Following on from our previous post, the European Commission (EC) has published its official decision to prohibit the proposed merger between UPS and TNT in Europe. The decision comes two weeks after the parties decided to abandon the merger based on indications from the EC case team that the EC was intending to block the deal.
In the decision, the EC stated that the proposed merger would have restricted competition in the market for the express delivery of small packages in 15 European countries, including Sweden, Poland, Denmark and the Netherlands. The competition detriment would have impacted businesses requiring these express delivery services, and would have occurred as a result of the significant reduction in choice of service providers able to provide these services within the European market. The merger would have resulted in a reduction from 3 to 2 service providers, with DHL being the alternate service provider. The EC did not consider FedEx to be a significant constraint across the single European market as it is only able to offer strong competition in a limited number of European countries. Further, the individual national postal providers were also not considered able to provide sufficient competitive constraints as their delivery networks are primarily confined within their own countries’ borders and rely on road transport in comparison to express delivery providers that rely on extensive air transport networks. Therefore, due to the reduction in competition, the EC considered it likely that the merger would lead to price increases or reduced service delivery levels in the market.
In an attempt to address the EC’s concerns, UPS proposed a remedies package proposing to:
- divest TNT’s subsidiaries in the 15 relevant European countries,
- in certain circumstances, divest TNT’s subsidiaries in Spain and Portugal, and
- offer access to its air network for 5 years, if necessary.
The EC rejected the remedies package on the basis that it “was simply not enough” to address the likely concerns.
Ultimately, TNT’s European assets may still be up for grabs… time will tell whether a more suitable suitor will emerge.