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COMPETITION IN THE PACKAGE 

DELIVERY INDUSTRY 

HEARING 

BEFORE THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

SEPTEMBER 9, 2008 

Serial No. 110–203 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

LINDA T. SA ́ NCHEZ, California 

STEVE COHEN, Tennessee 

HANK JOHNSON, Georgia 

BETTY SUTTON, Ohio 

LUIS V. GUTIERREZ, Illinois 

BRAD SHERMAN, California 

TAMMY BALDWIN, Wisconsin 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

ARTUR DAVIS, Alabama 

DEBBIE WASSERMAN SCHULTZ, Florida 

KEITH ELLISON, Minnesota 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

DANIEL E. LUNGREN, California 

CHRIS CANNON, Utah 

RIC KELLER, Florida 

DARRELL ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

PERRY APELBAUM, Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

(III) 

C O N T E N T S 

SEPTEMBER 9, 2008 

Page 

OPENING STATEMENTS 

The Honorable Steve Cohen, a Representative in Congress from the State 

of Tennessee, and Member, Committee on the Judiciary ................................. 1 

The Honorable Lamar Smith, a Representative in Congress from the State 

of Texas, and Ranking Member, Committee on the Judiciary ......................... 2 

WITNESSES 

The Honorable George V. Voinovich, a U.S. Senator from the State of Ohio 

Oral Testimony ..................................................................................................... 4 

Prepared Statement ............................................................................................. 5 

The Honorable Sherrod Brown, a U.S. Senator from the State of Ohio 

Oral Testimony ..................................................................................................... 7 

Prepared Statement ............................................................................................. 9 

The Honorable Marcy Kaptur, a Representative in Congress from the State 

of Ohio 

Oral Testimony ..................................................................................................... 10 

Prepared Statement ............................................................................................. 13 

The Honorable Michael R. Turner, a Representative in Congress from the 

State of Ohio 

Oral Testimony ..................................................................................................... 15 

Prepared Statement ............................................................................................. 17 

The Honorable Betty Sutton, a Representative in Congress from the State 

of Ohio 

Oral Testimony ..................................................................................................... 18 

Prepared Statement ............................................................................................. 20 

Mr. David Lee Fisher, Lieutenant Governor, State of Ohio 

Oral Testimony ..................................................................................................... 22 

Prepared Statement ............................................................................................. 25 

The Honorable David L. Raizk, Mayor, Wilmington, OH 

Oral Testimony ..................................................................................................... 32 

Submitted Material .............................................................................................. 35 

Mr. John P. Mullen, CEO, DHL Express 

Oral Testimony ..................................................................................................... 70 

Prepared Statement ............................................................................................. 73 

Mr. Burt Wallace, Senior Vice President of Corporate Transportation, UPS 

Oral Testimony ..................................................................................................... 87 

Prepared Statement ............................................................................................. 89 

Mr. David Ross, President, Teamsters Local 224, on behalf of the Pilots 

of ABX Air 

Oral Testimony ..................................................................................................... 93 

Prepared Statement ............................................................................................. 95 

Mr. John Prater, President, Air Line Pilots Association, International 

Oral Testimony ..................................................................................................... 98 

Prepared Statement ............................................................................................. 100 

Mr. David A. Balto, Attorney at Law 

Oral Testimony ..................................................................................................... 107 

Prepared Statement ............................................................................................. 109 

Page

IV 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Prepared Statement of the Honorable Sheila Jackson Lee, a Representative 

in Congress from the State of Texas .................................................................. 141 

Prepared Statement of the Honorable Barack Obama, a U.S. Senator from 

the State of Illinois .............................................................................................. 143 

(1) 

COMPETITION IN THE PACKAGE 

DELIVERY INDUSTRY 

TUESDAY, SEPTEMBER 9, 2008 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Committee met, pursuant to notice, at 2:12 p.m., in room 

2141, Rayburn House Office Building, the Honorable Steve Cohen 

(acting Chairman of the Committee) presiding. 

Present: Representatives Conyers, Delahunt, Cohen, Johnson, 

Sutton, Gutierrez, Sherman, Wasserman Schultz, Smith, Coble, 

Goodlatte, Chabot, Keller, Issa, Forbes, King, and Jordan. 

Staff Present: Perry Apelbaum, Staff Director and Chief Counsel; 

Anant Raut, Majority Counsel; Brandon Johns, Majority Staff Assistant; Sean McLaughlin, Minority Chief of Staff and General 

Counsel; and Stewart Jeffries, Minority Counsel. 

Mr. COHEN. This hearing of the Judiciary Committee will come 

to order. 

The proposed agreement between the package delivery companies, UPS and DHL, whereby UPS would provide DHL with all air 

transport for DHL packages, raises a number of concerns. First, 

does this proposed agreement violate the Federal antitrust laws? 

I fully expect the witnesses from DHL and UPS will tell us that 

there is no need to be concerned because nothing has been finalized 

yet. Each has huge teams of lawyers working on the language of 

their agreement, but we are worried about it. Any transaction in 

which one of the package delivery company’s entire air service is 

provided by a competitor must be viewed with a heavy dose of 

skepticism. It is incumbent upon the contracting parties to satisfy 

us that it would not be anticompetitive. What specific terms are 

being incorporated into this agreement to allay our concerns? 

Second, what will be the impact on Ohio workers? The City of 

Wilmington and the State of Ohio invested a considerable amount 

of time and resources in providing DHL with a first-class sorting 

facility. Since 2004, the State of Ohio has offered DHL approximately $400 billion in direct and indirect financial assistance and 

incentives, including tax credits and the construction of a highway 

bypass. Between the employees of DHL and its two carrier airlines, 

ASTAR and ABX, nearly 10,000 jobs across 41 counties are at 

stake. What is going to happen to these people if DHL decides to 

suddenly leave town? What kind of strain will this put on Ohio social services if 10,000 residents wake up tomorrow without a job? 

2 

Third, after this transaction, air transport in the package delivery industry will essentially be consolidated in the hands of two 

players, UPS and FedEx. When competition increases, consumers 

win. When competition decreases, consumers absolutely lose. 

Right now, if you need express delivery of a package, you have 

four options—FedEx, UPS, DHL or the Postal Service. The Postal 

Service already outsources most of its air transport to FedEx. If 

DHL outsources its air transport to UPS, what is to stop UPS and 

FedEx from raising prices across the board for express delivery 

packages? Businesses that require high-volume shipping will be 

stuck. 

New, nationwide package delivery services don’t just appear 

overnight. And these costs will inevitably get passed along to consumers who in these times don’t have a lot of extra cash lying 

around. With those remarks, which are also the remarks of Chairman Conyers, who, I notice, is here and who notices that I am 

here, I give proper accord to his positions. 

And now I’d like to recognize the Ranking minority Member, 

Lamar Smith, for an opening statement. 

Mr. SMITH. Mr. Chairman, thank you for calling this hearing 

today regarding the proposed deal between DHL and UPS for air 

transport. This is a second hearing in 2 months, the first being the 

agreement between Google and Yahoo about a nonmerger-related 

agreement between competitors; and I appreciate your willingness 

to assert the Committee’s jurisdiction in these matters. 

On May 28, 2008, DHL, which is a unit of Deutsche Post 

WorldNet, announced a restructuring of its U.S. express business. 

Deutsche Post, which had a minority ownership stake in DHL dating back to the late 1990’s, reached 100 percent ownership in the 

company in 2002. Late that same year, DHL acquired its competitor, Airborne Express. Because a restriction was on the foreign 

ownership of U.S. airlines, DHL’s air carriers, ABX, the former Airborne Express, and ASTAR, the former DHL, were created as separate companies with whom DHL had a contractual arrangement. 

The two airlines flew out of Wilmington, Ohio, a town of about 

12,000 in southwest Ohio. 

In the last couple of years, DHL’s North American business and, 

in particular, its air transport business has suffered large losses, 

even though the parent company’s worldwide profits were quite 

large. The reorganization announced in May 2008 involves DHL’s 

outsourcing its entire airfreight business to its rival, UPS. 

A DHL customer will still interact with a DHL driver at pickup. 

However, instead of going to Wilmington, Ohio, the DHL vans will 

now head to Louisville, Kentucky, where UPS operates its air hub. 

A UPS plane will then transport the package to its destination city, 

where a DHL van will deliver the package. 

DHL estimates that this new arrangement will save the company as much as $1 billion annually. It will, however, result in the layoffs of almost 7,000 employees in Wilmington, Ohio. Conversely, 

UPS will receive as much as $1 billion in new revenue and will increase its presence in the Louisville area to compensate for the increased demand on its airline. 

Other carriers, such as FedEx and the U.S. Postal Service, have 

agreements that allow for the transport of some packages on a 

3 

competitor’s planes. However, this will likely be the first time that 

a major shipping company has outsourced its entire airfreight capacity to a rival. 

As of today’s hearing, UPS and DHL have not reached a formal 

agreement. Because this is not a merger, the companies are not required to receive approval of the arrangement from the Department of Justice or Federal Trade Commission. However, it is my 

understanding the companies will provide the agreement to the Department of Justice once the contract is finalized. 

Unlike Google and Yahoo, it is my understanding that the parties will not delay implementation of the agreement until after 

DOJ has completed its review. Like Google and Yahoo, the question 

of whether this agreement harms competition will turn in large 

measure on the terms of the contract. Under that contract, will 

UPS have an incentive to discriminate against DHL’s packages 

when it prioritizes items for delivery? Will UPS gain access to sensitive pricing or customer information that will give it an advantage over DHL? 

The Department of Justice will also have to consider the likely 

fate of DHL as a stand-alone competitor in the United States absent this deal; that is, if this deal is all that prevents DHL from 

going out of business, then it may be worth allowing this deal to 

go through so as to preserve a strong third competitor against UPS 

and FedEx. 

These are complicated factual questions and are unanswerable at 

this point because the parties have not finalized any agreements. 

I am aware that this deal has been very controversial in Ohio 

and for good reason. The loss of 7,000 jobs would severely impact 

the town of Wilmington located in Congressman Michael Turner’s 

district. To that end, I am happy that we will be hearing from so 

many distinguished members from the Ohio delegation today. And 

both Presidential candidates have discussed the issue on the campaign trail as well. 

While the political ramifications of this agreement cannot be ignored, I hope this Committee will focus on the subject of its jurisdiction, namely the possible impact on consumers of such a transaction. 

Mr. Chairman, I look forward to the hearing and hearing from 

our witnesses and thank you again for calling it on this subject. 

Mr. CONYERS. [Presiding.] Thank you, Mr. Smith. 

I am so delighted we have one, two, three, four, five Members of 

the Senate and the House here. And I notice Betty Sutton, our distinguished Member of the Committee, is with us. In addition, there 

is Michael Turner himself and, of course, my dear friend Marcy 

Kaptur, whose district is only 54 miles from ours. So she is in the 

Detroit Labor Day parade as much as I am. And, of course, Sherrod 

Brown, who has served us in the House for so many years before 

he was elevated to the Senate. 

