UPS/TNT update: The EC clarifies the reasons for its Phase II review

More information has emerged about the European Commission’s decision to move its review of the proposed UPS takeover of TNT to a Phase II level. When that decision was first announced, the news came from the investor relations departments at the two companies, and, understandably, they did not provide a great deal of detail. However, the EC has now issued a statement clarifying the matter. The full statement is available here, but we summarize it below. 

In it’s statement, the Commission says it “clears the vast majority of mergers after a one-month review, but if it has competition concerns it must open an in-depth investigation (Phase II review).” In the case of the UPS/TNT merger, the Commission said its preliminary investigation “indicated potential competition concerns in the markets for small parcel delivery services, in particular international express services, in numerous Member States, where the parties would have very high combined market shares.”

In essence, it appears that the EC sees a need to determine whether a merged UPS/TNT entity would reduce competition in some European countries to an unacceptable level, and if so, what mitigation would be required to allow the merger to go ahead. Both UPS and TNT have said they do not believe the merger will be rejected, and the EC itself has made clear that “the opening of a full probe does not prejudge its outcome.” Deadline for the decision in the Phase II investigation is 28 November of this year.

In a related matter, the Bloomberg news service quotes a spokesperson for the SETCA union (which represents TNT employees in Belgium) as saying the Belgian region of Wallonia is considering buying a stake in TNT AIRWAYS. The union representative said Wallonia’s Economy Minister had confirmed in a meeting that he was “open to the proposal.” Whether this openness will lead to any concrete action is unknown, but if UPS/TNT merger is cleared by the EC, then a change of ownership will be required for TNT Airways. The carrier is currently wholly-owned by TNT Express, and European law allows a maximum of 49% foreign (i.e. non-EU) ownership of EU-based airlines, so UPS can not own it directly.

Today’s blog is expanded from this week’s issue of Cargo Facts Update. Those of you who do not already subscribe to the the monthly printed Cargo Facts newsletter, and its companion the weekly emailed Cargo Facts Update,  can click here for more information.