# C_2014137EN.01000801.xml

| 7.5.2014 | EN | Official Journal of the European Union | C 137/8 |
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7.5.2014

EN

Official Journal of the European Union

C 137/8

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Summary of Commission Decision

of 30 January 2013

declaring a concentration incompatible with the internal market and the functioning of the EEA Agreement

(Case COMP/M.6570 — UPS/TNT Express)

(notified under document C(2013) 431 final)

(notified under document C(2013) 431 final)

(Only the English version is authentic)

(Text with EEA relevance)

2014/C 137/05

On 30 January 2013 the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (1), and in particular Article 8(3) of that Regulation. A non-confidential version of the full Decision can be found in the authentic language of the case on the website of the Directorate-General for Competition, at the following address: http://ec.europa.eu/comm/competition/index_en.html

On 30 January 2013 the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (1

I.   THE PARTIES

THE PARTIES

| 1. | United Parcel Service Inc. (‘UPS’ – United States of America) is one of the world’s largest logistics providers operating mainly in the small package delivery, freight transport and contract logistics sectors. UPS’ EU hub is located in Köln, Germany. |
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1.

United Parcel Service Inc. (‘UPS’ – United States of America) is one of the world’s largest logistics providers operating mainly in the small package delivery, freight transport and contract logistics sectors. UPS’ EU hub is located in Köln, Germany.

| 2. | TNT Express N.V. (‘TNT’ – The Netherlands) is active in the small package delivery and freight transport sectors. TNT’s European network has its central hub in Liège, Belgium. |
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2.

TNT Express N.V. (‘TNT’ – The Netherlands) is active in the small package delivery and freight transport sectors. TNT’s European network has its central hub in Liège, Belgium.

II.   THE OPERATION AND EU DIMENSION

THE OPERATION AND EU DIMENSION

| 3. | On 15 June 2012, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 (the ‘Merger Regulation’) by which the undertaking UPS intended to acquire within the meaning of Article 3(1)(b) of the Merger Regulation sole control of the whole of the undertaking TNT by way of a public takeover under Dutch law (2) (the ‘Merger’). UPS and TNT are hereafter referred to as ‘the Parties’. |
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3.

On 15 June 2012, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 (the ‘Merger Regulation’) by which the undertaking UPS intended to acquire within the meaning of Article 3(1)(b) of the Merger Regulation sole control of the whole of the undertaking TNT by way of a public takeover under Dutch law (2) (the ‘Merger’). UPS and TNT are hereafter referred to as ‘the Parties’.

2

| 4. | The operation had an EU dimension in accordance with Article 1(2) of the Merger Regulation. |
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4.

The operation had an EU dimension in accordance with Article 1(2) of the Merger Regulation.

III.   THE PROCEDURE

THE PROCEDURE

| 5. | After the first phase market investigation, the Commission concluded that the Merger raised serious doubts as to its compatibility with the internal market and with the EEA Agreement. Therefore, on 20 July 2012, the Commission opened second phase proceedings pursuant to Article 6(1)(c) of the Merger Regulation. |
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5.

After the first phase market investigation, the Commission concluded that the Merger raised serious doubts as to its compatibility with the internal market and with the EEA Agreement. Therefore, on 20 July 2012, the Commission opened second phase proceedings pursuant to Article 6(1)(c) of the Merger Regulation.

| 6. | A Statement of Objections was sent to the Parties on 19 October 2012. The Parties had the opportunity to present their views through a written response and at an Oral Hearing that took place on 12 November 2012. |
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6.

A Statement of Objections was sent to the Parties on 19 October 2012. The Parties had the opportunity to present their views through a written response and at an Oral Hearing that took place on 12 November 2012.

| 7. | On 29 November 2012 the Notifying party presented Commitments pursuant to Article 8(2) of Council Regulation (EC) No 139/2004. New commitments were submitted subsequently on 16 December 2012 and on 3 January 2013. |
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7.

On 29 November 2012 the Notifying party presented Commitments pursuant to Article 8(2) of Council Regulation (EC) No 139/2004. New commitments were submitted subsequently on 16 December 2012 and on 3 January 2013.

| 8. | A Letter of Facts was sent to UPS on 21 December 2012. UPS submitted its written observations on the Letter of Facts on 4 January 2013. |
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8.

A Letter of Facts was sent to UPS on 21 December 2012. UPS submitted its written observations on the Letter of Facts on 4 January 2013.

| 9. | On 30 January 2013, the Commission adopted pursuant to article 8(3) of the Merger Regulation a decision declaring the Merger to be incompatible with the internal market and the EEA agreement (the ‘Decision’). |
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9.

On 30 January 2013, the Commission adopted pursuant to article 8(3) of the Merger Regulation a decision declaring the Merger to be incompatible with the internal market and the EEA agreement (the ‘Decision’).

Decision

IV.   COMPETITIVE ASSESSMENT

COMPETITIVE ASSESSMENT

1.   Description of the small package sector

Description of the small package sector

| 10. | The small package delivery industry shows at least two major characteristics:






  (a) | significant economies of density/scale as it is a network industry. Pick-up and delivery costs are a major contributor to a parcel service provider’s direct cost. Moreover, coverage at both the origin and destination is important; |
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10.

The small package delivery industry shows at least two major characteristics:

(a)

significant economies of density/scale as it is a network industry. Pick-up and delivery costs are a major contributor to a parcel service provider’s direct cost. Moreover, coverage at both the origin and destination is important;

network industry

both

| (b) | highly differentiated products as providers are able to differentiate the service supplied across a vast number of dimensions:
  (i) speed of delivery (ranging from early-morning next-day express delivery services to two or more days standard delivery services), (ii) geography (ranging from domestic to international extra-EEA services), and (iii) quality of service (such as reliability, security, late pick-up time, comprehensive track-and-trace ability, etc.). |
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(b)

highly differentiated products as providers are able to differentiate the service supplied across a vast number of dimensions:

(i) speed of delivery (ranging from early-morning next-day express delivery services to two or more days standard delivery services), (ii) geography (ranging from domestic to international extra-EEA services), and (iii) quality of service (such as reliability, security, late pick-up time, comprehensive track-and-trace ability, etc.).

| 11. | There are a number of different operators active in the industry: integrators, national and local postal operators, partner networks and freight forwarders, each with a different operating model based on the structure and type of its network. The main characteristic of an integrator is that it has full operational control over the logistics of the parcel delivery from origin to destination, including air transport. Within the EEA, there are four integrators: UPS, TNT, DHL and FedEx. |
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11.

There are a number of different operators active in the industry: integrators, national and local postal operators, partner networks and freight forwarders, each with a different operating model based on the structure and type of its network. The main characteristic of an integrator is that it has full operational control over the logistics of the parcel delivery from origin to destination, including air transport. Within the EEA, there are four integrators: UPS, TNT, DHL and FedEx.

| 12. | National postal operators own extensive domestic ground networks and in some cases are present in international operations. In particular, Royal Mail (United Kingdom), through its subsidiary GLS, and La Poste (France), through its subsidiary DPD, as well as PostNL (Netherlands) and Austrian Post (Austria), qualify as international network operators. La Poste, in particular in France and Spain, offers international intra-EEA express deliveries for many EEA countries, as does Royal Mail in the UK. These operators nevertheless do not have their own air fleet network and offer international intra-EEA express delivery services based on road transportation for neighbouring countries as well as on air transportation that relies on commercial flights (belly space) or on integrators. |
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12.