And we begin with the senior Senator from Ohio, the Honorable 

George Voinovich. Since 1999, he has served in the United States 

Senate with great distinction. And we are delighted you are all 

here. All your statements will be included in the record. 

And might I invite the senior Senator to begin our discussion 

this afternoon. Welcome to the Judiciary Committee, sir. 

4 

Mr. VOINOVICH. Thank you, Mr. Chairman. 

Mr. CONYERS. Press your button. We are high tech here. You 

have got to press the right buttons. 

All right, we are low tech here. Where are the engineers? This 

is so embarrassing. Our visitors come from the other body and 

what do we do? I assure you this was an accident, ladies and gentlemen. 

TESTIMONY OF THE HONORABLE GEORGE V. VOINOVICH, 

A U.S. SENATOR FROM THE STATE OF OHIO 

Mr. VOINOVICH. Mr. Chairman, thanks for this opportunity, sir, 

for having this hearing. It will examine competition in the package 

delivery industry—here we go—including the competitive impacts 

of the proposed agreement between DHL Express U.S., its parent 

Deutsche Post WorldNet—collectively, DHL—and the United Parcel Service, Inc. 

I am pleased that the Committee will spend time reviewing the 

competitive situation in this industry. I believe activities like this 

hearing, as well as what I anticipate will be a review of the proposed DHL-U.S.A. agreement by the Department of Justice Antitrust Division, will reveal why a DHL-UPS agreement is likely to 

result in consumer harm and an unnecessary loss of jobs and an 

uprooting in the lives of thousands of families in Ohio. 

There is a saying that trying times bring out the best in people, 

and that has certainly been the case with the DHL situation. I 

have been very proud of the way Ohio’s political leaders have 

worked together to bring attention to the DHL situation, which is 

evidenced by the presence of Senator Brown, Senator Turner—Congressmen Turner, Sutton and Kaptur. And our lieutenant governor 

is here today. 

Each of us recognizes the devastating impact that the loss of 

7,000 jobs will have on the Wilmington community. Families will 

struggle to pay their mortgages, save for their children’s education 

and ensure their retirements. In news reports, DHL and UPS characterize their agreement as nothing more than a consumer-vendor 

agreement that raises no antitrust issues. 

The proposed DHL-UPS agreement, however, is not a theoretical 

consumer-vendor agreement, nor is it a typical agreement. This 

agreement will result in DHL becoming heavily dependent on one 

of its closest competitors for a key component of its service, the airlift that moves overnight letters and packages around the country, 

and will result in DHL’s sharing critical and competitively sensitive information with UPS when UPS handles DHL’s packages. 

The company has also claimed they have not yet entered into 

this agreement; thus, there is no need to worry about the competitive implications. Unfortunately, if DHL and UPS complete an 

agreement, which both companies agree does not require a review 

under the Hart-Scott-Rodino Antitrust Improvements Act, then any 

government antitrust review would occur after the agreement went 

into effect after ABX and ASTAR, the airlines that currently provide airlift service for DHL, significantly scale back their operations, shedding workers, planes and abandoning Wilmington, 

Ohio, from which they operate. If this occurs, it would be nearly 

impossible to return the market to the situation as it exists today. 

5 

I know the Committee is aware that the very purpose of the 

Hart-Scott-Rodino Act was to avoid situations where two parties 

enter into agreement without adequate review that would irreversibly harm competition. Because the DHL-UPS agreement does not 

require Hart-Scott-Rodino Act notification and review, there is a 

significant role for Congress and the Antitrust Division to act 

proactively to ensure that competition is protected. 

Whenever there is a concerted effort between or among competitors, special caution must be taken to ensure that competition is 

maintained. Because the DHL and UPS agreement will require 

DHL to relinquish cost and quality control over its business to UPS 

and allow UPS to gain information about DHL customers, any 

DHL-UPS agreement raises significant antitrust issues under the 

Sherman Act. 

As discussed in the Antitrust Division’s and Federal Trade Commission’s antitrust guidelines for collaborations among competitors, 

an agreement that limits the independent decision making or combines control over key assets is prone to result in situations that 

reduce the ability or incentive for competition and may increase the 

likelihood of an exercise of market power by facilitating explicit or 

tacit collusion. A DHL-UPS agreement will result in DHL’s surrendering cost and quality control to UPS over a significant part of its 

U.S. operation, resulting in just the sort of competitive harm DOJ, 

FTC, JB guidelines raise. Moreover, if DHL adopts the UPS package tracking and labeling system, it appears UPS will gain competitive information about DHL’s customers. As a result, such an 

agreement should be scrutinized closely by this Committee and 

other Committees and the Antitrust Division. 

Mr. Chairman, thank you very much for allowing me to testify 

today. 

[The prepared statement of Mr. Voinovich follows:] 

PREPARED STATEMENT OF THE HONORABLE GEORGE V. VOINOVICH, 

A U.S. SENATOR FROM THE STATE OF OHIO

INTRODUCTION

Chairman Conyers, Ranking Member Smith, and Committee members, good afternoon and thank you for this opportunity to testify before you at this important hearing, which will examine competition in the package delivery industry, including the 

competitive impacts of the proposed agreement between DHL Express U.S., its parent Deutsche Post World Net (collectively ‘‘DHL’’), and United Parcel Service, Inc. 

(‘‘UPS’’). I am pleased that the Committee will spend time reviewing the competitive 

situation in this industry. I believe activities like this hearing, as well as what I 

anticipate will be a review of the proposed DHL/UPS agreement by the Department 

of Justice Antitrust Division (‘‘Antitrust Division’’), will reveal why the DHL/UPS 

agreement is likely to result in consumer harm, an unnecessary loss of jobs, and 

uprooting the lives of thousands of families in Ohio. 

Before I turn to the specific topic of this hearing, I would like to say a few words 

about the efforts of the Ohio delegation relating to the DHL/UPS situation. There 

is a saying that trying times bring out the best in people—and that has certainly 

been the case with the DHL situation and the Ohio Congressional delegation’s reaction. I have been very proud of the way Ohio’s community and public leaders have 

come together to ensure that competition in this industry is maintained and the 

Wilmington community is treated fairly. This unity is evidenced by the presence of 

Senator Brown, Mr. Turner, Ms. Sutton, Ms. Kaptur, Lieutenant Governor Fisher, 

and Wilmington Mayor Raisk at this hearing. We all recognize the devastating impact that the loss of roughly 8,000 jobs will have on the Wilmington community. 

Families will struggle to pay their mortgages, save for their children’s education, 

and ensure their retirements. 

6 

THE DHL/UPS AGREEMENT

When DHL first announced that it intended to partner with UPS, I met with the 

head of DHL’s North American Operations, John Mullen, and needless to say, I expressed my disappointment and concern about the transaction. Ohio and Wilmington made a commitment to DHL, and now DHL is not willing to work with 

the Ohio stakeholders to help the company solve its financial issues. Instead, DHL 

will try to resolve its financial issues by completing an agreement with one of its 

closest competitors. 

In news reports, DHL and UPS characterize their agreement as nothing more 

than a customer-vendor supply agreement that raises no antitrust issues. The companies maintain there is nothing anticompetitive about such a customer-vendor 

agreement, and in the abstract, I would tend to agree. However, the proposed DHLUPS agreement is not a theoretical customer-vendor agreement, nor is it a typical 

agreement. Rather, this agreement will result in DHL becoming heavily dependent 

on one of its closest competitors for a key component of its service—the airlift that 

moves overnight letters and packages around the country. In addition, the agreement will inevitably result in DHL sharing critical and competitively sensitive information with UPS when UPS handles DHL’s packages. 

The companies also claim that they have not yet entered into an agreement; thus, 

there is no need to worry about the competitive implications. Unfortunately, such 

logic does not hold up under scrutiny. If DHL and UPS complete an agreement, 

which both companies have agreed does not require review under the Hart-ScottRodino Antitrust Improvements Act (‘‘HSR Act’’), then any government antitrust review would occur after the agreement went into effect and after the likely competitive harm has permanently changed the competitive landscape. The airlines that 

currently provide airlift service for DHL, ABX and ASTAR, will likely scale back 

quickly, shedding workers, planes, and abandoning the Wilmington, Ohio facility 

from which they operate. If this sort of change occurs and later the Antitrust Division finds competitive issues with the DHL/UPS agreement, then it would be nearly 

impossible to return the market to the situation as it exists today. 

I know this Committee is aware that the very purpose of the HSR Act was to 

avoid situations where two parties enter into an agreement that would irreversibly 

harm competition. That is, the HSR Act was designed to avoid situations in which 

the egg cannot be unscrambled. The HSR Act, however, does not apply to every 

agreement that raises antitrust issues. Nevertheless, there is a significant role for 

Congress and the Antitrust Division to ensure that competition and consumers are 

protected against the harms that could ensue from agreements, such as the DHL/ 

UPS agreement, that are not reported under the HSR Act. 

ANY DHL/UPS AGREEMENT RAISES COMPETITIVE ISSUES

Section 1 of the Sherman Antitrust Act (‘‘Sherman Act’’) makes contracts in restraint of trade unlawful. Whenever there is a concerted activity between or among 

competitors, special caution must be taken to ensure competition is maintained. Because the DHL/UPS agreement will require DHL to relinquish cost and quality control over its business to UPS and allow UPS to gain information about DHL’s customers, any DHL/UPS agreement raises significant antitrust issues under the Sherman Act. 

As discussed in the Antitrust Division and Federal Trade Commission’s (‘‘FTC’’) 

Antitrust Guidelines for Collaborations Among Competitors (the ‘‘DOJ/FTC JV 

Guidelines’’), an agreement that limits the independent decision-making or combines 

control over key assets is prone to result in situations that ‘‘reduce the ability or 

incentive [for competitors] to compete independently’’ and ‘‘may increase the likelihood of an exercise of market power by facilitating explicit or tacit collusion.’’ 

A DHL/UPS agreement will likely result in DHL surrendering cost and quality 

control to UPS over a significant part of its U.S. operations resulting in just the sort 

of competitive harm the DOJ/FTC JV Guidelines anticipate. Moreover, if DHL 

adopts UPS’s package tracking and labeling system, it appears UPS will gain competitive information about DHL’s customers. As a result, such an agreement should 

be scrutinized closely to ensure that it does not lead to consumer harm in terms 

of increased costs or decreased services. 

1CONCLUSION

Thank you for allowing me to testify today, and I look forward to continuing my 

work with the state of Ohio and my colleagues in the entire Ohio Congressional delegation. I want to thank this Committee for its willingness to provide the necessary 

oversight of the competitive environment in the package delivery industry. 

7 

Mr. CONYERS. Thank you for your opening comments, Senator 

Voinovich. 

