The European Commission wants a strong new competitor to emerge in the European express market,likely to be La Poste-owned DPD, as the key condition for approving UPS’ €5.16 billion acquisition
of TNT Express, the latest comments by EU competition commissioner Joaquín Almunia have made clear.Almunia told reporters in London today: “We need to substitute the TNT role as integratorwith an equivalent player one way or another.” The competition commissioner had previously told theFinancial Times that “the elimination of competitors such as TNT, that is an integrator, requires…an alternative integrator or someone who will play the same role from the competition point of viewwith equivalent competitive pressure.” He added: “What I have told UPS, what you have to present isan equivalent.”
The Commission is still evaluating whether the remedies presented by UPS and TNT will besufficient to create “the same kind of competitive pressure in this market”, Almunia added. The twocompanies have offered to sell TNT businesses in numerous European countries and to provide accessto the future UPS air network at competitive rates for five years so that the new player couldcompete effectively in the air express business.
Intensive talks are taking place with La Poste-owned parcels operator DPD, which is the onlybuyer following FedEx’s rejection of an informal approach by UPS. According to the Financial Times,Brussels wants a binding UPS-DPD agreement before approving the TNT acquisition. DPD is being askedto provide assurances on how it plans to use the TNT assets and on its long-term plans to challengeUPS and DHL in express delivery.
The European Commission is due to decide on the UPS-TNT merger by February 5. Almunia toldreporters today that he did “not see the conditions in this case” for stopping the clock in orderto give the involved parties more time for their negotiations.
UPS and TNT have repeatedly said they are committed to sealing the agreed deal, which wasfirst announced last March.
Should the Commission approve the UPS takeover of TNT, including the disposal of TNTbusinesses to DPD, the future European express market would be headed by DHL Express and UPS withDPD and FedEx as the other two major players. The other major pan-European delivery company GLSfocuses on ground-based parcel deliveries while other express companies in Europe are domestic orsmall regional operators.