National postal operators own extensive domestic ground networks and in some cases are present in international operations. In particular, Royal Mail (United Kingdom), through its subsidiary GLS, and La Poste (France), through its subsidiary DPD, as well as PostNL (Netherlands) and Austrian Post (Austria), qualify as international network operators. La Poste, in particular in France and Spain, offers international intra-EEA express deliveries for many EEA countries, as does Royal Mail in the UK. These operators nevertheless do not have their own air fleet network and offer international intra-EEA express delivery services based on road transportation for neighbouring countries as well as on air transportation that relies on commercial flights (belly space) or on integrators.

| 13. | National small package operators have a predominantly domestic small package business. Companies such as Bartolini in Italy, Yodl in the UK, Siodemka in Poland or Speedex in Greece have rather a national footprint and compete with the Parties only at that level. Partner networks (such as Eurodis, NetExpress, and EuroExpress) hardly have any own operations on the international intra-EEA express markets. Freight forwarders (e.g. Kuehne + Nagel, DB Schenker, DSV, Geodis) focus on heavy consignments but sometimes also deliver small packages, mostly for customers who send cargo through their networks. For the international intra-EEA express market they essentially resell the integrators’ services. |
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13.

National small package operators have a predominantly domestic small package business. Companies such as Bartolini in Italy, Yodl in the UK, Siodemka in Poland or Speedex in Greece have rather a national footprint and compete with the Parties only at that level. Partner networks (such as Eurodis, NetExpress, and EuroExpress) hardly have any own operations on the international intra-EEA express markets. Freight forwarders (e.g. Kuehne + Nagel, DB Schenker, DSV, Geodis) focus on heavy consignments but sometimes also deliver small packages, mostly for customers who send cargo through their networks. For the international intra-EEA express market they essentially resell the integrators’ services.

2.   Market definition

Market definition

| 14. | In line with its decisional practice, (3) the Commission identifies the relevant product markets for small package delivery services (4) on the basis of the speed of delivery (i.e. express delivery services — commonly understood as services with a next day delivery commitment, and standard/deferred delivery services) and whether the packages are picked-up and delivered in the same country, in two different EEA countries, or in one EEA country and one non-EEA country (i.e. domestic, international intra-EEA and international extra-EEA services). |
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14.

In line with its decisional practice, (3) the Commission identifies the relevant product markets for small package delivery services (4) on the basis of the speed of delivery (i.e. express delivery services — commonly understood as services with a next day delivery commitment, and standard/deferred delivery services) and whether the packages are picked-up and delivered in the same country, in two different EEA countries, or in one EEA country and one non-EEA country (i.e. domestic, international intra-EEA and international extra-EEA services).

3

4

| 15. | With respect to the geographic dimension, the Commission identified national markets for both domestic and international services |
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15.

With respect to the geographic dimension, the Commission identified national markets for both domestic and international services

| 16. | The Commission concluded for the purpose of the Decision that there is a separate product market for international intra-EEA express small package delivery services. This market is national in scope. |
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16.

The Commission concluded for the purpose of the Decision that there is a separate product market for international intra-EEA express small package delivery services. This market is national in scope.

3.   International intra-EEA express small package delivery services

International intra-EEA express small package delivery services

(i)   Competitive constraints on the Parties: non-integrators

Competitive constraints on the Parties: non-integrators

| 17. | International intra-EEA express delivery is a network industry requiring operators to ensure a presence in all countries. The required presence in turn entails investments in infrastructure all along the value chain (from pick-up, sorting, line-hauls, hubs, air network, delivery). Even if outsourcing of parts of the value chain to third parties is possible, outsourcing reduces the control over the value chain, the operational efficiency and ultimately the quality of the services rendered. |
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17.

International intra-EEA express delivery is a network industry requiring operators to ensure a presence in all countries. The required presence in turn entails investments in infrastructure all along the value chain (from pick-up, sorting, line-hauls, hubs, air network, delivery). Even if outsourcing of parts of the value chain to third parties is possible, outsourcing reduces the control over the value chain, the operational efficiency and ultimately the quality of the services rendered.

| 18. | Outsourcing of air transport is a case in point. According to UPS’ estimates, the cost of air transport accounts for a substantial share of direct costs for international deliveries. In order to minimize them, a key determinant is the aircraft load factor, hence the necessity to adapt capacity, schedules and routes to volumes in order to minimize these costs. Non-integrators that outsource air transport services have no control over the routings, frequencies, schedules and capacity of the aircraft operated. They have therefore less opportunities to optimise their cost structure and they face a higher risk of failing to comply with the committed delivery timeframe, a very serious disadvantage vis-à-vis the integrators. |
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18.

Outsourcing of air transport is a case in point. According to UPS’ estimates, the cost of air transport accounts for a substantial share of direct costs for international deliveries. In order to minimize them, a key determinant is the aircraft load factor, hence the necessity to adapt capacity, schedules and routes to volumes in order to minimize these costs. Non-integrators that outsource air transport services have no control over the routings, frequencies, schedules and capacity of the aircraft operated. They have therefore less opportunities to optimise their cost structure and they face a higher risk of failing to comply with the committed delivery timeframe, a very serious disadvantage vis-à-vis the integrators.

| 19. | On the basis of the market investigation, it turned out that non-integrators are weaker competitors with respect to several key parameters of competition:
  (i) coverage (numbers of countries, postal codes, business addresses served), as their coverage is less than the one offered by the Parties, (ii) air network, so that non-integrators do not serve customers with significant needs for international intra-EEA express services requiring air transport (long-haul segment), (iii) premium services, i.e. timed next-day morning express services. |
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19.

On the basis of the market investigation, it turned out that non-integrators are weaker competitors with respect to several key parameters of competition:

(i) coverage (numbers of countries, postal codes, business addresses served), as their coverage is less than the one offered by the Parties, (ii) air network, so that non-integrators do not serve customers with significant needs for international intra-EEA express services requiring air transport (long-haul segment), (iii) premium services, i.e. timed next-day morning express services.

| 20. | These weaknesses are also shared by the two ground-based operators, La Poste and Royal Mail, which operate an extensive network across the EEA, but are not fully-fledged competitors of the Parties in the international intra-EEA express market. This was largely confirmed by the Commission’s analysis of the bidding data provided by UPS, TNT, DHL and FedEx. |
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20.

These weaknesses are also shared by the two ground-based operators, La Poste and Royal Mail, which operate an extensive network across the EEA, but are not fully-fledged competitors of the Parties in the international intra-EEA express market. This was largely confirmed by the Commission’s analysis of the bidding data provided by UPS, TNT, DHL and FedEx.

| 21. | For the above reasons, the Commission concluded that non-integrated players are unable to exert a sufficient competitive constraint on integrators. |
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21.

For the above reasons, the Commission concluded that non-integrated players are unable to exert a sufficient competitive constraint on integrators.

(ii)   Competitive constraints on the Parties: FedEx and DHL

Competitive constraints on the Parties: FedEx and DHL

| 22. | The Parties argued that other than DHL as the current market leader among integrators also FedEx were a fully-fledged competitor. However, the in-depth investigation confirmed that FedEx is currently a weaker competitor for the following reasons:






  a) | in terms of market shares, FedEx is the weakest of the four integrators in most of the EEA-countries. FedEx’ market share does not exceed [5-10 %] in 14 out of the 15 EEA-countries where the Commission found a significant impediment to effective competition and post transaction, FedEx would have held the smallest market share in all 29 EEA-countries among the integrators; |
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22.