We are always glad to see Sherrod Brown, now a Member, as we 

say, of the other body, but we still remember him fondly for his 

work. Now he is an author and sometimes Members of the Committee; they wonder if we are—have you written a book lately, another book lately? 

Mr. BROWN. No. A couple a while ago, but not—— 

Mr. CONYERS. Well, there are some Members—— 

Mr. BROWN. When I was in the minority in the House, I had a 

little more time. 

Mr. CONYERS. We are happy to have you here. Welcome. 

TESTIMONY OF THE HONORABLE SHERROD BROWN, 

A U.S. SENATOR FROM THE STATE OF OHIO 

Mr. BROWN. Thank you, Mr. Chairman. 

And Ranking Member Smith, nice to see you. Thank you very 

much. 

And when I walked in and saw Mr. Cohen sitting in the chairman’s seat, I just thought, 14 years in the House, I never got to 

sit there. I come back 2 years later, things have—I just don’t understand that. 

But thank you. And special thanks to the whole Committee, especially the chairman and the Ranking Member, and to all those 

in Ohio and around the country that have been so helpful in this 

issue. 

I cite the work of my colleague, Senator Voinovich. I cite especially the work of Congressman Turner and what Mayor Raizk has 

done in Wilmington. I particularly thank Marcy Kaptur and Betty 

Sutton, sitting on the panel, and those Members, Steve Chabot and 

Jim Jordan, who have shown interest way beyond the confines of 

their districts. This is a southwest Ohio issue, but it is bigger than 

that, a State issue, and even bigger than that, obviously a national 

issue. I particularly also appreciate the work that Captain David 

Ross and the Teamsters have done; and the governor, Governor 

Strickland, and Lieutenant Governor Fisher, and more on that in 

a minute. 

In addition to Ohio’s congressional delegation and State leaders, 

Senators Herb Kohl and Orrin Hatch, the Chair and Ranking 

Member of the Antitrust Subcommittee, have asked the Justice Department to investigate the proposed transaction. Senator 

Voinovich and I are particularly appreciative of that. 

This is a national issue, of course, as evidenced by both Senator 

McCain and Senator Obama’s requesting an antitrust review and 

monitoring this situation. The proposed transaction between DHL 

Worldwide Express and United Parcel Service would result in 

DHL’s becoming almost entirely dependent on its main competitor, 

UPS, to deliver its packages. It may cause serious harm to competition in the U.S. Air express package delivery market. 

This DHL-UPS proposal, as we have heard, puts more than 8,000 

jobs in Ohio at risk, forcing those Ohioans, their families, the communities in which they live to endure unrelenting financial uncertainty. The lack of competitive pricing will affect consumers all 

over the country. If the DHL-UPS deal breaks antitrust rules, we 

8 

need to know that, we need to know it quickly. If this deal is actually finalized, DHL will rely on its competitor for a critical element 

of its service, its airlift. That sounds simple enough, but what does 

that mean? 

Well, it is a lot more than one set of planes or another. As Mr. 

Smith’s opening statement put out questions that we need to answer, here are some others. Whose system do you use? Will there 

be DHL or UPS bar codes on the package? Will customer and pricing information be shielded from UPS? What prevents a price 

squeeze since UPS has control of DHL’s wholesale operations? 

When the Christmas rush comes, whose packages will move first 

if cargo capacity is strained? And finally, what prevents UPS from 

using its control of DHL’s airlift to marginalize DHL as a competitor? 

Congress needs to better understand what this proposed deal 

would mean for free market competition. DHL will tell you its been 

losing a billion dollars a year. That justifies changes to the company, not to the market in which it functions. Competitive pricing, 

consumer choice are the hallmarks of a functioning market. They 

must be preserved. 

This proposed deal teaches a lesson in corporate responsibility or 

the lack thereof. The final result may leave a mark on how our government regulates foreign investment when it comes to aviation. I 

am referring to the U.S.-EU Open Skies Initiative, which aims to 

loosen existing restrictions on EU air carriers operating in our 

great country. Its proponents claim that deal will create thousands 

of U.S. jobs and benefits our Nation’s economy enormously. 

Mr. Chairman, we have heard that before. When DHL moved to 

Ohio, it promised to boost competition in the air carrier market. It 

promised to create thousands of good-paying jobs. It promised, of 

course, to benefit Ohio’s economy enormously. When DHL bought 

Airborne in 2003 and decided to headquarter its airlift operations 

in Wilmington, our State, of course, welcomed the deal. In fact, the 

city of Wilmington and Mayor Raizk, Clinton County, and the State 

of Ohio produced an incentive package including nearly $80 million 

in direct tax benefits for DHL and several infrastructure projects 

and up to $400 million in indirect benefits. Sales of yellow and red 

paint must have tripled as DHL’s logo is everywhere throughout 

the region, and DHL’s name from the All-Star Game to local billboards quickly became a source of pride throughout our State. But 

now Ohio stands to lose 8,000 jobs directly—thousands more, as 

Senator Voinovich said, if you count other jobs in the community. 

I have done roundtables in Wilmington, listened to the mayor 

talk about what it means to police and fire, listened to hospital administrators talk about what it means to their ability to deliver 

medical care in this community in Highland County and Montgomery County and all over the region. 

I am particularly disturbed by DHL’s unwillingness to fully review alternative proposals that would prevent so many jobs from 

being eliminated. That justifies changes—again, DHL says it is losing a billion dollars in the U.S. market. That justifies changes to 

the structure, and Governor Strickland and Lieutenant Governor 

Fisher and our delegation have shown willingness to adapt. We 

9 

simply ask the company to give a fair opportunity to other proposals, including from ABX Air. 

We have been willing to discuss creative solutions. We have been 

met with silence. 

Mr. Chairman, the story does not have to end this way. I ask Mr. 

Mullen and Mr. Appel of Deutsche Post in Germany to negotiate 

in good faith an alternative structure that keeps as many jobs as 

possible in my State. It would take genuine courage for DHL to reconsider its plan with UPS and figure out a solution that works for 

the community as well as the company and its customers. Workers 

in Wilmington and throughout Ohio would applaud that courage. 

Thank you for the opportunity to share my views. 

[The prepared statement of Mr. Brown follows:] 

PREPARED STATEMENT OF THE HONORABLE SHERROD BROWN, 

A U.S. SENATOR FROM THE STATE OF OHIO

Thank you, Chairman Conyers and Ranking Member Smith. I’d like to also acknowledge Mayor David Raizk of Wilmington who will testify today. Thank you for 

your leadership in handling this enormous issue. 

Before I begin, I’d like to say a word about the efforts and coordination between 

local, county, state and federal officials. From the city council to the White House, 

our public officials have recognized the substantive and financial risks posed by this 

deal. I’m grateful for the unity in our delegation and the responsiveness from members of Congress in both chambers. 

In addition to Ohio’s congressional delegation and state leaders, Senator Herb 

Kohl and Senator Orrin Hatch, the Chair and Ranking Members of the Antitrust 

Subcommittee, have asked the Justice Department to investigate the proposed 

transaction. 

Indeed, this is a national issue, as evidenced by both Democrat and Republican 

presidential candidates requesting an antitrust review and monitoring the situation. 

The proposed transaction between DHL Worldwide Express and United Parcel 

Service (UPS) would result in DHL becoming almost entirely dependent on its main 

competitor—UPS—to deliver its packages. It may cause serious harm to competition 

in the U.S. air express package delivery market. 

This DHL-UPS proposal puts more than 8,000 jobs in Ohio at risk, forcing those 

Ohioans, their families, and the communities in which they live to endure unrelenting financial uncertainty. 

The lack of competitive pricing will affect consumers all around the country. 

If the DHL-UPS deal breaks antitrust rules, we need to know that, and we need 

to know it quickly. If this deal is actually finalized, DHL will rely on its competitor, 

UPS, for a critical element of its service—its air lift. 

That sounds simple enough, but what does that mean? Well, it’s a lot more than 

one set of planes or another. 

The sorting and tracking functions are highly automated. Whose system do you 

use? Will there be DHL or UPS bar codes on the package? Will customer and pricing 

information be shielded from UPS? What prevents a price squeeze since UPS has 

control of DHL’s wholesale operations? When the Christmas rush comes, whose 

packages will move first if cargo capacity is strained? 

I’m certainly not an expert on these topics, but what prevents UPS from using 

its control of DHL’s airlift to marginalize DHL as a competitor? These are some of 

the questions that arise and probably just scratch the surface. 

Congress needs to better understand what this proposed deal would mean for free 

market competition. In my view, it can only mean trouble. 

DHL will tell you it has been losing $1 billion per year. That justifies changes 

to the company, not to the market in which it functions. 

Competitive pricing and consumer choice are the hallmarks of a functioning market. They must be preserved. 

The ripple effects of this proposed deal, if it goes forward, would reach beyond the 

financial hardship it will create in Ohio. This proposed deal may teach us a lesson 

in corporate responsibility, or the lack thereof. The final result may leave a mark 

on how our government regulates foreign investment when it comes to aviation. 

I’m referring to the U.S.-EU Open Skies Initiative, which aims to loosen existing 

restrictions on EU air carriers operating in our country. Its proponents claim that 

10 

deal will create thousands of U.S. jobs, and benefit our nation’s economy enormously. 

Ohioans have heard this before, just five years ago. When DHL moved to Ohio, 

it was going to boost competition in the air carrier market, create thousands of good 

paying jobs, and benefit Ohio’s economy enormously. 

When DHL Express bought Airborne Express in 2003 and decided to headquarter 

its airlift operations in Wilmington, our state welcomed the deal. In fact, the City 

of Wilmington, Clinton County, and state of Ohio produced an incentive package including nearly $80 million in tax benefits for DHL and several infrastructure 

projects. Sales of yellow and red paint must have tripled as DHL’s logo was everywhere throughout the region, and DHL’s name quickly became a source of pride 

throughout our state. 

Despite millions in financial incentives to DHL, the company has not gained market share. When DHL purchased Airborne Express in 2003, it had 18 percent market share. By 2007, DHL’s market share dwindled to about 7 percent. Now, Ohio 

stands to lose 8,000 jobs directly—and thousands more if you count other jobs in 

the community. 

I am particularly disturbed by DHL’s unwillingness to fully review alternative 

proposals that would prevent so many Ohio jobs from being eliminated. 

Again, DHL says it is losing $1 billion in the U.S. market. That justifies changes 

to the structure, and Governor Strickland, Lt. Governor Fisher and the Ohio congressional delegation have shown willingness to adapt. We have asked the company 

to give a fair opportunity to other proposals, including from ABX Air. We have been 

willing to discuss creative solutions. We have been met with silence. 

The story does not have to end this way. I just ask Mr. Mullen, and Mr. Appel 

of Deutsche Post, to negotiate in good faith an alternative structure that keeps as 

many jobs as possible in Ohio. 

