In a ruling[1] issued on 7 March 2017 the General Court (GC) annulled the decision[2] by the European Commission to block the proposed merger between United Parcel Services (UPS) and TNT Express. In January 2013 the Commission had vetoed the proposed acquisition, finding that it would have resulted in a significant impediment to effective competition (SIEC) in express small package delivery services in 15 EEA Member States. UPS subsequently appealed the decision to the GC, arguing that its rights of defence had been infringed due to the Commission’s failure to disclose the final version of an econometric model relied upon in its prohibition decision.


UPS notified the Commission of its proposed acquisition of TNT in June 2012. The Commission adopted its decision on 30 January 2013, prohibiting the proposed acquisition on the grounds that the transaction would have reduced the number of significant players in the express delivery of small packages market from four to three, or even two, in 15 EEA Member States. This in turn would likely have resulted in price increases for customers.  

In reaching its conclusion the Commission used econometric analysis to predict the anti-competitive price effects of the proposed acquisition. The Commission participated in an ongoing dialogue with UPS regarding the econometric models used, providing UPS with the opportunity to submit its observations on those models throughout the process. However, between the issuing of its Statement of Objectives (SO) and the adoption of its final decision, the Commission made changes to its econometric model, but failed both to inform UPS of the changes and to provide UPS with the opportunity to express its opinion on the analysis. The amended econometric model was ultimately relied upon in the prohibition decision. 

The GC’s judgment 

UPS appealed the decision to the GC, seeking its annulment. UPS submitted that during the administrative procedure it and the Commission had exchanged analyses of the net effects of the merger on prices in various national markets. However, the price analysis of the merger used in the decision was materially different from the versions that UPS had been able to consult during the administrative procedure, which UPS claimed had infringed its rights of defence.

In its ruling, the GC first recalled that the observance of the rights of defence is a general principle of EU law enshrined in the Charter of Fundamental Rights of the European Union which must be guaranteed in all proceedings, including merger proceedings before the Commission. In particular, the right to a fair hearing requires that a party concerned in such proceedings must be afforded the opportunity to make known its views on the truth and relevance of the facts and circumstances alleged and the documents used by the Commission to support its claim.[3] 

When applying these principles to the Commission’s decision, the GC made the following observations: 

  • the Commission had relied on the econometric analysis in question in order to identify the number of SEIC States;
  • the Commission adopted the final version of the econometric model more than two months before the adoption of its decision in January 2013, providing ample time in which to consult with UPS;
  • the final version of the econometric model was not communicated to UPS; and
  • the GC rejected the Commission's claim that the econometric model ultimately used in its decision was only marginally different from that which was presented to UPS. Despite the existence of numerous similarities, the GC concluded that the changes made to the final model could not be regarded as "negligible". [4]

Accordingly, the GC concluded that the Commission was required to communicate the final model to UPS before adopting its decision and that its failure to do so had infringed UPS’s rights of defence. 

The GC then proceeded to consider whether the annulment of a merger decision would be warranted. In this regard, the GC rejected the Commission’s arguments that the applicant must demonstrate that, in the absence of the procedural irregularity, the Commission’s decision would have been different. Instead, the GC (referring to the European Court of Justice (ECJ) judgment in Solvay[5] ) stated that UPS only had to show that “there was even a slight chance that it would have been better able to defend itself”. [6] 

In this regard, the GC firstly emphasised that the Commission had relied on the econometric analysis to identify SIEC States. The GC noted that when the SO was adopted the Commission had provisionally found there to be 29 SIEC States – a number which had dropped to only 15 States by the time of the decision. Secondly, during the administrative procedure, UPS had significantly influenced the development of the econometric model by providing solutions to technical problems it had identified with the model. In light of this, the GC concluded that UPS might have been able to better defend itself had it been able to review the final version of the econometric model in question. 

Moreover, the Commission expressly acknowledged that the results of its new econometric analysis had caused a decrease in the number of SIEC States after the SO was issued. The results were therefore capable of countering the qualitative information which had been taken into account in relation to certain States. This led the GC to conclude that UPS had been deprived of information which, provided it would have been exchanged with it in due time, could have enabled it to submit different results on the merger’s effects on prices. Had UPS been able to make such submissions, the scope of the information taken into consideration by the Commission may have been reassessed and may, accordingly, have reduced the number of SIEC States.[7]

The GC therefore concluded that the Commission had infringed UPS’s rights of defence by failing to communicate the final version of its econometric model and that the contested decision must be annulled.

Some thoughts

The GC currently has 12 merger related appeals pending before it, including a record number of eight cases which were brought to it in 2016. The majority of these cases concern the telecommunications sector - an area which has been heavily scrutinised by the Commission recently. The outcome of these cases remains to be seen but it should be noted that the GC’s track record with appeals generally does not bode well for notifying parties considering an appeal of an unfavourable Commission merger decision. In particular, of the total number of Commission prohibition decisions that have been appealed since 2003, only around 25 per cent have been successful before the GC and resulted in annulment.

However the UPS ruling highlights a number of encouraging points for notifying parties in a merger review context. In its strictest interpretation, the Commission will be required to disclose all the economic modelling it uses if it wishes to rely upon the results of that modelling in its decisions. Where the results are finely balanced, the judgment might deter the Commission from relying on economic analysis to avoid protracted consultation with notifying parties which puts pressure on the Commission’s tight deadlines. More generally, the ruling may lead to greater scrutiny of the Commission’s merger review process. 

Beyond providing a useful precedent for challenging the Commission’s decisions, the GC’s judgment buttresses the rights of notifying parties whilst also reinforcing the importance of due process in merger review - a welcome result for notifying parties at all stages of the process.