Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: EC approves acquisition of TNT Express by FedEx, (Jan 8, 2016)

By Linda O’Brien, J.D., LL.M.

The European Commission (EC) has cleared under the European Union (EU) merger regulation the proposed acquisition of TNT Express by FedEx Corporation, the EC announced today. Both companies offer world-wide small package delivery services.

FedEx, based in the United States, is an international provider of small package delivery, freight forwarding, and cargo transportation services through its integrated global network. TNT Express, based in the Netherlands, is active in the global logistics sector, where it provides small package delivery, air and ground freight, and freight forwarding services.

In July 2015, the Commission opened an in-depth investigation into FedEx's takeover of TNT Express that was prompted by concerns that the proposed acquisition would substantially lessen competition in certain markets for international deliveries of small packages up to 31.5kg in the European Economic Area (EEA). The specific markets included (1) international intra-EEA express delivery services markets comprising small packages that are picked up in an EEA-country and are delivered to a different EEA country and (2) extra-EEA delivery services markets comprising certain markets for deliveries of small packages picked up in an EEA-country and delivered to a destination outside the EEA.

The EC was concerned that, following the transaction, the merged entity would face insufficient competitive constraints from the only two remaining integrators, DHL and United Parcel Service (UPS). A lack of sufficient competitive constraints could lead to higher prices for business customers and consumers. These concerns were resolved by the investigation, and the Commission concluded that the proposed concentration would not significantly impede effective competition in the EEA or any substantial part of it.

Intra-EEA express delivery services. As regards international intra-EEA express delivery services, the Commission considered that the merged entity's market position will be moderate and that, amongst integrators, FedEx and TNT are not particularly close competitors. The EC's investigation showed that FedEx still exerts a weaker competitive constraint on the other integrators due to the lack of density and scale of its European networks. The agency carried out a price concentration analysis in line with the approach in UPS/TNT and found that the transaction will give rise to verifiable, merger-specific efficiencies due to network cost savings, which will benefit customers.

Extra-EEA delivery services. With regard to extra-EEA deliveries, the Commission concluded that the market position of the merged entity on markets for deliveries to the world and to the major world trade lanes will be moderate and that, among integrators, FedEx and TNT are not particularly close competitors. This is due to TNT's focus on intra-European markets. The EC also found that DHL and UPS will compete effectively with the merged entity after the transaction and that the takeover will allow the business to be run more efficiently due to network cost savings.

The Commission also thoroughly investigated allegations that the transaction may cause particular harm to small and medium enterprises (SMEs). After a comprehensive market investigation, the EC concluded that SMEs will not be more affected by the acquisition than other customers.

In 2013, the EC blocked the planned acquisition of TNT by UPS. In that transaction, the Commission found that the takeover was likely to harm customers by causing price increases. This conclusion was based on the fact that FedEx did not exert a significant competitive constraint in a number of national markets for intra-EEA express delivery services. In its investigation in the present case, the Commission replicated the same assessment as was undertaken in the UPS/TNT case both for intra-EEA express and for extra-EEA markets to ensure full consistency with its previous practice.

"Many businesses and consumers rely heavily on affordable and reliable small package delivery services, in particular with the growth of e-commerce,” Commissioner Margrethe Vestager, in charge of competition policy, commented. “Therefore, the Commission has thoroughly assessed the markets affected by this takeover. The conclusion is that European consumers will not be adversely affected by the transaction. We have therefore unconditionally approved the merger."

Companies: TNT Holdings, B.V.; FedEx Corporation

News: AcquisitionsMergers Antitrust