It would take genuine courage for DHL to reconsider its plan with UPS, and figure out a solution that works for the community, as well as the company and its 

customers. Workers in Wilmington and throughout Ohio would honor that courage. 

Thank you for the opportunity to share my views and for the Committee’s commitment to examining this proposal. I look forward to continuing to work with the city 

of Wilmington, the state of Ohio and federal officials in fighting for these jobs. 

Mr. CONYERS. Thank you, Senator Brown. 

Congresswoman Marcy Kaptur has worked with this Committee 

and with its chairman across the years. We are neighbors, nearly 

contiguous districts, even in different States. And she has helped 

me become an infrequent visitor and lecturer at the Toledo School 

of Law. 

And we are happy to have you here again today. 

TESTIMONY OF THE HONORABLE MARCY KAPTUR, 

A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO 

Ms. KAPTUR. Thank you, Mr. Chairman, so very much for the opportunity to appear here with our colleagues. 

And I want to thank you personally for your leadership to bring 

us together today with your Ranking Member, Mr. Smith, and 

Members of the full Committee; and also to say up front that we 

appreciate all the attention that you are giving to this devastating 

proposal that DHL, a German government-owned corporation and 

its competitor, UPS, are pursuing. 

I want to thank our colleagues from Ohio, Congressmen Turner 

and Sutton, as well as Senators Brown and Voinovich and our lieutenant governor, Lee Fisher, who is with us today, as well as the 

mayor of Wilmington, David Raizk, who I know is in the audience 

and will likely be testifying as well. It is important that we shine 

light for the country on this issue and its expected harm to our 

economy, our State, and our country. 

The question for the Committee is, should the United States 

allow this de facto merger between DHL and UPS to go forward 

11 

without scrutiny? More good Ohio jobs are likely to be lost, communities washed out, and consumers across our country, as well as 

world customers, subjected to higher prices because of reduced 

competition. 

This deal is being constructed as an attempt to escape regulatory 

oversight, to expedite the consolidation of an already heavily consolidated industry. 

Let me just place on the record: This is a package delivery industry that has been making money. In 2007, overall, 32.8 billion— 

that is with a ‘‘b’’—billion dollars was taken in in annual revenues. 

Now, FedEx got about 42.7 percent of that, $14.02 billion. $14.02 

billion is about as much as we spend in an annual year to fund 

NASA. The United Parcel Service earned 10.6 billion; they had 

about a 32 percent share of the market. DHL, 2.8 billion in revenues, about 8.5 percent, so they weren’t one of the two big players, 

but they weren’t insignificant with—2 billion is a lot more than 

most small businesses in my district make. And the Postal Service 

had 950 million, small kid on the block, with about 2.9 percent of 

the package delivery business. And then other competitors held 

about $4.45 billion. So we are talking about big fish in the ocean 

here. 

In Ohio, I might just say—I am sure you already know it—we 

have lost hundreds of thousands of good-paying jobs with benefits, 

certainly since the implementation of lopsided trade agreements 

like NAFTA. But the UPS-DHL proposal is merely one more corporate dispossession of workers in communities that are the backbone of our economy. 

If this arrangement goes through, it is estimated at least 8,000 

Ohio jobs are on the short list for elimination and tens of thousands of supporting jobs in Wilmington, Ohio, and surrounding 

counties. 

Wilmington itself is a town of 13,000 people. It may not survive 

the fatal blow of an abandoned facility that displaces such a vast 

workforce. Indeed, as we examine the recent history of UPS and 

DHL, we see that job losses and abandoned facilities are likely. 

When UPS acquired Emery Worldwide in 2004, operating at the 

Dayton airport, UPS left the facility vacant with 1,200 people unemployed without wages or health insurance. That is a huge job 

loss by anybody’s calculation. And then when DHL acquired Airborne Express, DHL left the Cincinnati airport with unused facilities. I know that Congressman Chabot knows that story well. 

If these two package giants merge air operations, we can expect 

that the Wilmington facility will suffer a similar fate, despite the 

hundreds of millions of dollars of taxpayer money that DHL asked 

the State of Ohio to invest in infrastructure to support its operations. Not only will the people of southwestern Ohio be hit hard, 

but also so will consumers nationwide and likely worldwide. 

Eliminating DHL from the express overnight shipping market 

will leave just two companies, UPS and FedEx. This further reduces competition with likely higher prices for you, for me, and for 

everyone. Furthermore, the possibility that this alliance will extend 

to Asian and European operations is merely a step ahead. 

12 

I urge your Committee to investigate this proposal both in terms 

of its antitrust implications, but also the impact that it will have 

on Wilmington and the State of Ohio as a whole. 

It is no secret that Senator Obama has visited Wilmington, as 

well as Senator McCain. We need to have this on everyone’s radar. 

If we allow these types of megabusiness arrangements with little 

regulation or regard, we can expect other companies will feel comfortable abandoning communities all in the name of higher corporate profits. But at whose expense? When is big too big? And 

when does big become anticompetitive? 

Since national corporations cannot be allowed to forgo their duties to fulfill promises such as those DHL made to the city of Wilmington and the State of Ohio—they promised to be a long-term 

presence and enhance competition, not detract from it—it appears 

that we can no longer count on corporations keeping their word or 

our ability to ensure a return on our State’s investments. 

Congress’s most important responsibility is to represent our people, not just the interests of huge corporations. I am here to speak 

on behalf of workers who will be forced out of jobs and left without 

health care. I know that Captain David Ross is here, President of 

the Teamsters Local 1224 and representing the pilots of ABX Air. 

I hope they will be given an opportunity to testify as well. We 

speak on behalf of students and our schools that will be underfunded because of the potential loss of tax revenue, and communities who will be harmed by pending facility closures. 

In closing, Mr. Chairman and Members, thank you for giving us 

the opportunity to bring to you and to the Committee’s attention 

the plight of our people in communities who will be abandoned if 

DHL is allowed to break its commitment to the State of Ohio and 

to the people of Wilmington. And most of all, thank you for meeting 

the responsibilities of your Committee. Thank you. 

[The prepared statement of Ms. Kaptur follows:] 

13 

PREPARED STATEMENT OF THE HONORABLE MARCY KAPTUR, 

A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO


MK-1.eps
14 


MK-2.eps
15 

Mr. CONYERS. Thanks, Marcy Kaptur. 

Now the former mayor of Dayton, Ohio, now serving several 

terms in the House of Representatives, the Honorable Michael 

Turner, who is a very active Member of this 110th Congress. Welcome to the House Judiciary Committee. 

TESTIMONY OF THE HONORABLE MICHAEL R. TURNER, 

A REPRESENTATIVE IN CONGRESS FROM THE STATE OF 0HIO 

Mr. TURNER. Thank you, Mr. Chairman. 

Thank you, Ranking Member Smith. 

Mr. Chairman, I thank you for holding this hearing on what really is an important issue for the U.S. economy. And I thank the 

Members of the Committee for their attention and their scrutiny of 

this transaction, Senator Brown and Senator Voinovich, and I 

thank Congresswoman Kaptur and Sutton for coming together to 

support an issue that affects Ohio. This has been a bipartisan issue 

in our State, and we greatly appreciate your reviewing it today, 

Mr. Chairman. 

Wilmington, Ohio, is in my district, the Third District of Ohio, 

so I want to speak a moment about the people of the Third District 

who will be impacted by this transaction. 

This facility is not closing because of them. They are hardworking, professional, and committed. The facility that is subject to 

possible closure was operated prior to DHL’s acquisition without a 

loss. However, the people will be impacted, professions will be lost, 

homes are at risk, dreams are at risk, the ability to send children 

to college is at risk. In a nine-county area around Wilmington, 

Ohio, people send family members to this facility in order to obtain 

health insurance. Family farms and small businesses that depend 

on that health insurance will be impacted. And, of course, the businesses that serve the people of the community will be impacted. 

Well, today, I wanted to, with the others, outline why this is bad 

for the U.S., the U.S. consumer, and why I believe this is an antitrust violation. 

If you go back just 4 years ago and view this as a stepped transaction, you see a very different picture in the shipping industry. 

Four years ago we would have had five major players—Emery, Airborne, Federal Express, DHL and UPS. UPS acquired Emery and 

one disappeared. DHL acquires Airborne and another disappears. 

Now DHL and UPS are intending to combine for taking what were 

five in the U.S. market down to two. 

But we shouldn’t just stop there. We should also look at what is 

going on in the European industry right now. The Atlanta Journal 

Constitution just reported that UPS is in negotiations to acquire 

the number two carrier in Europe. They report that there are three 

major carriers in Europe—UPS, TNT and DHL. Well, if UPS acquires TNT, the number two, they will be down to two. But in reality they will be down to one because we already know that between DHL and UPS, there will be this strategic alliance. So there 

really will be one where there were three. So if you go to Europe 

to send a package to the United States, whether you go into a DHL 

or UPS office, you will be dealing with, in effect, one company. 

Now, what else is bad for the U.S. besides the impact of the consolidation? We will be dismantling important infrastructure for the 

16 

operation of our economy. When these industries grew, they grew 

slowly in scope. Today, though, in order to be able to compete in 

the package systems industry, you have to have a nationwide system. That will be dismantled and will become a barrier to entry for 

others. So we will have consolidation and we will also have preventing further competition. 

Once they have market control, what will happen? Well, they can 

limit the service and control pricing. 

What are some of the things that we know? Well, I met with 

DHL officials in my office, and these are some of the things that 

we do know. Their computer systems will be integrated because the 

two companies will have to talk to one another. Their costs will 

have to be coordinated because UPS will be charging DHL. And we 

also know, because they reported this to me in my office, that this 

may expand—the strategic alliance may expand to European and 

Asian markets. So it is not merely just a strategic alliance between 

UPS and DHL here. 

Now, what do we need to know? We need to know why would 

UPS and DHL agree to do this and how did DHL take Airborne, 

a prior business that was profitable, and generate losses? What is 

the future relationship between DHL? Is this just the start? And 

what does this mean for the almost 10,000 people in southwest 

Ohio that will have lost their jobs as a result of these consolidations with DHL and UPS? 

Now, usually, for me, if something doesn’t make sense, I assume 

something else is going on. And in this instance, I think something 

else is going on and that we do have here a de facto merger. Why 

would DHL hand its clients to UPS? Why would DHL cost structure—agree to a cost structure that would become higher than 

UPS, since they are basically going to become UPS-plus? 

DHL is going to share its information with UPS. Why wouldn’t 

UPS steal DHL’s clients and why wouldn’t that concern them? Why 

would anyone choose DHL when everyone will know that they are 

a front office for UPS and they can go direct? 

Why wouldn’t DHL seek cost cutting without abandoning their 

independent U.S. presence instead? And why is there no deal for 

us to scrutinize when they have been in negotiations and discussions for months? Why would DHL have exclusive negotiating 

rights with UPS and not agreed to negotiate with their own carriers, ASTAR and ABX? For me, if it doesn’t sound right, it probably isn’t right. 

