The European Commission’s decision in 2013 to prohibit the acquisition of TNT by UPS has been overturned. However it is far too late for UPS, given that FedEx subsequently snapped up the struggling Dutch-owned integrator.
The General Court of the European Union has found that UPS was denied the right to a fair hearing during the investigation into its proposed acquisition of TNT in 2013. Consequently, the Court has annulled the decision in its entirety, without the need to examine the other pleas in law put forward by UPS.
Following the decision by the European Commission on 30 January 2013, UPS had been prohibited from acquiring TNT as the EC alleged that it would reduce competition to three (UPS, DHL and FedEx) or even in some markets two (UPS and DHL) major cross-border, intra-EU express players.
The decision relates to the final econometric model which had been used by the Commission to identify the competitive environment in the cross-border parcels market. It seems that UPS had been denied the opportunity to challenge the final model which had been developed, which was materially different from the one which had been used throughout the review process.
To many this may seem to be a technicality and indeed there were other issues highlighted by UPS at the General Court which will not now be decided upon. However, the econometric model was at the heart of the decision by the European Commission and the fact that UPS was not allowed to challenge it was a fundamental injustice.
Commenting at the time, Ti’s Head of Consulting, Joel Ray, said, “It is hard to see what the EC sought to achieve through the negative stance they took to this deal. Their decision making process looks flawed, caused by a fundamental lack of understanding of the industry. It seems to have been driven by a desire to engineer a market structure through political motivations. European shippers would have gained from the acquisition through a strong new road and air based player. This decision has set the market back many years, and risks reducing competition, not increasing it.” Logistics Briefing January 14, 2013 http://www.ti-insight.com/briefs/15545/. The General Court’s ruling today has vindicated this view.
The move will no doubt leave UPS’s management frustrated and, of course, far too late to allow it to challenge the subsequent acquisition of TNT by its rival, FedEx. The protracted investigation weakened TNT’s position in the market further and TNT at the time acknowledged it had been a distraction for management. UPS itself had to pay €200m to TNT when the deal broke down.
Apart from FedEx, the big winner of the initial ruling was DHL which has since grown its business very successfully in Europe, benefiting from growth in the e-Commerce sector, especially cross-border. This fact will no doubt not have been lost on UPS.
Source: Transport Intelligence, March 8, 2017
Author: John Manners-Bell