UPS wants Europe’s top court to overturn the European Commission’s veto of its TNT bid three years ago but is keeping tight-lipped about any possible appeal over Brussels’ approval of FedEx’s offer for TNT.
The company confirmed to CEP-Research today that the European Court of Justice (ECJ) in Luxembourg held a hearing last Wednesday (April 6) on its appeal made in April 2013 against the European Commission’s decision in January 2013 to block its €5.2 billion offer for TNT.
“We are not aware of further hearings being scheduled. The timing of any decision is up to the ECJ,” a UPS Europe spokesman said.
In its filing made on April 5, 2013, UPS called on the court to “annul in its entirety” the Commission’s decision of January 30, 2013, to prohibit its proposed acquisition of TNT. Brussels blocked the deal on the grounds that a UPS-TNT merger would leave only DHL Express as a major competitor in the intra-Europe air express market, with FedEx seen as a small player in Europe.
But UPS claimed the Commission had “committed an error of law and a manifest error of assessment when examining the likely price effects of the concentration” and had erred in concluding, without substantive evidence, that the merged entity's potential price increases would be accommodated by the rival to the merged entity.
The US company also criticised how the Commission had evaluated efficiencies from a UPS-TNT merger, the Commission’s competition definitions, its conclusion that “competitors who are not close competitors could not expand to constrain effectively the merged entity in the foreseeable future” and its analysis of “customers' ability to restrain the merged entity”.
However, UPS already made clear in April 2013 that the legal action was aimed at clarifying legal issues but did not signal any interest in a renewed move for TNT.
“We are challenging the decision in order to ensure a more accurate assessment of the EU competitive landscape and that no precedent is established by the EC that would limit international growth opportunities,” a spokeswoman told CEP-Research at the time. “If the appeal is successful, the prohibition decision would be “annulled,” which essentially means the prior decision could not be used as a basis for future decisions by the EC,” she explained. “The appeal is not meant to signal a renewed interest in TNT.”
Three years on, the ECJ case is significant against the background of FedEx’s planned €4.4 billion acquisition of TNT, which was unconditionally cleared by the European Commission on January 8, 2016.
Explaining this decision, the EU regulatory authority stated in a press release that, for intra-Europe express deliveries, “FedEx and TNT are not particularly close competitors and the merged entity will continue to face sufficient competition from its rivals in all markets concerned”, in particular DHL and UPS. The Commission said it had carried out a price concentration analysis “which is in line with the approach in the UPS/TNT case” and also found that the transaction “will give rise to verifiable, merger-specific efficiencies due to network cost savings which will benefit customers”.
Asked whether UPS has made or is considering an appeal to the ECJ over the Commission’s approval of the FedEx offer for TNT, the UPS Europe spokesman responded: “It is impossible to take a view as the European Commission has not yet issued the full text of its decision.”
UPS recently lost an appeal in Brazil against regulatory approval for the FedEx-TNT deal and is reportedly considering an appeal in China should the regulatory authorities approve the proposed takeover.
FedEx and TNT have repeatedly stated that they expect the deal, which has a ‘long-stop date’ of June 6, to complete in the first half of this year.
