Freightways may call in lawyers over NZ Post discounting

Freightways says NZ Post's discounted zonal pricing eats into earnings at its rival DX Mail. Photo / File

Freightways may call in the lawyers as it lobbies for an end to state-owned New Zealand Post's discounted zonal pricing, which it says is eating into earnings at its rival DX Mail division.

NZ Post introduced zonal pricing last year for certain bulk mail products, charging different prices for mail delivered to different areas.

NZX-listed Freightways said its DX Mail unit is under direct attack from the structure, "which effectively offers their customers the cheapest rates to those areas that DX Mail delivers into, and more expensive rates to those areas where DX Mail does not deliver."

An NZ Post spokesperson told BusinessDesk that "a zonal pricing structure was introduced on some bulk mail services last year to enable NZ Post to be more competitive in areas where there is competition and align pricing closer to actual delivery costs of different areas."

Physical mail delivery services have been in decline as people adopted electronic pathways. That has become more pronounced over the past decade, prompting the state-owned NZ Post to slash its workforce and place more emphasis on its profitable courier business.

The Commerce Commission undertook a preliminary investigation into the issue but decided not to take it further.

"On the basis of the information available to us, we currently consider that there is unlikely to be significant harm to consumers from NZ Post's pricing," a Commerce Commission spokesperson said.

Freightways, which this week reported revenue up 1 per cent to $318.9 million in the six months to Dec. 31 from a year earlier, reiterated the level of discounting "has had an adverse effect on earnings in the DX Mail Division."

Chief executive Mark Troughear told BusinessDesk the commission determined that the targeted discounted zonal pricing didn't have an adverse impact on consumers in the short term. However, longer term it "completely ignored" the fact that if you end up with only one provider then you have no competition.

Troughear said he planned to go back to the competition regulator "very shortly," claiming NZ Post is now offering additional rebates.

If that doesn't pan out, "we have a number of other options," he said.

"We will consider litigation, but we will also carry on competing hard with New Zealand Post," he said.