The Parties argued that other than DHL as the current market leader among integrators also FedEx were a fully-fledged competitor. However, the in-depth investigation confirmed that FedEx is currently a weaker competitor for the following reasons:

a)

in terms of market shares, FedEx is the weakest of the four integrators in most of the EEA-countries. FedEx’ market share does not exceed [5-10 %] in 14 out of the 15 EEA-countries where the Commission found a significant impediment to effective competition and post transaction, FedEx would have held the smallest market share in all 29 EEA-countries among the integrators;

post

| b) | its coverage is inferior compared to other integrators. If measured in terms of business addresses served, this holds true for all express services (end-of day, before noon and before 10 am); |
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b)

its coverage is inferior compared to other integrators. If measured in terms of business addresses served, this holds true for all express services (end-of day, before noon and before 10 am);

| c) | its network is less developed in Europe in comparison to the other integrators (in terms of number of pick up points, flight points, type of aircrafts, etc.); |
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c)

its network is less developed in Europe in comparison to the other integrators (in terms of number of pick up points, flight points, type of aircrafts, etc.);

| d) | its European pick-up and delivery (PUD) costs are currently significantly higher than those of UPS and TNT. |
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d)

its European pick-up and delivery (PUD) costs are currently significantly higher than those of UPS and TNT.

| 23. | The Commission concluded that FedEx represents a weak competitive constraint to the Parties on the market of international intra-EEA express services. This view was shared by customers as well as other competitors. FedEx’ business core activities are related to the extra-EEA deliveries. This was confirmed also by the analysis of the Commission of the UPS and FedEx internal databases. |
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23.

The Commission concluded that FedEx represents a weak competitive constraint to the Parties on the market of international intra-EEA express services. This view was shared by customers as well as other competitors. FedEx’ business core activities are related to the extra-EEA deliveries. This was confirmed also by the analysis of the Commission of the UPS and FedEx internal databases.

| 24. | The Commission took also into account in the competitive assessment FedEx’ on-going organic expansion plan which aims at strengthening its network infrastructure and increasing its density and coverage, as well as its global domestic expansion. It turned out that, depending on the EEA-country considered, its organic expansion plan was indeed deemed likely to help FedEx to attract additional volumes to fill in the network increasing capacity and, thus, indirectly benefit its competitiveness in the international intra-EEA market. However, the Commission concluded that FedEx would still lag behind the Parties and DHL in terms of market position in the near future. |
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24.

The Commission took also into account in the competitive assessment FedEx’ on-going organic expansion plan which aims at strengthening its network infrastructure and increasing its density and coverage, as well as its global domestic expansion. It turned out that, depending on the EEA-country considered, its organic expansion plan was indeed deemed likely to help FedEx to attract additional volumes to fill in the network increasing capacity and, thus, indirectly benefit its competitiveness in the international intra-EEA market. However, the Commission concluded that FedEx would still lag behind the Parties and DHL in terms of market position in the near future.

| 25. | As concerns DHL, the outcome of the market investigation confirmed that DHL is a strong and credible player and that it is a close competitor to both UPS and TNT. Post merger, the customers would thus face two very strong integrators: DHL and the merged entity. |
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25.

As concerns DHL, the outcome of the market investigation confirmed that DHL is a strong and credible player and that it is a close competitor to both UPS and TNT. Post merger, the customers would thus face two very strong integrators: DHL and the merged entity.

Post

(iii)   Theory of harm, closeness of competition and barriers to entry

Theory of harm, closeness of competition and barriers to entry

| 26. | The Commission assessed the effects of the merger in the different national markets as the Merger would have led to a significant increase in the level of concentration of the market and a strong combined market position of the Parties in a large number of EEA countries and reduced the number of competitors from four to three (UPS/TNT, DHL and FedEx) or even from three to two (UPS/TNT and DHL) in a significant portion thereof. |
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26.

The Commission assessed the effects of the merger in the different national markets as the Merger would have led to a significant increase in the level of concentration of the market and a strong combined market position of the Parties in a large number of EEA countries and reduced the number of competitors from four to three (UPS/TNT, DHL and FedEx) or even from three to two (UPS/TNT and DHL) in a significant portion thereof.

| 27. | In fact, the Parties, together with DHL, can be considered to be close competitors on the international intra-EEA express market while all other companies are seen as offering products which are much more distant substitutes, FedEx included, than the ones offered by UPS, TNT and DHL. Absent any countervailing factors, the Commission concluded that the Parties, which are close competitors, would have had an incentive to increase prices after the merger. The price concentration analysis undertaken by the Commission concluded that there would be a price increase in all 29 EEA countries. UPS disagreed with the Commission on the magnitude of the price increase. |
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27.

In fact, the Parties, together with DHL, can be considered to be close competitors on the international intra-EEA express market while all other companies are seen as offering products which are much more distant substitutes, FedEx included, than the ones offered by UPS, TNT and DHL. Absent any countervailing factors, the Commission concluded that the Parties, which are close competitors, would have had an incentive to increase prices after the merger. The price concentration analysis undertaken by the Commission concluded that there would be a price increase in all 29 EEA countries. UPS disagreed with the Commission on the magnitude of the price increase.

| 28. | UPS claimed that certain customers could exercise buyer power either by down-trading to less demanding services or by switching to other existing suppliers, either by selecting other suppliers for express, or by shifting non-express volumes to other suppliers (multisourcing). However, this was not confirmed during the course of the market investigation. |
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28.

UPS claimed that certain customers could exercise buyer power either by down-trading to less demanding services or by switching to other existing suppliers, either by selecting other suppliers for express, or by shifting non-express volumes to other suppliers (multisourcing). However, this was not confirmed during the course of the market investigation.

| 29. | With respect to the barriers to entry, it turned out that a new entrant would have had to set up (i) a sophisticated IT infrastructure, (ii) a sorting infrastructure all across the EEA and (iii) an air network ensuring an efficient air and road corresponding connection. As it is evidenced by the absence of major entry over the last 20 years, these barriers are quite high and cannot be overcome, not even by outsourcing. As regards outsourcing of airlift, in fact, the Commission’s findings were that it was not an effective alternative due to double marginalisation and generally lower service quality. |
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29.

With respect to the barriers to entry, it turned out that a new entrant would have had to set up (i) a sophisticated IT infrastructure, (ii) a sorting infrastructure all across the EEA and (iii) an air network ensuring an efficient air and road corresponding connection. As it is evidenced by the absence of major entry over the last 20 years, these barriers are quite high and cannot be overcome, not even by outsourcing. As regards outsourcing of airlift, in fact, the Commission’s findings were that it was not an effective alternative due to double marginalisation and generally lower service quality.

| 30. | Given the absence of new entrants and the absence of countervailing buyer power, as even the largest UPS’ customer accounts for less than [0-5] % of its total sales, the Commission concluded that should the merged entity unilaterally increase the prices on the express international intra-EEA market by [5-10] to [10-20] %, such rise would have not created an incentive to induce further entry or expansion in the timeframe relevant for the assessment of this concentration, as confirmed by a large majority of competitors. |
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30.

Given the absence of new entrants and the absence of countervailing buyer power, as even the largest UPS’ customer accounts for less than [0-5] % of its total sales, the Commission concluded that should the merged entity unilaterally increase the prices on the express international intra-EEA market by [5-10] to [10-20] %, such rise would have not created an incentive to induce further entry or expansion in the timeframe relevant for the assessment of this concentration, as confirmed by a large majority of competitors.