I would like to end with the last paragraph that I put in an op 

ed piece for the Cincinnati Enquirer. I think it sums up the issues 

that we have here. All of this should be unnecessary. If DHL lived 

up to its promises to Ohio and to the town of Wilmington, we all 

would be focusing on how to make DHL more successful. 

Wilmington’s past support for DHL should count for something. 

The surrounding community accepted DHL’s vision of a global company operating in their backyards and understands that DHL must 

curtail its losses. However, usually when a company is losing 

money, they fire someone, they don’t fire a whole town. 

Well, I guess now we know that there is a difference with DHL. 

Maybe the letters for DHL stand for ‘‘Do Harm and Leave.’’ 

[The prepared statement of Mr. Turner follows:] 

17 

PREPARED STATEMENT OF THE HONORABLE MICHAEL R. TURNER, 

A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO

Thank you Chairman Conyers, Ranking Member Smith and the other members 

of the Judiciary Committee for holding this important hearing today on the proposed DHL/UPS transaction that would shift DHL’s air shipping from ABX and 

AStar to an exclusive contract with UPS. 

I also want to thank my Ohio colleagues for their work on this important issue. 

Our delegation has truly worked together on a bipartisan basis to achieve the best 

possible outcome for Ohio, its workers and their families. 

Mr. Chairman, from what we currently know of this proposal, DHL intends on 

ending their inter-US air shipping contracts with ABX and AStar, and contract exclusively with UPS. The result of this transaction would be the closure of the Wilmington Airpark, owned by DHL, as DHL’s operations would presumably consolidate to a UPS facility. Additionally, as DHL is the largest customer of ABX and 

AStar, it is reported that this transaction will likely result in the drastic 

downsizing, if not full closure of these two domestic carriers. The total direct impact 

of the current proposed transaction will amount to over 8000 jobs in Ohio, most of 

which are in Clinton and Highland Counties. 

The losses go beyond the direct impact of jobs. From schools, to churches, to nonprofits, to small businesses, I would venture to say that there will not be a single 

entity in Wilmington that will not be detrimentally impacted by DHL’s abandonment. 

Mr. Chairman, unfortunately, since the announcement of the transaction, very 

few details have been released. Our community and its workers deserve answers. 

My community wants assurances that this transaction complies with federal law. 

That is what we hope to achieve here today. 

Mr. Chairman, unfortunately, this is not the first time in recent history when 

UPS has negatively impacted my community of southwest Ohio. The transaction between UPS and DHL, which this committee will examine today, should be viewed 

in the context of UPS’s recent history of consolidations in southern Ohio. 

Prior to 2001, Emery Worldwide had been operating a successful air shipping 

business out of Dayton, Ohio. Emery was succeeded by Menlo Worldwide Forwarding, a global shipping company. Menlo operated their business out of the Dayton International Airport with gross revenues reported at $1.9 Billion in 2003. In 

2004, UPS acquired Menlo and consolidated their operations to Louisville, Kentucky. This eliminated over 1500 Dayton-based jobs. 

Similarly, until 2003, Airborne Express had been a leading domestic shipping 

company, operating out of Wilmington, Ohio. It was reported that at that time, Airborne maintained 19% of the overnight shipping market in the US. DHL operated 

a facility at the Cincinnati Airport. DHL acquired Airborne and subsequently consolidated their Cincinnati operations into the Wilmington, Ohio facility. 

Mr. Chairman, I and the leaders of the Wilmington community were assured that 

the outcome would be favorable for the community and that no jobs would be lost. 

As a result, our federal, state and local leaders rallied to make DHL a success. DHL 

owns a state-of-the-art airpark and sorting facility in Wilmington. The State of 

Ohio, as well as local city and county governments, pledged nearly $450 Million dollars in investments toward ensuring DHL’s success. 

Now, UPS will become the benefactor of DHL’s airlift operations; once again, consolidating the air cargo market, causing the demise of two additional domestic shipping companies (ABX and AStar), and causing the loss of over 8000 Ohio jobs. 

If this transaction is allowed to proceed, the overall effect will be that UPS will 

have successfully consolidated over 10 thousand jobs from Ohio, and caused the closure of four domestic air cargo companies (Emery/Airborne/ABX/AStar). 

This consolidation of the market will surely have a detrimental impact on American consumers. In fact, this transaction has the potential to affect international 

shipping, further consolidating markets, and consumer choice. The Atlanta Journal 

Constitution reported on August 22nd that UPS is rumored to be acquiring TNT, 

a European express shipping company. Reports indicate that this acquisition will 

add 15% market share to UPS’s European express shipping business and will make 

them the number one express shipper in Europe. 

These consolidations are just the beginning. In a meeting with DHL officials, I 

asked if they believed that the DHL/UPS strategic relationship would expand to include their European and Asian markets, and they indicated that it could. 

Further, UPS and DHL report that they will continue to compete against each 

other. However, they intend to fully integrate their computer systems, customer 

lists, and transportation infrastructures. Dealing with DHL will really be dealing 

18 

with UPS. They will cease to operate as separate companies. This transaction 

should be viewed as if a merger between them was to occur. 

If these transactions go forward, the US market with contract from what has been 

five major players—FedEx, UPS, DHL, Airborne, and Emery—to two players. FedEx 

and a combined DHL/UPS will be left. In Europe, the three major carriers will in 

effect become one, with a possible UPS/TNT acquisition and a strategic alliance between UPS and DHL. 

Today the committee has the opportunity to shed much needed light on this proposal and to get answers to the questions which Wilmington and Ohioans are seeking. 

Mr. Chairman, my community has brought forward a list of questions that I have 

provided to the Committee’s membership. These are questions that employees, their 

families and friends have submitted to my office, and I encourage the Committee’s 

membership to consider these inquiries when they have the opportunity to question 

today’s panels. 

Mr. Chairman, I’m sure you will hear today from UPS and DHL, and they will 

tell you that this transaction does not raise anti-trust issues. But when you consider 

the context of this transaction—that the proposed UPS/DHL transaction is the next 

phase in a stepped transaction which will result in the loss of four domestic carriers, 

it is obvious that American consumers will lose meaningful choice when they ship 

a package. 

Mr. Chairman, I would like to close by reiterating what I said in an Op-Ed for 

the Cincinnati Enquirer. I would like to submit that Op-Ed for the record. In that 

piece, I said: ‘‘. . . all of this should be unnecessary. If DHL lived up to its promises 

to Ohio and to the town of Wilmington, we could all be focusing on how to make 

DHL more successful. Wilmington’s past support for DHL should count for something. The surrounding community accepted DHL’s vision of a global company operating in their backyards and understands that DHL must curtail its losses. However, usually when a company is losing money, they fire someone, not a whole 

town.’’ 

We now know that the letters ‘‘DHL’’ stand for ‘‘Do Harm and Leave’’. 

Mr. CONYERS. Thank you so much. 

I notice Attorney Betty Sutton, a Judiciary Committee Member 

from Ohio, who works with me closely on matters of antitrust, but 

none of the Senators or Members of Congress here have used the 

term ‘‘outsourcing agreement,’’ and that is perhaps an oversight or 

maybe—I don’t know what it is. Would you share some light on 

that area of this hearing with us, Attorney Betty Sutton? 

TESTIMONY OF THE HONORABLE BETTY SUTTON, 

A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO 

Ms. SUTTON. Thank you, Mr. Chairman. I do believe that that 

word is in my testimony. 

Mr. Chairman, thank you so much for holding this hearing on 

this very important issue. And thank you to all the Members who 

are here today to hear about this, that is so crucial to working families in Ohio. I want to thank my colleagues both from the Senate 

and the House for coming forward; and we stand in solidarity to 

make our points. 

As an Ohioan, I sincerely appreciate your efforts, Mr. Chairman, 

to closely examine this agreement between DHL and UPS. And I 

hope that the efforts here today will bring to light the very negative implications of this proposed agreement. This hearing is an important step in protecting American consumers and fighting for 

American jobs, and I commend your leadership on both. 

This business contract affects not only the 8- to 10,000 jobs that 

are at risk in Ohio, but every American who receives and sends 

packages. And that is why today I would like to talk about the U.S. 

domestic air carrier market. Currently, the air carrier market, as 

has been noted, is dominated by three express carriers—FedEx, 

19 

DHL and UPS. Any person in this country can use one of these 

providers to have packages shipped throughout the country for 

door-to-door delivery. However, there are recent developments that 

affect these top competitors in the air carrier markets. 

In May, Deutsche Post WorldNet, the parent company of DHL, 

announced that it was restructuring all of its North American operations. As part of this restructuring, DHL announced it would 

enter into a long-term contract with UPS in which UPS would provide air carrier services for DHL within North America. So that 

means that if a DHL customer sent a package that required air 

transportation, UPS would sort and deliver the package instead of 

DHL. In a sense, DHL is outsourcing its air carrier operations to 

UPS. 

The contract between DHL and UPS is not a formal merger; 

however, given the close relationship between the two industries, 

it is a de facto merger. If UPS executes all of DHL’s air carrier operations, it will require the sharing of sensitive information such 

as tracking numbers, customer information and pricing. And I believe it is safe to say that the sharing of this sensitive information 

puts the companies at risk of remaining independent competitors. 

It is common sense. When a business agreement results in 

shared information that decreases competition, that raises serious 

concerns under section 1 of the Sherman Act. 

Besides these very legitimate concerns, this business agreement, 

as has been stated here, would substantially diminish the competitive nature of the air carrier industry. If UPS and DHL are allowed 

to enter into this contract, then the domestic air carrier industry 

would only be comprised of FedEx and UPS. According to a report 

from the Air Cargo Management Group, without DHL as an independent competitor, UPS and FedEx would make up 96 percent of 

the domestic air delivery market. This raises a series of concerns. 

First, with only two large competitors in the industry, it will 

make it difficult for smaller businesses to enter into the market. 

Second, there is less incentive to compete on price, which would 

negatively affect consumers. And lastly, since this agreement would 

lessen competition, it raises a potential violation of section 7 of the 

Clayton Act. The bottom line, Mr. Chairman, is that this agreement between DHL and UPS raises serious questions under the 

antitrust law and deserves careful examination. 

What is perhaps the most concerning aspect of the issue, beyond 

the potential violation of the antitrust law, is the incredibly harmful effect this agreement will have on Ohio workers and families; 

and that can’t be overlooked. There are 8,000 Ohio workers at risk 

of losing their jobs. This means more families without health insurance, more families struggling to put food on the table, and more 

families struggling to keep a roof over their heads. 

