The High Court accepted Postcomm's grounds for imposing the £1m fine, which was reduced from an original £2.16m, but did not uphold the penalty because Postcomm was deemed to have incurred problems in calculating the correct fine to be levied on Royal Mail.
Postcomm has expressed disappointment in the ruling, stating the fine was dismissed over a "technical difficulty" in calculating the correct amount.
In its ruling, the High Court said Postcomm "could not depart from its published penalty policy" in the Royal Mail case. Postcomm has said it will consider appealing the decision.
Royal Mail was hit with a £2.16m penalty in February 2006 for failing to put in place adequate measures across its retail and wholesale divisions to stop it gaining an unfair advantage over competitors, which it must do under condition 10 of its licence. The amount was later reduced to £1m in July last year.
Royal Mail has been charging competitors, including TNT, Express and UK Mail, a fee for access to its last mile delivery network since April 2004.
In a statement, Postcomm said: "The regulator is disappointed that the £1m penalty was quashed because of a technical difficulty in its policy for calculating financial penalties in cases where the benefit to Royal Mail and the burden on others from the licence contravention cannot be assessed."