The regulator found Royal Mail to have abused its dominant position in the market by discriminating against its only major competitor delivering letters.

The penalty is the result of an investigation into a complaint by Whistl, one of Royal Mail’s wholesale customers, about changes Royal Mail made to its wholesale customers’ contracts in early 2014, including wholesale price increases.

At the time, Whistl was expanding its business to compete directly with Royal Mail by delivering bulk mail to addresses in certain parts of the UK.

The 2014 wholesale price increases meant that any of Royal Mail’s wholesale customers seeking 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.

Following notification of these new prices, Whistl suspended plans to extend delivery services to new areas.

Ofcom’s investigation found that Royal Mail’s actions amounted to anti-competitive discrimination against customers, such as Whistl, who sought to deliver bulk mail.

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.”

In a statement, Royal Mail said it was “very disappointed by Ofcom’s decision”.

It added: “Royal Mail strongly refutes any suggestion that it has acted in breach of the Competition Act, and considers that the decision is without merit and fundamentally flawed.

“The company will now lodge an appeal with the Competition Appeal Tribunal within the next two months. No fine is payable until the appeals process is exhausted.”