EU court annuls block of 2013 UPS and TNT merger
Back in 2013 the EU blocked UPS’s $5.5bn takeover of Dutch-based TNT over concerns that the deal would affect consumers with drastically reduced choice and expected price increases for small parcel delivery in Europe. However, in an interesting turn of events, this week an EU court ruled in agreement with UPS that the EU’s probe, led by the Competition Commissioner at the time Joaquín Almunia, was wrong in its decision to block the deal.
In the four years since the breakdown of the deal, TNT was bought by FedEx for 4.4bn euros and UPS acquired i-parcel and Coyote Logistics. It isn’t unusual for regulatory authorities to collapse a deal, particularly when it involves such a large transaction. But the fact that FedEx, arguably its largest competitor, had its bid for TNT unconditionally approved must have been difficult for UPS to hear.
Following the EU’s block of the deal, UPS challenged the decision at the Luxembourg-based General Court, who ruled that the Commission has wrongly infringed the company’s rights of defence. This is because in the Commission’s analysis of the deal, it used a different econometric model than had previously been used in the exchange of views and arguments. The court argued that UPS would have been able to better defend the deal if it had access to the final version of the econometric model which was used by the commission.
While it is obviously too late to reconcile the deal now, the decision to annul the block could potentially allow UPS to sue the European regulators for damage claims. In addition, TNT shareholders who lost out on the deal could file their own damages claims.
The decision, however, remains a hollow victory for UPS, and there is speculation that Brussels may appeal the court’s ruling. The ruling could also trigger similar investigations or affect other contentious deals. According to antitrust lawyer Nicholas Levy of Cleary Gottlieb, the annulment marks the first time in over a decade that the regulator has been found to wrongly block a deal, the last time being in 2002 when the blocked deals involving Airtours and First Choice, Schenider and Legrand, and Tetra Laval and Sidel were all annulled throughout the year.
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