The European Commission has released the summary of its Jan. 30, 2013, decision that found a proposed takeover by UPS of TNT Express to be “incompatible with the internal market” and was not in the best interest of European consumers.
The commission’s main argument was that “the merger would have led to a significant increase in the level of concentration of the market and a strong combined market position of the parties in a large number of [European] countries and reduced the number of competitors from four to three … or even from three to two … in a significant portion thereof,” according to the document
Commissioners were also dubious to UPS’ claims that FedEx represented a significant European competitor. They also found that there would be a price increase in all European countries if the merger had gone through; UPS didn't see eye-to-eye with the EU regarding the magnitude of the increase.
In a statement, UPS said that by denying the merger, the European Commission kept a $6.8-billion investment from the European people. That investment would have helped create a better infrastructure around the continent, UPS said. Consumers would have also benefited from favorable pricing and increased services, the company said.
“The EC's analysis recognized that 95 percent of the combined UPS and TNT business was not problematic. Additionally, there were no concerns in the countries that drive 80 percent of European Union GDP,” UPS said in a statement. “In the 15 countries where concerns were identified, UPS proposed significant and tangible remedies.”
The Commission found that the following countries would see “significant impediment to effective competition” regarding small-package deliveries: Bulgaria, the Czech Republic, Denmark, Estonia, Finland, Hungary, Latvia, Lithuania, Malta, the Netherlands, Poland, Romania, Slovakia, Slovenia and Sweden.
In its statement, UPS said it appealed the commission’s decision because it focused, falsely, on a single product, ignored evidence about competition to UPS and TNT, and recognized only a few of the many efficiencies that would have been created from the merger. Finally, UPS said, “The decision was not based on an accurate assessment of the multi-product nature of customer contracts.”
UPS first-quarter numbers reflected an international package operating profit growth of 24 percent, year-over-year, which was mainly due to the $39 million it received from TNT when the deal fell through.