Wednesday, January 16, 2019

Appeal Says Freight and Logistics Group Should Have Been Allowed to Acquire Parcel Carrier

European Commission Decision Annulled by European Court of Justice
Shipping News Feature
US – EUROPE – The European Court of Justice (ECJ) has confirmed that the European Commission's (EC) decision to deny the proposed takeover of Dutch parcel carrier TNT, by US freight and logistics giant UPS, must be annulled due to 'procedural irregularity', agreeing with the General Court in finding that the EC infringed UPS's right of the defence.

In January 2013, the EC refused to authorise a merger between UPS and TNT Express over fears that it would unfairly constrain the express small package delivery service sector. The decisive factor on which the EC’s refusal was based is an econometric analysis that led the Commission to conclude that there was a risk that prices would increase on the majority of the markets concerned. TNT was later sold to competitor FedEx in May 2016, with full regulatory approval, for €4.4 billion, compared to the €5.2 billion UPS offered in 2012.

UPS successfully brought an action against the Commission's decision before the General Court of the European Union. In March 2017, the General Court annulled the Commission’s decision on the ground that UPS’s rights of the defence had been infringed. The General Court found that the price concentration econometric model ultimately used by the Commission differed considerably from that disclosed to UPS during the administrative procedure, without the Commission giving UPS the opportunity to submit observations on the amendments made.

The Commission then in turn brought an appeal before the Court of Justice to have the judgment of the General Court set aside. In December 2017, UPS decided to sue the European Commission for €1.74 billion plus interest over the EC's 2013 refusal.

In this latest judgment by the Court of Justice, the ECJ points out that observance of the rights of the defence before the adoption of a decision relating to merger control requires the notifying parties to be put in a position in which they can make known effectively their views on the accuracy and relevance of all the factors on which the Commission intends to base its decision. Thus, where the Commission intends to base its decision on econometric models, the notifying parties must be able to submit their observations in that regard.

Consequently, the Court of Justice considers that the General Court did not err in law when it concluded that the Commission could not claim that it was not required to disclose the final econometric analysis model to the applicant before adopting the decision at issue.

In addition, the ECJ has upheld the General Court’s finding that failure to disclose an econometric model to the parties to a merger can lead to the Commission’s decision being annulled, provided that it has been established that that irregularity has denied them the chance, even if that chance is slight, better to defend themselves. It need not be proven that, but for that procedural irregularity, the decision would have been different in content.

The ECJ concluded that the General Court was entitled to find, without erring in law, that UPS’s rights of the defence were infringed, with the result that the decision should be annulled, provided that it has been sufficiently demonstrated by UPS that, but for that procedural irregularity, it would have had the opportunity better to defend itself. Accordingly, the Court of Justice has rejected the Commission’s appeal.