UPS has formally withdrawn its offer to buy TNT Express, following the publication of the European Commission’s notice prohibiting the deal.
The commission concluded that the proposed take-over would have restricted competition in 15 European member states, when it comes to the express delivery of small packages to another European country.
In these member states, the acquisition would have reduced the number of significant players to only three or two, sometimes with DHL as the only alternative to UPS.
To mitigate these concerns UPS had offered to divest TNT’s subsidiaries in these 15 countries plus – under certain conditions – TNT’s subsidiaries in Spain and Portugal, to increase further the volume of small package express deliveries that would be transferred to the purchaser.
It also suggested that it would allow the buyer to access its intra-European air network for five years.
These remedies were assessed by the commission, including a market test where customers and other interested parties were consulted. However, they proved inadequate to address the identified competition concerns.
“What they offered was simply not enough to address the serious competition problems we identified,” said commission vice president in charge of competition policy Joaquín Almunia.
UPS believes that if the deal had gone ahead, the combined company would have brought benefits to consumers and customers around the world, while supporting much needed growth in Europe in particular.
The commission said that to provide intra-EEA express deliveries from the 17 countries covered by the remedy package, the hypothetical purchaser would have needed suitable networks or partners in these other countries. This requirement alone severely limited the number of potentially suitable purchasers, casting doubt over the effectiveness of the remedies.
“To dispel this uncertainty, UPS would have needed to sign a binding agreement with a suitable purchaser before the concentration was implemented. However, UPS did not propose this to the commission and its last minute attempt to sign such an agreement before the end of the Commission’s investigation did not materialise,” said Almunia.
“Many businesses active in the EU single market need to send small packages to another European country with guaranteed delivery on the next day. This requires access to affordable, reliable services that truly fit their needs. These businesses would have been directly harmed by the takeover of TNT by UPS because it would have drastically reduced choice between providers and probably led to price increases. We worked hard with UPS on possible remedies until very late in the procedure.”
When the Commission announced that it planned to prohibit the deal, Scott Davis, UPS chairman and chief executive officer said: “We are extremely disappointed with the EC’s position. We proposed significant and tangible remedies designed to address the EC’s concerns with the transaction.”