(iv)   Efficiencies

Efficiencies

| 31. | The Horizontal Merger Guidelines establish a cumulative set of requirements to take efficiencies into consideration. Efficiencies have to benefit consumers, be merger-specific and be verifiable. UPS claimed that the Merger was expected to give rise to significant efficiencies through the combination of the UPS and TNT’s businesses. It pointed out the expected significant economies of density and of scope, improved service quality, and transactional efficiencies by combining their complementary networks: UPS customers gained access to TNT’s extensive European road and freight network and TNT’s customers benefited from access to UPS’s worldwide network. |
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31.

The Horizontal Merger Guidelines establish a cumulative set of requirements to take efficiencies into consideration. Efficiencies have to benefit consumers, be merger-specific and be verifiable. UPS claimed that the Merger was expected to give rise to significant efficiencies through the combination of the UPS and TNT’s businesses. It pointed out the expected significant economies of density and of scope, improved service quality, and transactional efficiencies by combining their complementary networks: UPS customers gained access to TNT’s extensive European road and freight network and TNT’s customers benefited from access to UPS’s worldwide network.

| 32. | Following UPS’ analysis, efficiencies would have benefited consumers, as the majority of the cost synergies were variable and merger-specific since they could not be achieved without full integration. To show that efficiencies were deemed verifiable, the Parties provided internal documents with estimates of the efficiencies following a certain number of years after closing the Merger, divided into three main areas: - operational (covering ground transportation costs), air network and management and administrative overheads, amounting to a total of EUR 400-550 million. Based on the Parties estimates, the total savings for the international intra-EEA express services would vary in the different countries. |
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32.

Following UPS’ analysis, efficiencies would have benefited consumers, as the majority of the cost synergies were variable and merger-specific since they could not be achieved without full integration. To show that efficiencies were deemed verifiable, the Parties provided internal documents with estimates of the efficiencies following a certain number of years after closing the Merger, divided into three main areas: - operational (covering ground transportation costs), air network and management and administrative overheads, amounting to a total of EUR 400-550 million. Based on the Parties estimates, the total savings for the international intra-EEA express services would vary in the different countries.

| 33. | The Commission agreed that the efficiencies were merger-specific, but it confirmed as verifiable only the cost savings related to the European air network and the ground handling, arising during the first three years after the completion of the Merger, that amount to respectively EUR [...] million, for intra Europe air network synergies and to EUR [...] million for ground handling. These savings were allocated on a country by country level based on UPS volume and cost data at the lane level. In order to estimate the pass-through rate of changes in variable costs to consumers, the Commission considered appropriate the estimate of the impact of total average cost changes on the price of international intra-EEA express services provided by the Parties following their price concentration analysis. This is likely to be an underestimation of the actual pass-through of marginal costs. |
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33.

The Commission agreed that the efficiencies were merger-specific, but it confirmed as verifiable only the cost savings related to the European air network and the ground handling, arising during the first three years after the completion of the Merger, that amount to respectively EUR [...] million, for intra Europe air network synergies and to EUR [...] million for ground handling. These savings were allocated on a country by country level based on UPS volume and cost data at the lane level. In order to estimate the pass-through rate of changes in variable costs to consumers, the Commission considered appropriate the estimate of the impact of total average cost changes on the price of international intra-EEA express services provided by the Parties following their price concentration analysis. This is likely to be an underestimation of the actual pass-through of marginal costs.

| 34. | Based on the computation of the Commission, the total savings for the international intra-EEA express services in the different countries ranged from [0-5] to [5-10] % of the price. |
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34.

Based on the computation of the Commission, the total savings for the international intra-EEA express services in the different countries ranged from [0-5] to [5-10] % of the price.

| 35. | UPS put forward that the operation would also induce out-of-market efficiencies. However, the Commission concluded that those were not verifiable to the required standard. |
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35.

UPS put forward that the operation would also induce out-of-market efficiencies. However, the Commission concluded that those were not verifiable to the required standard.

(v)   Country-by-country analysis

Country-by-country analysis

| 36. | The Commission evaluated the likely effects of the Merger, country by country, on the basis of four main factors: the market structure, the competitors’ expansion plans in the next years, in particular FedEx’ expansion plans, the results from the market investigation and the price effect taking into account efficiencies. |
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36.

The Commission evaluated the likely effects of the Merger, country by country, on the basis of four main factors: the market structure, the competitors’ expansion plans in the next years, in particular FedEx’ expansion plans, the results from the market investigation and the price effect taking into account efficiencies.

| 37. | The Decision concludes that the proposed merger would likely lead to a significant impediment to effective competition on the markets for international intra-EEA express deliveries of small package in 15 countries:
  (i) Bulgaria, (ii) Czech Republic, (iii) Denmark, (iv) Estonia, (v) Finland, (vi) Hungary, (vii) Latvia, (viii) Lithuania, (ix) Malta, (x) the Netherlands, (xi) Poland, (xii) Romania, (xiii) Slovakia, (xiv) Slovenia and (xv) Sweden, as it is summarized in the following paragraphs. |
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37.

The Decision concludes that the proposed merger would likely lead to a significant impediment to effective competition on the markets for international intra-EEA express deliveries of small package in 15 countries:

(i) Bulgaria, (ii) Czech Republic, (iii) Denmark, (iv) Estonia, (v) Finland, (vi) Hungary, (vii) Latvia, (viii) Lithuania, (ix) Malta, (x) the Netherlands, (xi) Poland, (xii) Romania, (xiii) Slovakia, (xiv) Slovenia and (xv) Sweden, as it is summarized in the following paragraphs.

| 38. | Post transaction the integrators’ market shares (5) in Bulgaria were estimated as follows: UPS/TNT [30-40] %; DHL [50-60] %; FedEx [5-10] %. Because of FedEx’s limited market presence, its very weak geographic coverage (on the destination side) and in view of internal documents relating to expansion plans in Bulgaria, it appeared to exert, at the time of the Decision and for the near future, a limited competitive constraint on the Parties. |
| --- | --- |

38.

Post transaction the integrators’ market shares (5) in Bulgaria were estimated as follows: UPS/TNT [30-40] %; DHL [50-60] %; FedEx [5-10] %. Because of FedEx’s limited market presence, its very weak geographic coverage (on the destination side) and in view of internal documents relating to expansion plans in Bulgaria, it appeared to exert, at the time of the Decision and for the near future, a limited competitive constraint on the Parties.

5

| 39. | Following the Commission’s price concentration analysis, price increase on lanes originating from Bulgaria would have ranged between [5-10] % and [5-10] %, while the estimated net price effects in Bulgaria, by taking into account the efficiency gains would have been positive, ranging between [0-5] % and [5-10] %. |
| --- | --- |

39.

Following the Commission’s price concentration analysis, price increase on lanes originating from Bulgaria would have ranged between [5-10] % and [5-10] %, while the estimated net price effects in Bulgaria, by taking into account the efficiency gains would have been positive, ranging between [0-5] % and [5-10] %.

| 40. | For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Bulgarian market for international intra-EEA express deliveries of small packages. |
| --- | --- |

40.

For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Bulgarian market for international intra-EEA express deliveries of small packages.

| 41. | Post transaction the integrators’ market shares in the Czech Republic were estimated as follows: UPS/TNT [50-60] %; DHL [40-50] %; FedEx [5-10] %. FedEx is characterised by a limited market presence, a weaker geographic coverage (on the destination side) and longer time-in-transit data. In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a weak competitive constraint on the Parties even in the near future. |
| --- | --- |

41.