Mr. Chairman, Ohio’s working families are already suffering 

from the impact of harmful trade and economic policies that have 

caused much damage and that this Congress is working hard to reverse. According to the Ohio Department of Jobs and Family Services, in the month of July, the number of workers unemployed in 

Ohio was 430,000. Last year alone, Ohio lost nearly 100,000 jobs, 

contributing to an unemployment rate of 7.2 percent; and now we 

face a flawed business agreement that is threatening more Ohio 

20 

jobs. I, along with my colleagues, will continue to fight to make 

sure our working families have a voice in this matter and that we 

look at it very closely. 

And what is perhaps even more alarming is that the potential job 

loss reaches far beyond Ohio. Deutsche Post WorldNet’s new North 

American business plan also includes closing 34 percent of its U.S. 

operations. 

Mr. Chairman and fellow Committee Members, I ask that you examine this issue with the utmost concern and scrutiny not only because of its antitrust implications, but because of the negative impact this agreement would have on our economy and our working 

families. With a 6.1 percent unemployment rate nationally, I do not 

think that any of our districts in Ohio or beyond can afford to lose 

more jobs, especially from a faulty business agreement. 

And I yield back. 

[The prepared statement of Ms. Sutton follows:] 

PREPARED STATEMENT OF THE HONORABLE BETTY SUTTON, 

A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO

Thank you Mr. Chairman for holding this important hearing on an issue that is 

so crucial to working families in my home state of Ohio. 

As an Ohioan, I sincerely appreciate your efforts to closely examine this agreement between DHL and UPS and I hope that your efforts here today will bring to 

light the very possible negative implications of this proposed agreement. 

This hearing is an important step in protecting American consumers and fighting 

for American jobs and I commend your leadership in both. 

This business contract affects not only the 8,000 jobs that are at risk in Ohio, but 

every American who sends or receives packages. 

And that is why today I would like to talk about the U.S. domestic air carrier 

market. 

Currently, the air carrier market is dominated by three express carriers: FedEx, 

DHL and UPS. 

Any person in this country can use one of these providers to have packages 

shipped throughout the country for timely, door to door delivery. 

However, there are recent developments that affect these top competitors in the 

air carrier market. 

In May, Deutsche Post World Net, the parent company of DHL, announced that 

it was restructuring all of its North American operations. 

As part of this restructuring, DHL announced that it would enter into a long-term 

contract with UPS, in which UPS would provide air carrier services for DHL within 

North America. 

This means that if a DHL customer sent a package that required air transportation, UPS would sort and deliver the package instead of DHL. 

In a sense, DHL is outsourcing its air carrier operations to UPS. 

The contract between DHL and UPS is not a formal merger. 

However, given the close relationship between the two industries it is a de facto 

merger. 

If UPS executes all of DHL’s air carrier operations, it will require the sharing of 

sensitive information such as tracking numbers, customer information, and pricing. 

I believe it is safe to say that the sharing of this sensitive information puts the 

companies at risk of remaining independent competitors. 

When a business agreement results in shared information that decreases competition, this raises serious concerns under Section 1 of the Sherman Act. 

Besides these very legitimate concerns, this business agreement would substantially diminish the competitive nature of the air carrier industry. 

If UPS and DHL are allowed to enter in this contract, then the domestic air carrier industry would only be comprised of FedEx and UPS. 

According to a report from the Air Cargo Management Group, without DHL as 

an independent competitor, UPS and FedEx would make up 96 percent of the domestic air delivery market. 

This raises a series of concerns. 

First, with only two large competitors in the industry, it will make it difficult for 

smaller businesses to enter into the market. 

21 

Second, there is less incentive to compete on price, which could negatively affect 

consumers. 

And lastly, since this agreement would substantially lessen competition, it raises 

a potential violation of Section 7 of the Clayton Act. 

The bottom line, Mr. Chairman, is that this agreement between DHL and UPS 

raises serious questions under Anti-Trust law and deserves careful examination. 

What is perhaps the most concerning aspect of this issue beyond the potential violation of Anti-Trust law, is the incredibly harmful effect this agreement will have 

on Ohio workers and families. 

There are 8,000 Ohio workers at risk of losing their jobs. 

This means more families without health insurance, more families struggling to 

put food on the table and more families struggling to keep a roof over their heads. 

Mr. Chairman, Ohio’s working families are already suffering from the impact of 

harmful trade and economic policies that have caused much damage, and that this 

Congress is working hard to reverse. 

According to the Ohio Department of Jobs and Family Services, in the month of 

July, the number of workers unemployed in Ohio was 430,000. 

Last year alone, Ohio lost nearly 100,000 jobs contributing to an unemployment 

rate of 7.2 percent. 

Now, we face a flawed business agreement that is threatening more Ohio jobs, 

and I will continue to fight, along with my colleagues, to make sure our working 

families have a voice in this matter. 

And what is perhaps even more alarming, is that the potential job loss reaches 

far beyond Ohio. 

Deutsche Post World Net’s new North American business plan also includes closing 34 percent of its U.S. operations. 

Mr. Chairman and fellow members of the Committee, I ask that you examine this 

issue with the utmost concern and scrutiny. 

Not only because of its Anti-Trust implications, but because of the negative impact this agreement could have on our economy and our working families. 

With a 6.1 percent unemployment rate nationally, I do not think that any of our 

districts can afford to loose more jobs, especially from a faulty business agreement. 

Thank you, Mr. Chairman and I yield back. 

Mr. CONYERS. Thank you. 

There is a sense of urgency here. This could go into effect, like 

tomorrow; am I not correct? And further, this could reach, not just 

throughout Ohio, but it could reach Michigan and beyond; am I not 

correct? 

And so as I thank the Senators for their appearance here today 

and close down our first panel. 

I would like to caution our Members of the Committee to realize 

that there must be another side to this story here. With all due respect to the distinguished group of colleagues that are before the 

Judiciary Committee, there must be some other position not yet revealed to the Committee that makes this something—well, let’s 

say, if we were in court, there would be a presumption of innocence, wouldn’t there be, to start off with consideration of these 

matters? 

Right now, we have received from the distinguished men and 

women that represent the State of Ohio and including another distinguished Member from Ohio on the Committee, as well as the one 

that is before us, there has been one picture here. And so I look 

forward to the second panel to hope that there may be some proportionality or redressing of the issue that makes us wonder how 

this could be going on, this so-called agreement of outsourcing that, 

in effect, is a merger. And where is our Antitrust Division of the 

Department of Justice? 

There should be some good reasons forthcoming, and I thank this 

panel so much for their time and energy and resourcefulness. We 

22 

will expand this recess for the vote that is pending on the floor. 

Thank you all very much. 

[Recess.] 

[3:25 p.m.] 

Mr. CONYERS. The Committee will come to order. And I thank 

the witnesses and our guests here today for their patience and cooperation. 

We are so delighted that we are joined by Mr. David Balto, Captain Prater, Captain Ross, President Burt Wallace, CEO John 

Mullen, Mayor David Raizk. And, of course, we are honored to have 

the Lieutenant Governor of the State of Ohio, Lee Fisher, who has 

a long and distinguished career in Ohio politics. He has been not 

only a State representative but a State senator for quite a period 

of time and has a distinguished resume. He has also been Attorney 

General of the State of Ohio and was elected Lieutenant Governor 

in 2006. 

Now, it is true that in panel one the testimony seemed to stack 

up all one way. We are hoping that with this panel there may be 

a development of some kind of balance that didn’t seem to exist 

previously. 

But all your statements will be included into the record. And we 

will now begin. And we welcome as our first witness Lieutenant 

Governor Lee Fisher. 

TESTIMONY OF DAVID LEE FISHER, LIEUTENANT GOVERNOR, 

STATE OF OHIO 

Mr. FISHER. Mr. Chairman, thanks very much for giving me and 

my colleagues today the opportunity to testify. 

Although I have no doubt that you will hear some balance today, 

you are not going to hear it from me, because I share the views 

of all the members of the prior panel. And, in fact, Governor Strickland and I have worked very closely with Senator Brown and Senator Voinovich and Congressman Turner, Congressman Sutton, 

and, for that matter, every single Member of the House congressional delegation, including Congressman Jordan, who is here 

today as a member of your panel. 

And I want to begin by saying to you that this is not one of those 

issues that has a partisan divide. This is an issue that both Presidential candidates have focused in on because it is an American 

issue dealing with jobs. 

I have the responsibility in Ohio, Mr. Chairman, of serving not 

only as Lieutenant Governor but also as the director of the Ohio 

Department of Economic Development. So I am here today wearing 

both hats. And as you were nice to mention, I also, in a prior position, served as the Attorney General of Ohio. And during that time, 

I was the Chair of the National Association of Attorneys General 

Antitrust Committee. So I don’t pretend to be as expert as some 

of members of this or other panels on antitrust law, but I do have 

some familiarity. And where antitrust laws intersect with economic 

development I suspect that I do have some experience, given the 

job that I hold today. 

And in the time that I have been in public office in Ohio over 

the last 28 years, I have never seen a potential dislocation that 

will, if it goes forward, have the magnitude that it will have in 

23 

southwest Ohio. That is why Governor Strickland and I wake up 

every single morning and make this particular matter our single 

highest priority. 

The Wilmington Air Park is the largest privately owned airport 

in the United States of America. This is no small part of real estate. It is a piece of real estate that actually has tremendous potential. And to the credit of DHL, they recognized that early on when 

they first made their decision to locate there. 

ABX, a contractor with DHL, employs approximately 6,000 

women and men; ASTAR, another contractor, employs approximately 1,200; and DHL itself employs 1,000. But that only begins 

to touch the surface. As Congressman Chabot knows, who just 

walked in, there are some 2,000 employees throughout southwest 

Ohio in 41 affected counties, including the congressional districts 

of many members of our Ohio delegation, that will be either directly or indirectly affected by this decision. 

I want to recognize that because I deal with economic development every day. Neither Governor Strickland nor I are naive or ignorant of the changes that are going on in the global delivery market and, particularly, the pressures that are on those companies 

that are unusually oil-dependent. And until we all do a better job 

of reducing our dependence on foreign oil, whether it is our domestic automakers or whether it is DHL, they are going to have some 

challenges. 

But what has been disappointing, at least so far, in this situation 

is that we have not been given the opportunity, as the seventhlargest State in the country, to be able to sit down with DHL and 

try to address their financial challenges. 

While we might have some disagreement about the extent of 

those challenges, we might even have some disagreement about 

why they have their challenges, we don’t have disagreement that 

they have them. Where we have disagreement is about how to 

solve them. We think that their proposed transaction with UPS is 

a solution that is unwise, unfair and unnecessary. 

We have indicated, Mr. Chairman, on repeated occasions that we 

are prepared to meet with Deutsche Post and DHL anywhere, anytime, in the world to work with them as their risk-sharing collaborative partner, as we do with companies around the world every 

day, to try to address their financial challenges, to reduce their cost 

of doing business. But we have not been given that opportunity despite repeated requests since May 28th when the announcement 

was made. 

