the changes were part of a deliberate strategy to limit competition in delivery as a direct response to the threat of competition from Whistl.

Jonathan Oxley, Ofcom’s competition group director, said: “Royal Mail broke the law by abusing its dominant position in bulk mail delivery. All companies must play by the rules. Royal Mail’s behaviour was unacceptable, and it denied postal users the potential benefits that come from effective competition.”

Ofcom found Royal Mail in breach of Section 18 of the Competition Act and Article 102 of the Treaty for the Functioning of the European Union, which prohibits a firm from abusing its dominant position.