Post transaction the integrators’ market shares in the Czech Republic were estimated as follows: UPS/TNT [50-60] %; DHL [40-50] %; FedEx [5-10] %. FedEx is characterised by a limited market presence, a weaker geographic coverage (on the destination side) and longer time-in-transit data. In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a weak competitive constraint on the Parties even in the near future.

| 42. | Following the Commission’s price concentration analysis, price increase on lanes originating from the Czech Republic would have ranged between [0-5] % and [0-5] % and taking into account the efficiency gains, the net price effects in the Czech Republic would have been positive, ranging between [0-5] % and [0-5] %. |
| --- | --- |

42.

Following the Commission’s price concentration analysis, price increase on lanes originating from the Czech Republic would have ranged between [0-5] % and [0-5] % and taking into account the efficiency gains, the net price effects in the Czech Republic would have been positive, ranging between [0-5] % and [0-5] %.

| 43. | For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Czech market for international intra-EEA express deliveries of small packages. |
| --- | --- |

43.

For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Czech market for international intra-EEA express deliveries of small packages.

| 44. | Post transaction the integrators’ market shares in Denmark were estimated as follows: UPS/TNT [50-60] %; DHL [40-50] %; FedEx [5-10] %. FedEx is characterised by a limited market presence, a slightly weaker geographic coverage (on the destination side) and longer time in transit data. On the basis of FedEx’s organic expansion in Denmark, it was deemed likely that in the near future FedEx would experience only a limited increase of its international intra-EEA express market share, with a resulting market share of less than [5-10] %. |
| --- | --- |

44.

Post transaction the integrators’ market shares in Denmark were estimated as follows: UPS/TNT [50-60] %; DHL [40-50] %; FedEx [5-10] %. FedEx is characterised by a limited market presence, a slightly weaker geographic coverage (on the destination side) and longer time in transit data. On the basis of FedEx’s organic expansion in Denmark, it was deemed likely that in the near future FedEx would experience only a limited increase of its international intra-EEA express market share, with a resulting market share of less than [5-10] %.

| 45. | Following the Commission’s price concentration analysis, price increase on lanes originating from Denmark would have ranged between [0-5] % and [0-5] % and taking into account the efficiency gains, the net price effects in Denmark would have been negative, ranging between -[0-5] % and -[0-5] %. Although the efficiencies appear to outweigh the price increases, there was a serious risk that the efficiencies alone would have been insufficient to outweigh the overall negative effect of the Merger. In fact, the merger would have eliminated an important competitive force from the Danish international intra-EEA express market and limited the possibilities of switching supplier while there was no sufficient countervailing buyer power and no entry or expansion was likely, timely and sufficient to defeat possible anticompetitive effects. |
| --- | --- |

45.

Following the Commission’s price concentration analysis, price increase on lanes originating from Denmark would have ranged between [0-5] % and [0-5] % and taking into account the efficiency gains, the net price effects in Denmark would have been negative, ranging between -[0-5] % and -[0-5] %. Although the efficiencies appear to outweigh the price increases, there was a serious risk that the efficiencies alone would have been insufficient to outweigh the overall negative effect of the Merger. In fact, the merger would have eliminated an important competitive force from the Danish international intra-EEA express market and limited the possibilities of switching supplier while there was no sufficient countervailing buyer power and no entry or expansion was likely, timely and sufficient to defeat possible anticompetitive effects.

| 46. | For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Danish market for international intra-EEA express deliveries of small packages. |
| --- | --- |

46.

For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Danish market for international intra-EEA express deliveries of small packages.

| 47. | Post transaction the integrators’ market shares in Estonia were estimated as follows: UPS/TNT [40-50] %; DHL [50-60] %; FedEx [0-5] %. FedEx is characterised by a very limited market presence, with no geographic coverage (on the destination side). In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a weak competitive constraint on the Parties even in the near future. |
| --- | --- |

47.

Post transaction the integrators’ market shares in Estonia were estimated as follows: UPS/TNT [40-50] %; DHL [50-60] %; FedEx [0-5] %. FedEx is characterised by a very limited market presence, with no geographic coverage (on the destination side). In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a weak competitive constraint on the Parties even in the near future.

| 48. | Following the Commission’s price concentration analysis, price increases on lanes originating from Estonia would have ranged between [5-10] % and [5-10] % and taking into account the efficiency gains, the net price effects in Estonia would have been positive, ranging between [0-5] % and [0-5] %. |
| --- | --- |

48.

Following the Commission’s price concentration analysis, price increases on lanes originating from Estonia would have ranged between [5-10] % and [5-10] % and taking into account the efficiency gains, the net price effects in Estonia would have been positive, ranging between [0-5] % and [0-5] %.

| 49. | For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Estonian market for international intra-EEA express deliveries of small packages. |
| --- | --- |

49.

For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Estonian market for international intra-EEA express deliveries of small packages.

| 50. | Post transaction the integrators’ market shares in Finland were estimated as follows: UPS/TNT [30-40] %; DHL [60-70] %; FedEx [0-5] %. FedEx is characterized by a very limited market presence, with weaker geographic coverage (on the destination side). Even more striking, FedEx does not offer premium services, i.e. morning deliveries to Sweden, Norway and Denmark, which are neighbouring countries. In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that it was unlikely that FedEx position would have changed in the foreseeable future to such an extent as to counter-act the negative effects of the Merger on competition. |
| --- | --- |

50.

Post transaction the integrators’ market shares in Finland were estimated as follows: UPS/TNT [30-40] %; DHL [60-70] %; FedEx [0-5] %. FedEx is characterized by a very limited market presence, with weaker geographic coverage (on the destination side). Even more striking, FedEx does not offer premium services, i.e. morning deliveries to Sweden, Norway and Denmark, which are neighbouring countries. In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that it was unlikely that FedEx position would have changed in the foreseeable future to such an extent as to counter-act the negative effects of the Merger on competition.

| 51. | Following the Commission’s price concentration analysis, price increase on lanes originating from Finland would have ranged between [5-10] % and [5-10] % and taking into account the efficiency gains, the net price effects in Finland would have remained positive, ranging between [0-5] % and [0-5] %, despite the expected cost savings. |
| --- | --- |

51.

Following the Commission’s price concentration analysis, price increase on lanes originating from Finland would have ranged between [5-10] % and [5-10] % and taking into account the efficiency gains, the net price effects in Finland would have remained positive, ranging between [0-5] % and [0-5] %, despite the expected cost savings.

| 52. | For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Finish market for international intra-EEA express deliveries of small packages. |
| --- | --- |

52.

For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Finish market for international intra-EEA express deliveries of small packages.

| 53. | Post transaction the integrators’ market shares in Hungary were estimated as follows: UPS/TNT [40-50] %; DHL [30-40] %; FedEx [10-20] %. FedEx has a significantly lower market share than each of the other three integrators, with weaker geographic coverage (on the destination side). In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a limited competitive constraint to the Parties even in the near future. |
| --- | --- |

53.

Post transaction the integrators’ market shares in Hungary were estimated as follows: UPS/TNT [40-50] %; DHL [30-40] %; FedEx [10-20] %. FedEx has a significantly lower market share than each of the other three integrators, with weaker geographic coverage (on the destination side). In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a limited competitive constraint to the Parties even in the near future.

| 54. | Following the Commission’s price concentration analysis, price increase on lanes originating from Hungary would have ranged between [0-5] % and [0-5] % and taking into account the efficiency gains, the net price effects in Hungary would have therefore ranged between -[0-5] % and [0-5] %. The quantitative analysis produces an ambiguous result in Hungary given that the net effect is predicted as a slight price decrease or a slight price increase. |
| --- | --- |

54.

