Top EU court finds Commission “infringed” UPS’s right in TNT takeover bid

posted on 16th January 2019 by Justin Burns

The European Court of Justice (ECJ) today said that the European Commission’s decision prohibiting the acquisition of TNT Express by UPS must be annulled due to “procedural irregularity”.

The ECJ said that the General Court of the European Union, Europe’s second biggest court, was right in finding that the Commission “infringed” UPS’s rights of the defence.

The move paves the way to a $2 billion damages claim by UPS by annulling a 2013 decision to stop it buying Dutch courier firm TNT Express, when the Commission prohibited the €5.2 billion takeover.

The ECJ said the ruling followed a procedural error by the European Commission in its veto, which paved the way for FedEx to acquire TNT Express for $4.4 billion in 2016, a deal it approved.

UPS, which has said it is seeking $1.74 billion from the Commission, said it was pleased the court agreed the company had been given a fair hearing. “The judgment in UPS’s favor makes a number of points preserving a competitive environment in Europe by clarifying the procedure and relevant criteria for merger approval,” it said.

On 30 January 2013, the ECJ said that the Commission prohibited the takeover on the ground that in 15 Member States that operation would have “led to a significant impediment to effective competition on the market for the international express delivery of small parcels within the European Economic Area (EEA)”.

The ECJ said: “The decisive factor on which that prohibition was based is an econometric analysis that led the Commission to conclude that there was a risk that prices would increase on the majority of the markets concerned.

“UPS successfully brought an action against that prohibition before the General Court. By judgment of 7 March 2017, the General Court annulled the Commission’s decision on the ground that UPS’s rights of the defence had been infringed.

“The General Court found that the price concentration econometric model ultimately used by the Commission differed considerably from that disclosed to UPS during the administrative procedure, without the Commission giving UPS the opportunity to submit observations on the amendments made.

“In today’s judgment, the Court points out that observance of the rights of the defence before the adoption of a decision relating to merger control requires the notifying parties to be put in a position in which they can make known effectively their views on the accuracy and relevance of all the factors on which the Commission intends to base its decision.

The ECJ concludes: “That the General Court was entitled to find, without erring in law, that UPS’s rights of the defence were infringed, with the result that the decision should be annulled, provided that it has been sufficiently demonstrated by UPS that, but for that procedural irregularity, it would have had the opportunity better to defend itself.

“Accordingly, the Court of Justice rejects the Commission’s appeal.”