European Antitrust Enforcers Tell UPS Merger Is Undeliverable

European Union competition regulators have formally blocked a proposed merger between United Parcel Service Inc. (UPS) and its Dutch competitor TNT Express NV based on potential adverse effects on competition in 15 EU countries.

The express delivery companies had already announced they were abandoning the 5.2 billion euro ($6.99 billion) deal after being informed by the European Commission that it was working on a decision to block the merger.

The Commission found that only four companies in Europe have the required international air and ground transport network necessary to provide reliable overnight and express delivery service: UPS, FedEx, DHL and TNT Express. According to the Commission’s findings on the original merger offer, shipping costs would have increased for consumers in 29 European countries.

The Commission gave UPS time to correct the anticompetitive effects of the merger by finding a buyer to purchase and maintain TNT’s operations in 17 countries where the acquisition would have most severely restricted competition.

As part of a proposed solution, UPS would have provided a potential buyer with air support declaring in a press release, “customers and consumers will benefit from a broader portfolio of services and better global access, along with lower supply-chain costs overall.”  

After on-going negotiations failed, however, Commissioner Joaquin Almunia announced that UPS’s proposed corrections did not go far enough.  “We still had serious doubts on whether the buyer that UPS was working with – the French group La Poste/DPD – would have the ability and incentive to become a strong player in express deliveries,” Almunia said.

“In the absence of suitable remedies to the competition concerns we identified, I had no other choice but to propose to the college of commissioners to issue a negative decision,” Almunia said.

This is only the third merger out of nearly 800 reviewed since Almunia began his term in 2010 that have been prohibited.

One year ago, believing it would have deterred investment at an already rocky time, Almunia blocked a merger between the New York Stock Exchange and Germany’s stock market Deutsche Boerse.  Prior to that, the Commission blocked the merger of two Greek airlines based on the effects on local competition.