Following the Commission’s price concentration analysis, price increase on lanes originating from Hungary would have ranged between [0-5] % and [0-5] % and taking into account the efficiency gains, the net price effects in Hungary would have therefore ranged between -[0-5] % and [0-5] %. The quantitative analysis produces an ambiguous result in Hungary given that the net effect is predicted as a slight price decrease or a slight price increase.

| 55. | For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Hungarian market for international intra-EEA express deliveries of small packages. |
| --- | --- |

55.

For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Hungarian market for international intra-EEA express deliveries of small packages.

| 56. | Post transaction the integrators’ market shares in Latvia were estimated as follows: UPS/TNT [40-50] %; DHL [40-50] %; FedEx [5-10] %. FedEx can be considered as a weaker player in international intra-EEA express deliveries from Latvia with respect to the other integrators, because its limited market presence and its much weaker geographic coverage (on the destination side). In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a limited competitive constraint to the Parties even in the near future. |
| --- | --- |

56.

Post transaction the integrators’ market shares in Latvia were estimated as follows: UPS/TNT [40-50] %; DHL [40-50] %; FedEx [5-10] %. FedEx can be considered as a weaker player in international intra-EEA express deliveries from Latvia with respect to the other integrators, because its limited market presence and its much weaker geographic coverage (on the destination side). In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a limited competitive constraint to the Parties even in the near future.

| 57. | Following the Commission’s price concentration analysis, price increase on lanes originating from Latvia would have ranged between [5-10] % and [5-10] % and taking into account the efficiency gains, the estimated net price effects in Latvia would have been positive and significant, ranging between [0-5] % and [5-10] %. |
| --- | --- |

57.

Following the Commission’s price concentration analysis, price increase on lanes originating from Latvia would have ranged between [5-10] % and [5-10] % and taking into account the efficiency gains, the estimated net price effects in Latvia would have been positive and significant, ranging between [0-5] % and [5-10] %.

| 58. | For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Latvian market for international intra-EEA express deliveries of small packages. |
| --- | --- |

58.

For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Latvian market for international intra-EEA express deliveries of small packages.

| 59. | Post transaction the integrators’ market shares in Lithuania were estimated as follows: UPS/TNT [50-60] %; DHL [40-50] %; FedEx [0-5] %. FedEx is characterized by a very limited market presence, with no geographic coverage (on the destination side). In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a limited competitive constraint to the Parties even in the near future. |
| --- | --- |

59.

Post transaction the integrators’ market shares in Lithuania were estimated as follows: UPS/TNT [50-60] %; DHL [40-50] %; FedEx [0-5] %. FedEx is characterized by a very limited market presence, with no geographic coverage (on the destination side). In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a limited competitive constraint to the Parties even in the near future.

| 60. | Following the Commission’s price concentration analysis, price increase on lanes originating from Lithuania would have ranged between [5-10] % and [5-10] % and taking into account the efficiency gains, the net price effects in Lithuania would have be positive and significant, ranging between [0-5] % and [5-10] % |
| --- | --- |

60.

Following the Commission’s price concentration analysis, price increase on lanes originating from Lithuania would have ranged between [5-10] % and [5-10] % and taking into account the efficiency gains, the net price effects in Lithuania would have be positive and significant, ranging between [0-5] % and [5-10] %

| 61. | For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Lithuanian market for international intra-EEA express deliveries of small packages. |
| --- | --- |

61.

For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Lithuanian market for international intra-EEA express deliveries of small packages.

| 62. | Post transaction the integrators’ market shares in Malta were estimated as follows: UPS/TNT [40-50] %; DHL [50-60] %; FedEx [0-5] %. The outcome of the market investigation confirmed that FedEx is the weakest integrator as regards the international intra-EEA express deliveries. In view also of FedEx’ internal documents relating to its expansion plans, the Commission concluded that FedEx would remain a weak competitive constraint on the Parties even in the near future. |
| --- | --- |

62.

Post transaction the integrators’ market shares in Malta were estimated as follows: UPS/TNT [40-50] %; DHL [50-60] %; FedEx [0-5] %. The outcome of the market investigation confirmed that FedEx is the weakest integrator as regards the international intra-EEA express deliveries. In view also of FedEx’ internal documents relating to its expansion plans, the Commission concluded that FedEx would remain a weak competitive constraint on the Parties even in the near future.

| 63. | Following the Commission’s price concentration analysis, price increase on lanes originating from Malta would have ranged between [5-10] % and [10-20] % and taking into account the efficiency gains, the estimated net price effects in Malta would have been positive, ranging between [5-10] % and [5-10] %. |
| --- | --- |

63.

Following the Commission’s price concentration analysis, price increase on lanes originating from Malta would have ranged between [5-10] % and [10-20] % and taking into account the efficiency gains, the estimated net price effects in Malta would have been positive, ranging between [5-10] % and [5-10] %.

| 64. | For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Maltese market for international intra-EEA express deliveries of small packages. |
| --- | --- |

64.

For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Maltese market for international intra-EEA express deliveries of small packages.

| 65. | Post transaction the integrators’ market shares in the Netherlands were estimated as follows: UPS/TNT [50-60] %; DHL [40-50] %; FedEx [5-10] %. All the integrators have 100 % geographic coverage (on the destination side). In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a limited competitive constraint to the Parties even in the near future. |
| --- | --- |

65.

Post transaction the integrators’ market shares in the Netherlands were estimated as follows: UPS/TNT [50-60] %; DHL [40-50] %; FedEx [5-10] %. All the integrators have 100 % geographic coverage (on the destination side). In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a limited competitive constraint to the Parties even in the near future.

| 66. | Following the Commission’s price concentration analysis, price increase on lanes originating from the Netherlands would have ranged between [0-5] % and [0-5] % and taking into account the efficiency gains, the estimated net price effect in the Netherlands would have been negative and range between -[0-5] to -[0-5] %. However, the quantification of net merger effects was given less weight because the model did not allow to capture the specificities of the Dutch market, as the estimated price effect reflects the fact that FedEx’s coverage in the Netherlands is complete (in fact, all four integrators have 100 % coverage). The Commission noted that in the Netherlands, coverage data and market shares are particularly inconsistent. FedEx has a 100 % coverage but achieves very limited revenues. |
| --- | --- |

66.

Following the Commission’s price concentration analysis, price increase on lanes originating from the Netherlands would have ranged between [0-5] % and [0-5] % and taking into account the efficiency gains, the estimated net price effect in the Netherlands would have been negative and range between -[0-5] to -[0-5] %. However, the quantification of net merger effects was given less weight because the model did not allow to capture the specificities of the Dutch market, as the estimated price effect reflects the fact that FedEx’s coverage in the Netherlands is complete (in fact, all four integrators have 100 % coverage). The Commission noted that in the Netherlands, coverage data and market shares are particularly inconsistent. FedEx has a 100 % coverage but achieves very limited revenues.

| 67. | The Commission considered that the Merger was likely to eliminate an important competitive force from the Dutch international intra-EEA express market where FedEx does not represent an effective competitive constraint to the Parties and to limit the possibilities of switching supplier while there is no sufficient countervailing buyer power and no entry or expansion is likely, timely and sufficient to defeat possible anticompetitive effects. |
| --- | --- |

67.

The Commission considered that the Merger was likely to eliminate an important competitive force from the Dutch international intra-EEA express market where FedEx does not represent an effective competitive constraint to the Parties and to limit the possibilities of switching supplier while there is no sufficient countervailing buyer power and no entry or expansion is likely, timely and sufficient to defeat possible anticompetitive effects.

| 68. | For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Dutch market for international intra-EEA express deliveries of small packages. |
| --- | --- |

68.

