Thursday, March 9, 2017

Logistics Operator Wins Appeal over EU Merger Block

But Too Little Too Late
Shipping News Feature
EUROPE – The General Court of the European Union has annulled, on the ground of a 'procedural irregularity', a 2013 decision by the Commission the refusal to authorise the merger between UPS and TNT, over fears that it would unfairly constrain the express small package delivery services sector. The result now seems to provide little use to UPS considering last year’s sale of TNT to UPS's biggest rival, FedEx.

The Court found that the Commission had infringed UPS’ rights of defence by relying on an econometric analysis which had not been discussed in its final form during the administrative procedure

The US based parcel carrier UPS, and its Dutch competitor TNT Express operate on a global level in the specialist transport and logistics services sector. In the European Economic Area (EEA), UPS and TNT – as well as US rival FedEx and the German freight giant DHL – are present on the international express small package delivery markets,

In 2012, UPS notified the European Commission of its proposed acquisition of TNT under the Merger Regulation. By decision of 30 January 2013, the Commission prohibited the proposed acquisition of TNT by UPS. In essence, it considered that that take-over would have restricted competition in the small parcel market in 15 Member States to other European countries. In those Member States, the acquisition would have reduced the number of significant players in that market to only three, or even two, sometimes leaving DHL as the only alternative to UPS. The merger would therefore, according to the Commission, have likely harmed customers by causing price increases.

UPS brought an action before the General Court seeking the annulment of the Commission’s decision.

The Court notes that observance of the rights of the defence and, in particular, the right to a fair hearing requires that the undertaking concerned must have been afforded the opportunity, during the administrative procedure, to make known its views on the truth and relevance of the facts and circumstances alleged, and on the documents used by the Commission to support its claims.

The Court found that the econometric analysis used by the Commission in its decision of 30 January 2013 was based on an econometric model different from that which had been the subject of an exchange of views and arguments during the administrative procedure. The Commission made non-negligible changes to the analyses previously discussed with UPS. In view of those changes, the Commission was required to communicate the final econometric analysis model to UPS before adopting the contested decision. By failing to do so, the Commission infringed UPS’ rights of defence.

Taking the view that, during the administrative procedure, UPS might have been better able to defend itself if it had had at its disposal, before the adoption of the contested decision, the final version of the econometric model chosen by the Commission, the Court annulled the decision of 30 January 2013 in its entirety, without examining the other pleas in law put forward by UPS.

After receiving all the relevant regulatory approvals, FedEx acquired TNT for €4.4 billion in May last year. Prior to that, UPS had put a bid in for TNT worth €5.2 billion, in 2012 before being blocked a year later.