You heard today very articulately from my colleagues, both Senators and Members of Congress, why we believe that this is, in 

fact, anticompetitive; and we do. We think this transaction is one 

step closer to a full merger between DHL and UPS. As this deal 

has been reported, customers will still place their orders with DHL, 

the branding would remain the yellow and red, but UPS would 

handle the package sorting and the delivery of those packages. In 

effect, DHL would be a $1-billion-a-year customer of UPS. 

The question left unanswered—perhaps we will hear it today— 

is whether the customers of DHL Express would continue placing 

their orders with DHL when their packages are being sorted and 

24 

delivered by UPS. Or would DHL Express customers eliminate the 

middle man and contract with UPS directly? 

Some analysts view the proposed transaction as an indication 

that DHL will not continue to compete for market share. Less competition could mean higher rates for the two industry giants, UPS 

and FedEx. Based on past experience with DHL, we are concerned 

that the Wilmington Air Park will be idled once most of DHL 

Express’s domestic shipping and package-handling work is 

outsourced to UPS. As has been pointed out in prior testimony, this 

would be not the first time that Ohio has suffered a similar loss, 

although this will be the largest of them all. 

One of my successors in the Ohio Attorney General’s Office, the 

current Attorney General, Nancy Rogers, has met with Governor 

Strickland and me. And we have discussed that there is no higher 

legal priority to us than taking a look as to whether or not Ohio’s 

antitrust statute, the Valentine Act, applies to this particular 

transaction. 

I am pleased to say that the antitrust section of the Ohio Attorney General’s Office has retained and is working closely with a nationally respected economist experienced in issues of competition in 

the transportation industry. And the Attorney General’s Office has 

sought out, obtained and analyzed extensive data, conducted numerous interviews, and is engaged in statutorily authorized information-gathering at this point. 

As you know, our United States Attorney General has also been 

asked to look at this by the entire congressional delegation. On 

July 10th, I traveled to Washington, DC, to meet with James 

O’Connell of the Antitrust Division and Julie Warren in the Intergovernmental Office. We talked about why it was Governor 

Strickland’s and my belief that there were clear potential violations 

of the antitrust laws. 

We have negotiated in good faith with DHL Express. And we 

were pleased to extend financial and other incentives to the company to locate their operations at Wilmington in 2004. 

In April of 2008, representatives of DHL Express, including their 

chief legal counsel, who is here today, traveled to Columbus to discuss a taxation policy that has historically benefited the company. 

Unfortunately, during that meeting, when I directly asked the company representatives about the future of the DHL site in Wilmington, they did not indicate any plans to downsize DHL’s Express operations in Ohio. 

I want to make it clear that I know their chief counsel, and I am 

not suggesting in any way that he misled me. It is quite possible 

that he himself did not know at the time. But the point is not so 

much that we were misled but that we were not given the chance 

to sit down with DHL before they made this, we think, fateful and 

unwise decision. 

During the questions and answers, Mr. Chairman, I would be 

more than happy to address my own personal views on the violation of the Sherman Act, the Clayton Act and Ohio’s Valentine Act, 

but in the interest of time and because there is an antitrust expert 

at the other end of the table, that may not be necessary. And so 

I will defer those kinds of questions to later, if it is all right, Mr. 

Chairman. 

25 

[The prepared statement of Mr. Fisher follows:] 

PREPARED STATEMENT OF DAVID LEE FISHER


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Mr. CONYERS. Thank you, Lieutenant Governor Fisher, for getting this second panel off to a very fine start. Your information and 

insight and, I would say, considerable experience in antitrust 

issues will be very helpful as we sort our way through this very 

intriguing and, in some ways, mysterious problem that confronts 

the Committee on Judiciary today. 

Mayor David Raizk, a lifelong resident of Wilmington, is our next 

witness. He went to school there, he went to college there, he 

worked his entire life there. He was the director of public safety 

and then 16 years as the president of the Wilmington City Council. 

And the last 8 years, he has been its mayor and begins his third 

term. 

And we welcome you here for your insight on the subject matter 

for which we have come. 

TESTIMONY OF THE HONORABLE DAVID L. RAIZK, MAYOR, 

WILMINGTON, OH 

Mr. RAIZK. Thank you, Mr. Chairman. 

First of all, I want to say thank you to you and to all the Members of the Committee for giving me the opportunity to testify here 

today. I am always honored to represent the community that I 

serve, my hometown, Wilmington, Ohio. Wilmington and Clinton 

County is a wonderful place to live, work and raise your family. 

I also want to thank Lieutenant Governor Lee Fisher, Governor 

Ted Strickland, Senators Brown and Voinovich, Congressman Mike 

Turner, Congresswoman Betty Sutton, Mr. Chabot and all the 

members of the Ohio delegation for coming to our aid. We have created one of the perfect scenarios of bipartisan support in support 

of those citizens of southwestern Ohio. If anybody is disaffected 

with government today, they ought to look at what is happening 

in Wilmington, Ohio, and they can renew their hope in government. 

Since May 28th, a storm has descended on Wilmington, Ohio, 

and it won’t go away. On May 28th, DHL, Wilmington and Clinton 

County’s largest employer and also the largest employer in the five 

surrounding counties, announced that they were seeking a deal 

with UPS, their biggest competitor, to handle their airlift operations in the United States. This effectively would cease operations 

at the Wilmington Air Park. 

This was especially difficult for me, as I received this news firsthand in Germany at DHL and Deutsche Post World Net headquarters. I was in Germany as a guest of DHL, representing the 

City of Wilmington and the Wilmington Air Park, the largest hub 

in the DHL network, at the grand opening of their new hub in 

Leipzig. 

While given the economic climate, we knew some restructuring 

was in the works and some job loss would be coming, primarily as 

a result of the standing down of the DC-9 portion of the business 

of DHL, ABX and ASTAR. But there was reason for optimism concerning the Wilmington Air Park. 

In February, I hosted a conference call in my office with Governor Ted Strickland, representatives of ASTAR Air Cargo and 

ABX Air, DHL’s partners for airlift and sorting operations in the 

United States, and representatives of DHL. At that time, DHL asVerDate Aug 31 2005 15:13 Mar 26, 2009 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6601 H:\WORK\FULL\090908\44325.000 HJUD1 PsN: 44325
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sured the Governor that, although there would be some job cuts 

coming, they were committed to the Wilmington Air Park. In April, 

as the Lieutenant Governor testified, in discussions with DHL on 

possible assistance from the State of Ohio, Lieutenant Governor 

Lee Fisher was also assured of DHL’s commitment to the Wilmington Air Park. 

So it was with some comfort level that I went to Germany to represent Wilmington. That comfort was further enhanced when German Foreign Minister Steinmeyer, the keynote speaker at the hub 

opening, mentioned Wilmington, Ohio, in his address. 

Imagine my shock 2 days later when I received the news firsthand that DHL was seeking a deal with UPS. Those of you who 

have played football and have had the wind knocked out of you 

know exactly how I felt. 

What will be the result of this proposed transaction? What will 

be the impact? 

The job loss alone, which includes DHL, ABX Air, ASTAR Air 

Cargo, and 18 companies we have identified located in and around 

the air park with direct or indirect relationships with the operations there would be almost 10,000—9,786. 

The annual payroll for just the three companies is over $257 mil- lion. Health-care benefits provided for the workers total $63 million. The local hospital that these employees provide with their 

health-care coverage almost 8 percent of their total revenue, that 

would incur a loss to the local hospital of $7 million to $8 million, 

plus the increase in charity care when these benefits would cease. 

It would put them out of business. 

This transaction would also bankrupt the State of Ohio’s unemployment insurance fund. The impact to the schools, to city and 

county government, nonprofits and local business would be devastating. Our data analysis indicates that one in five small businesses will fail if this transaction goes through. 

If I sound alarmist, it is because we are facing an economic catastrophe of unparalleled proportion. We are not trying to save jobs 

of the old technology that have failed to keep pace with competition 

and the new economy. These are 21st-century jobs: pilots and crew 

members, supply chain and logistics professionals, aircraft and airframe mechanics, conveyer engineers. And this is not a case of the 

Rust Belt versus the Sun Belt. These jobs will simply disappear. 

In 2004, we welcomed DHL and ASTAR Air Cargo into the Wilmington family. ABX Air and its predecessor, Airborne Express, accounting for over 6,000 of these jobs, have been with us for 30 

years. They are part of the fabric of our community. There is an 

air park employee in one of every three households in the city of 

Wilmington. Many husbands and wives work there together. Many 

family farms were saved because of part-time work at the air park 

that provided the health care that they needed to continue. Students at Wilmington College, many the first in family to go to college, work at the air park to reduce their indebtedness upon graduation. In short, these jobs just didn’t appear in 2004. Over the last 

30 years, the community has grown with the growth of the air 

park. This proposal would rip the fabric of our community. 

Now, I don’t know what the criteria or the definition for ‘‘antitrust’’ is. I am a simple mayor from a small town in southwestern 

34 

Ohio. DHL and UPS say this is a contractor-vendor relationship. 

But to abandon your largest hub and deliver the freight to your 

number-one competitor, then I say it is a de facto merger. 

Given the recent history of acquisitions of smaller air carriers by 

both companies and the significant antitrust waivers embedded in 

the Open Skies agreements, a picture starts to form. In Wilmington, a foreign-owned company, with huge assistance from the 

State and local government, took over ownership and operation of 

the largest private airport in the United States, a state-of-the-art 

facility. In a little over 3 short years, if they complete this transaction, they will have taken two American companies off the board, 

both of which had significant market share. In the process, they 

will displace almost 10,000 American jobs. 

You know, at the end of the day, this is about people. These are 

not just numbers; they are our friends, our neighbors, our families. 

How will they pay their mortgage? How will they feed and clothe 

their kids? How will they educate their children? Please think 

about these hard-working Americans as you consider these issues. 

Thank you so much for the opportunity to testify. 

[Material submitted by Mr. Raizk follows:] 

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MATERIAL SUBMITTED BY THE HONORABLE DAVID L. RAIZK


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Mr. CONYERS. Thank you, Mayor. We are impressed by your 

international knowledge of the circumstances that bring us here 

today and also of your deep devotion to the city of Wilmington, 

which you clearly love so much. 

Well, Members of the Committee, we now turn to the chief executive officer of DHL, Mr. John Mullen, who is, as well, a member 

of the management board of DHL’s parent company. He is an experienced person in this area of cargo transportation. He has served 

on the boards of Telstra Corporation, Embarq Corporation, as well 

as a member of the International Swimming Hall of Fame. He is 

an all-around person, carrying a rather large responsibility at this 

hearing because so many issues have been raised, so many questions unanswered, that, in all fairness, we might feel obligated to 

give you as much time as everybody else before you has had, but 

obviously that is not possible. I regret it. 

But nevertheless, it is very interesting that this company, founded in 1969 by Adrian Dalsey, Larry Hillblom and Robert Lynn as 

an express delivery service between San Francisco and Honolulu, 

has grown, was purchased, indeed, by the German Government. 