For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Dutch market for international intra-EEA express deliveries of small packages.

| 69. | Post transaction the integrators’ market shares in Poland were estimated as follows: UPS/TNT [40-50] %; DHL [40-50] %; FedEx [5-10] %. FedEx is characterised by a limited market presence, with a slightly weaker geographic coverage (on the destination side) so that it will represent a limited competitive constraint against the Parties. The recent acquisition by FedEx of Opek would allow FedEx to increase its domestic presence in Poland, but it will not add volume in terms of international intra-EEA express and in domestic express. On balance the Commission concluded that FedEx then is unlikely to become a significantly stronger competitive force on this market in the near future. |
| --- | --- |

69.

Post transaction the integrators’ market shares in Poland were estimated as follows: UPS/TNT [40-50] %; DHL [40-50] %; FedEx [5-10] %. FedEx is characterised by a limited market presence, with a slightly weaker geographic coverage (on the destination side) so that it will represent a limited competitive constraint against the Parties. The recent acquisition by FedEx of Opek would allow FedEx to increase its domestic presence in Poland, but it will not add volume in terms of international intra-EEA express and in domestic express. On balance the Commission concluded that FedEx then is unlikely to become a significantly stronger competitive force on this market in the near future.

| 70. | Following the Commission’s price concentration analysis, price increase on lanes originating from Poland would have ranged between [0-5] % and [5-10] % and taking into account the efficiency gains, the net price effects in Poland would have been positive, ranging between [0-5] % and [0-5] %. |
| --- | --- |

70.

Following the Commission’s price concentration analysis, price increase on lanes originating from Poland would have ranged between [0-5] % and [5-10] % and taking into account the efficiency gains, the net price effects in Poland would have been positive, ranging between [0-5] % and [0-5] %.

| 71. | For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Polish market for international intra-EEA express deliveries of small packages. |
| --- | --- |

71.

For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Polish market for international intra-EEA express deliveries of small packages.

| 72. | Post transaction the integrators’ market shares in Romania were estimated as follows: UPS/TNT [40-50] %; DHL [50-60] %; FedEx [0-5] %. FedEx is characterised by a very limited market presence, with a much weaker geographic coverage (on the destination side). In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a weak competitive constraint on the Parties even in the near future. |
| --- | --- |

72.

Post transaction the integrators’ market shares in Romania were estimated as follows: UPS/TNT [40-50] %; DHL [50-60] %; FedEx [0-5] %. FedEx is characterised by a very limited market presence, with a much weaker geographic coverage (on the destination side). In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a weak competitive constraint on the Parties even in the near future.

| 73. | Following the Commission’s price concentration analysis, price increase on lanes originating from Romania would have ranged between [5-10] % and [5-10] % and taking into account the efficiency gains, the net price effects in Romania would have been positive, ranging between [0-5] % and [5-10] %. |
| --- | --- |

73.

Following the Commission’s price concentration analysis, price increase on lanes originating from Romania would have ranged between [5-10] % and [5-10] % and taking into account the efficiency gains, the net price effects in Romania would have been positive, ranging between [0-5] % and [5-10] %.

| 74. | For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Romanian market for international intra-EEA express deliveries of small packages. |
| --- | --- |

74.

For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Romanian market for international intra-EEA express deliveries of small packages.

| 75. | Post transaction the integrators’ market shares in Slovakia were estimated as follows: UPS/TNT [40-50] %; DHL [40-50] %; FedEx [5-10] %. FedEx is characterised by a limited market presence, with a much weaker geographic coverage (on the destination side). In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a weak competitive constraint on the Parties even in the near future. |
| --- | --- |

75.

Post transaction the integrators’ market shares in Slovakia were estimated as follows: UPS/TNT [40-50] %; DHL [40-50] %; FedEx [5-10] %. FedEx is characterised by a limited market presence, with a much weaker geographic coverage (on the destination side). In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a weak competitive constraint on the Parties even in the near future.

| 76. | Following the Commission’s price concentration analysis, price increase on lanes originating from Slovakia would have ranged between [0-5] % and [5-10] % and taking into account the efficiency gains, the net price effects in Slovakia would have been positive, ranging between [0-5] % and [0-5] %. |
| --- | --- |

76.

Following the Commission’s price concentration analysis, price increase on lanes originating from Slovakia would have ranged between [0-5] % and [5-10] % and taking into account the efficiency gains, the net price effects in Slovakia would have been positive, ranging between [0-5] % and [0-5] %.

| 77. | For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Slovakian market for international intra-EEA express deliveries of small packages. |
| --- | --- |

77.

For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Slovakian market for international intra-EEA express deliveries of small packages.

| 78. | Post transaction the integrators’ market shares in Slovenia were estimated as follows: UPS/TNT [30-40] %; DHL [60-70] %; FedEx [0-5] %. FedEx is characterised by a very limited market presence, with no geographic coverage (on the destination side). In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain in the near future a limited competitive constraint on the Parties. |
| --- | --- |

78.

Post transaction the integrators’ market shares in Slovenia were estimated as follows: UPS/TNT [30-40] %; DHL [60-70] %; FedEx [0-5] %. FedEx is characterised by a very limited market presence, with no geographic coverage (on the destination side). In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain in the near future a limited competitive constraint on the Parties.

| 79. | Following the Commission’s price concentration analysis, price increase on lanes originating from Slovenia would have ranged between [5-10] % and [5-10] % and taking into account the efficiency gains, the net price effects in Slovenia would have been positive, ranging from [0-5] % to [0-5] %. |
| --- | --- |

79.

Following the Commission’s price concentration analysis, price increase on lanes originating from Slovenia would have ranged between [5-10] % and [5-10] % and taking into account the efficiency gains, the net price effects in Slovenia would have been positive, ranging from [0-5] % to [0-5] %.

| 80. | For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Slovenian market for international intra-EEA express deliveries of small packages. |
| --- | --- |

80.

For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Slovenian market for international intra-EEA express deliveries of small packages.

| 81. | Post transaction the integrators’ market shares in Sweden were estimated as follows: UPS/TNT [40-50] %; DHL [50-60] %; FedEx [0-5] %. FedEx is characterised by a very limited market presence, with a geographic coverage (on the destination side) weaker than UPS and DHL. In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a weaker competitive constraint on the Parties even in the near future. |
| --- | --- |

81.

Post transaction the integrators’ market shares in Sweden were estimated as follows: UPS/TNT [40-50] %; DHL [50-60] %; FedEx [0-5] %. FedEx is characterised by a very limited market presence, with a geographic coverage (on the destination side) weaker than UPS and DHL. In view also of FedEx’ internal documents relating to its expansion plans, on balance, the Commission concluded that FedEx would remain a weaker competitive constraint on the Parties even in the near future.

| 82. | Following the Commission’s price concentration analysis, price increase on lanes originating from Sweden would have ranged between [5-10] % and [5-10] % and taking into account the efficiency gains, the net price effects in Sweden would have been positive, ranging between [0-5] % and [0-5] %. |
| --- | --- |

82.

Following the Commission’s price concentration analysis, price increase on lanes originating from Sweden would have ranged between [5-10] % and [5-10] % and taking into account the efficiency gains, the net price effects in Sweden would have been positive, ranging between [0-5] % and [0-5] %.

| 83. | For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Swedish market for international intra-EEA express deliveries of small packages. |
| --- | --- |

83.

