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BRUSSELS: In a newly published summary, the European Commission (EC) says the decision to block the UPS acquisition of TNT Express in 2013 was based on its conclusion that the intra-European express market would have been dominated by just two companies – DHL and UPS.

The EC began its merger due diligence on the assumption there are a number of different operators active in the industry: integrators, national and local postal operators, partner networks and freight forwarders - each of them with a different operating model based on the structure and type of its network.

TNT LiegeThe EC determined the main characteristic of an integrator is its full operational control over the logistics of the parcel delivery from origin to destination, including air transport. Within the European Economic Area (EEA) that means UPS, TNT, DHL and FedEx.

National mail operators, while operating extensive ground networks, could not be considered "fully-fledged competitors and exert a sufficient competitive constraint on integrators" because they do not operate their own aircraft fleets.

As a result, the EC focused on the competitive counterbalance of FedEx to a merged UPS/TNT and DHL. It determined that FedEx was the weakest of the four integrators and post-merger would have held the smallest market share in all 29 EEA-countries with a less-developed network and therefore "significantly higher costs than those of UPS and TNT".

So the EC concluded that FedEx wouldn't have provided sufficient competition to the resultant duopoly of a merged TNT/UPS and DHL – apparently a view shared by customers as well as other operators.

Commenting on the publication of the EC conclusions, UPS said the decision last April "prevented a sizeable investment in Europe of approximately US$6.8 billion, better services and pricing, and more important, an improvement of the European logistics infrastructure in those economies that are still struggling to return to economic growth".

The company said the EC's decision – which cost it US$200 million in cancellation fees to TNT - was not based on an accurate assessment of the multi-product nature of customer contracts, only focused on next day cross-border shipments, ignored evidence about the strength and number of other competitors, and considered only a fraction of the efficiencies that would have been created following the acquisition.

The UPS statement did not acnowledge the EC's main conclusion in respect to FedEx and the lack of equivalent competition.

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