For these reasons, the Commission concluded that the merger would have been likely to lead to a significant impediment to effective competition on the Swedish market for international intra-EEA express deliveries of small packages.

V.   COMMITMENTS

COMMITMENTS

1.   Description of the Commitments

Description of the Commitments

| 84. | UPS submitted three sets of commitments: (i) on 29 November 2012, (ii) on 16 December 2012 and (iii) on 3 January 2013. |
| --- | --- |

84.

UPS submitted three sets of commitments: (i) on 29 November 2012, (ii) on 16 December 2012 and (iii) on 3 January 2013.

| 85. | The three remedy packages had, to different degrees, a structural and a behavioural pillar:






  — | a divestment remedy: sale of TNT’s subsidiaries, in 17 countries to a single buyer. (6) |
| --- | --- | --- |

85.

The three remedy packages had, to different degrees, a structural and a behavioural pillar:

—

a divestment remedy: sale of TNT’s subsidiaries, in 17 countries to a single buyer. (6)

6

| — | an access remedy: engagement of UPS to provide access to its intra-European air network from/to the remedies countries. |
| --- | --- |

—

an access remedy: engagement of UPS to provide access to its intra-European air network from/to the remedies countries.

| 86. | Through the divestment, any overlap in the remedy Countries would have been eliminated. |
| --- | --- |

86.

Through the divestment, any overlap in the remedy Countries would have been eliminated.

| 87. | None of the market players interrogated on the Commitments of 29 November 2012 and on the Commitments of 16 December 2012 declared being interested by the divested business as a whole, with the exception of La Poste/DPD. |
| --- | --- |

87.

None of the market players interrogated on the Commitments of 29 November 2012 and on the Commitments of 16 December 2012 declared being interested by the divested business as a whole, with the exception of La Poste/DPD.

| 88. | As a result of the second market test, UPS presented another set of Commitments, on 3 January 2013, trying to accommodate particular needs of La Poste/DPD. |
| --- | --- |

88.

As a result of the second market test, UPS presented another set of Commitments, on 3 January 2013, trying to accommodate particular needs of La Poste/DPD.

2.   Assessment of the Commitments

Assessment of the Commitments

| 89. | The overall conclusion reached by the Commission was that the proposed commitments were not likely to eliminate the competition concerns raised in the Statement of Objections. On the one hand, UPS was unable to offer a fix-it-first or upfront-buyer solution, and on the other hand the Commitments in combination with the business plan of the only interested purchaser, La Poste/DPD, were insufficient to remove the Commission’s concerns. In this respect, the following concerns were still present after the third package: |
| --- | --- |

89.

The overall conclusion reached by the Commission was that the proposed commitments were not likely to eliminate the competition concerns raised in the Statement of Objections. On the one hand, UPS was unable to offer a fix-it-first or upfront-buyer solution, and on the other hand the Commitments in combination with the business plan of the only interested purchaser, La Poste/DPD, were insufficient to remove the Commission’s concerns. In this respect, the following concerns were still present after the third package:

(i)   Timing of the conclusion of the divestment procedure

Timing of the conclusion of the divestment procedure

| 90. | La Poste/DPD would have had to negotiate with UPS, inter alia, a Share Purchase Agreement, but La Poste/DPD itself indicated that the due diligence could take considerably longer than estimated by UPS. |
| --- | --- |

90.

La Poste/DPD would have had to negotiate with UPS, inter alia, a Share Purchase Agreement, but La Poste/DPD itself indicated that the due diligence could take considerably longer than estimated by UPS.

(ii)   Suitability of La Poste/DPD as a buyer of the divested activities

Suitability of La Poste/DPD as a buyer of the divested activities

| 91. | La Poste/DPD provided no evidence that it had made an assessment of the profitability of the acquired international intra-EEA express services, in light of the comparatively small volumes and the required investments to be made in the non-remedy destination countries. Instead, La Poste/DPD assessed the overall profitability of the divested TNT subsidiaries as a whole, per group of countries. From its business plan, it turned out that La Poste/DPD had no precise economic data whatsoever relating to the profitability of the international intra-EEA express businesses. |
| --- | --- |

91.

La Poste/DPD provided no evidence that it had made an assessment of the profitability of the acquired international intra-EEA express services, in light of the comparatively small volumes and the required investments to be made in the non-remedy destination countries. Instead, La Poste/DPD assessed the overall profitability of the divested TNT subsidiaries as a whole, per group of countries. From its business plan, it turned out that La Poste/DPD had no precise economic data whatsoever relating to the profitability of the international intra-EEA express businesses.

| 92. | La Poste/DPD furthermore stated that it did not intend to acquire, lease or charter aircraft once the agreement with UPS would have expired, despite its earlier negative opinion about the possibility to operate effectively in the international intra-EEA air-based express segment on the basis of outsourcing. This increased the above-mentioned doubts considerably with respect to the period that would have followed the expiry of the agreement on access to UPS air network. |
| --- | --- |

92.

La Poste/DPD furthermore stated that it did not intend to acquire, lease or charter aircraft once the agreement with UPS would have expired, despite its earlier negative opinion about the possibility to operate effectively in the international intra-EEA air-based express segment on the basis of outsourcing. This increased the above-mentioned doubts considerably with respect to the period that would have followed the expiry of the agreement on access to UPS air network.

| 93. | As a consequence, there was insufficient evidence to allow the Commission to conclude that, were La Poste/DPD to take up the Commitments of 3 January 2013, it was likely that it would have developed a network able to handle international intra-EEA express deliveries across the EEA as efficiently as an integrator. |
| --- | --- |

93.

As a consequence, there was insufficient evidence to allow the Commission to conclude that, were La Poste/DPD to take up the Commitments of 3 January 2013, it was likely that it would have developed a network able to handle international intra-EEA express deliveries across the EEA as efficiently as an integrator.

VI.   CONCLUSION

CONCLUSION

| 94. | For the reasons mentioned above, the Decision concludes that the proposed operation whereby United Parcel Service Inc. acquires sole control of TNT Express N.V. within the meaning of Article 3(1)(b) of Regulation (EC) No 139/2004 is declared incompatible with the internal market and the EEA Agreement. |
| --- | --- |

94.

For the reasons mentioned above, the Decision concludes that the proposed operation whereby United Parcel Service Inc. acquires sole control of TNT Express N.V. within the meaning of Article 3(1)(b) of Regulation (EC) No 139/2004 is declared incompatible with the internal market and the EEA Agreement.

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(1)  OJ L 24, 29.1.2004, p. 1.

1

(2)  Publication in the Official Journal of the European Union
  C 186, 26.6.2012, p. 9.

2

Official Journal of the European Union

(3)  Case COMP/M.3971 Deutsche Post/Exel paragraphs 8-24.

3

Deutsche Post/Exel

(4)  The Commission identifies a separate product market for small package delivery services for which 31,5 kg appears as an appropriate threshold to distinguish small packages from freight.

4

(5)  For all the EEA countries, the Commission reconstructed the integrator’s market positions basing itself on their revenues and on an integrator-only basis.

5

(6)  (i) Bulgaria, (ii) the Czech Republic, (iii) Denmark, (iv) Estonia, (v) Finland, (vi) Hungary, (vii) Latvia, (viii) Lithuania, (ix) Malta, (x) the Netherlands, (xi) Poland, (xii) Romania, (xiii) Slovakia, (xiv) Slovenia and (xv) Sweden. As of the second package, the remedy also included Spain and Portugal.

6

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