And because of Federal laws prohibiting foreign control of domestic 

air carriers, DHL’s U.S.-based air carrier was sold off, eventually 

becoming ASTAR Air Cargo. And, in 2003, DHL acquired Airborne 

Express and, due to those same prohibitions of foreign ownership 

of domestic air carriers, sold off Airborne Express air carrier, as 

what eventually became ABX Air. 

And so this international commercial activity, still located in little old Wilmington, is something that brings us all here to anxiously await your comments and explanation and anything else you 

would like to contribute to this hearing. And we are very pleased 

that you could come, Mr. Mullen. 

TESTIMONY OF JOHN P. MULLEN, CEO, DHL EXPRESS 

Mr. MULLEN. Thank you very much, Mr. Chairman. 

Chairman Conyers, distinguished Members of the Committee, I 

thank you very much for the opportunity to be here today and to 

explain to you a little bit about the situation that DHL is in on the 

proposed contract between ourselves and UPS. 

You will have received my written testimony. I hope you have 

had a chance to read it. In the interest of time, because I know it 

is pressing, I will try to paraphrase that as quickly as I can. 

Mr. Chairman, DHL is in a very difficult situation. For over 5 

years, we have battled to break into the U.S. market, and we have 

spent over $6 billion doing this. We have made a lot of progress, 

and we are very proud of that progress. But the reality is it has 

come at a huge cost, and today we are losing some $5 million a day 

or close to $1.3 billion a year. The air express market that we are 

operating in is shrinking, and there is intense competition for declining volume. On top of that, we are now facing a rapidly worsening economy and the impact of rising jet fuel, as well. 

Now, we are a large company, but no company can lose this 

amount of money and survive. We are under intense pressure from 

our shareholders, from analysts and other external parties, and we 

simply have to take action. And with volumes declining as they 

are, this means, of course, we have to take out cost. 

71 

Now, we have exhaustively examined all of the options that we 

think are open to us, from a number of restructuring options to potential partnerships, even to closing down altogether in this country. 

And on May 28, as a result of all of that analysis, we announced 

a restructuring plan for the U.S. business of DHL Express, which 

is in two parts: Firstly, we aim to restructure some of our ground 

operations, largely closing some of the stations in remote areas. 

But secondly, we announced the intention to enter into a contract 

with UPS to replace existing two subcontractors that provide airline haul for us with one, being UPS. Our goal here is to save 

around $1 billion per annum. 

Now, no solution is ideal, and in the situation that we find ourselves in there is no silver bullet, there is no simple solution. But 

we think that this is the best possible outcome for us, for our company and our shareholders. And it is the only option that will allow 

us to remain a viable competitor, and thereby preserving competition here. 

I would like to highlight, if I may, a few key points in respect 

to the proposed contract with UPS. 

Firstly, it is not a merger, it is not an alliance, it is not a joint 

venture, it is not a transfer of assets. We are simply replacing two 

existing subcontractors with one new one in one part of our business, which is the air carriage of our parcels. DHL remains as independent afterwards as it was before. All of our other operations— 

our pick-up and delivery, our billing, our customer service, our information technology, et cetera—all of those remain exactly as before. Indeed, the customer himself will not see any difference. If we 

are moving a package from New York to Los Angeles, the customer 

doesn’t know now on what aircraft that travels; does it go on an 

ASTAR, an ABX, a DHL or UPS? 

Furthermore, this is, in our view, a very common solution. In industries where a large amount of capital is tied up in fixed assets, 

capacity-sharing is common. In the passenger airline industry, 

code-sharing has existed for quite some time. In the marine industry, shipping lines have collated and used each other’s space for a 

long time. And in our own industry, here in the United States, 

some years ago, United States Parcel Service, with their competitive parcel product, did exactly the same thing: They closed the hub 

and outsourced that lift to FedEx, to Federal Express. 

Now, those are things that we had to do, and we recognize, of 

course, that no such change comes without an impact. We are 

hugely sensitive to the impact that this decision will have on Wilmington, on the local community, on our subcontractors and all the 

individuals that will be touched by it. And it is not a decision that 

has been taken lightly. We have absolutely agonized over this, I 

can assure you. 

We formed a team that is putting a huge effort into mitigating 

this impact. We realize, of course, that there is nothing that we can 

do that will entirely mitigate the impact on those directly affected. 

But we are working to put in place a plan which we believe goes 

well beyond any contractual or legal obligation that we have and 

well beyond the normal course of action that a company would take 

in this situation. 

72 

There are three components to that plan. Firstly, we expect to allocate $260 million in severance, pension and health benefits. Of 

that $260 million, only $35 million represents our contractual and 

legal obligation. The remaining $225 million are benefits over and 

above that we are willingly paying, not only to our own employees, 

but to the employees of subcontractor companies. Secondly, we are 

working with local State and community officials to try to help 

families and local businesses affected by these plans. And thirdly, 

the local community has asked us of our intentions with the air 

park, and we have expressed great willingness to sit down and discuss the future of that air park and if that can be useful to the 

community going forward. 

So, in conclusion, Mr. Chairman, may I summarize again, this 

has been a terribly difficult decisions for us. We are losing $1.3 billion in a declining market, and we have no option but to cut costs. 

We have considered every option, and now we plan to implement 

a solution that addresses this situation. 

Such a plan will obviously not be liked by those effected, but it 

is not a merger and it is not anticompetitive. It is common in industry generally, and it is common in our industry, where it has 

existed here in our industry in the United States. 

We believe that this will leave us as a viable competitor, thereby 

preserving competition in the U.S. marketplace. And last but most 

importantly of all, we are doing our very, very best to try to mitigate the impact that this decision will have. 

Mr. Chairman, distinguished Members of the Committee, thank 

you very much for your attention, and I look forward to responding 

to any questions that you may have. 

[The prepared statement of Mr. Mullen follows:] 

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PREPARED STATEMENT OF JOHN P. MULLEN


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Mr. CONYERS. Thank you, Mr. Mullen. We appreciate that introduction into understanding the other side of this problem that 

brings us here today. 

The other part of this outsourcing merger agreement, as it is 

called more correctly by you—or outsourcing agreement, not a 

merger, is the distinction you impressed the Committee with—the 

other part of this is UPS. And the president of corporate transportation for UPS is Mr. Burt Wallace. 

In 1980, he started as a package handler in UPS’s Atlantic District, and over the next three decades, through hard work and skill 

and intense preparation, he worked his way up to the executive 

suite and is now the president of corporate transportation for UPS 

since 2005. 

We have your testimony. Mr. Wallace, we welcome you here for 

your comments. 

TESTIMONY OF BURT WALLACE, SENIOR VICE PRESIDENT OF 

CORPORATE TRANSPORTATION, UPS 

Mr. WALLACE. Thank you, Mr. Chairman. 

Chairman Conyers and Members of the Committee, UPS welcomes the opportunity to appear before you today to present as 

clearly as possible the facts regarding UPS’s proposed agreement 

with DHL. 

On May 28th, 2008, UPS and DHL announced that the companies were working toward an agreement for UPS to provide airlift 

of DHL’s express, deferred and international package volume within the United States and to and from Canada and Mexico. We are 

still negotiating this agreement. 

The proposed agreement is part of a larger restructuring by DHL 

designed to reduce its cost and to help the company to remain competitive in the U.S. It has been widely reported that this restructuring has several elements, including engaging the U.S. Postal 

Service to provide ‘‘last-mile’’ delivery of some of DHL’s packages. 

DHL has stated very publicly and clearly that it will not be able 

to compete effectively or perhaps remain in the U.S. without restructuring its operations and cost. The company has reported that 

it expects to lose $1.3 billion in the U.S. this year. 

Mr. Chairman and Members of the Committee, let me state as 

clearly as I can: The anticipated agreement between UPS and DHL 

is not a merger or joint venture, it is not an acquisition, it is not 

a consolidation. UPS and DHL continue to compete independently. 

We will each price and market our own brands and services. We 

will not share profits, cost, or information about pricing of services 

to each other’s customers. 

Under the proposed agreement, UPS will act as a vendor to 

DHL, providing contractual services in the same way that carriers 

in our industry, including UPS and Federal Express, provide services to the United States Postal Service. This type of arrangement, 

where one company provides service to a competitor, is found 

throughout the transportation industry, including the trucking, rail 

and ocean carriage. It is also found in other industries, such as natural gas and telecommunications. 

UPS will not provide pick-up or delivery of packages to DHL customers. DHL will deliver packages to UPS airport locations for 

88 

movement through UPS’s air network to destination airports. DHL 

will then pick up the packages from the destination airports for 

final delivery to its customers. This is the same service currently 

being provided to DHL by two vendors, ABX and ASTAR. 

The anticipated agreement, in short, is simply an airlift contract, 

one part of the restructuring that DHL has concluded will significantly reduce its cost in the United States. 

There has been a great deal of discussion about the impact of 

DHL’s restructuring on the job market in the Wilmington, Ohio, region. UPS is a company that has a long history of providing good 

jobs and benefits for employees. We understand the importance 

communities place on attracting and retaining employment opportunities for their residents. 

It is very important to note in this regard that the expected result of DHL’s restructuring will be to preserve approximately 

40,000 DHL-related jobs in the U.S. that would otherwise be as 

risk. Further, the agreement with DHL will help to bring additional job security to more than 14,000 UPS employees in Ohio and 

358,000 UPS employees in the United States. 

I should note that, in 2003, UPS employed 317,000 people in the 

U.S., and since then we have added more than 41,000 employees 

to our payroll, which is 14,300 more people than the average total 

number of employees among the Fortune 500. 

It is our hope that growing our business will allow UPS to continue to increase the number of jobs throughout Ohio, the country 

and the world. Any suggestion that UPS could somehow manipulate the way in which DHL packages move through our system to 

gain a competitive advantage is simply untrue and gives DHL far 

too little credit for being able to protect itself. Let me assure you 

that DHL is a tough negotiator, fully able to protect its interest. 

UPS will continue to compete vigorously with DHL and others in 

the U.S. And around the world, and we fully expect DHL to compete vigorously as well. 

DHL’s restructuring, including its agreement with UPS, actually 

preserves competition in the package delivery business in the U.S. 

Now, you might ask, why would UPS want to do something that 

helps a competitor remain in the market? For UPS, our goal is to 

find profitable opportunities such as this to better utilize our existing capacity, make us a more efficient competitor, and allow us to 

create and provide career stability for our employees. In short, this 

proposed agreement represents a wise and efficient use of our assets. It helps protect the job of 358,000 UPS employees in the U.S. 

And if we didn’t pursue this agreement, one of our competitors 

would have. 

Mr. Chairman, thank you for the opportunity to share UPS’s perspective on the agreement that helps to strengthen a UPS company 

that provides career opportunities to hundreds of thousands of people. I hope the facts that I have outlined today address the questions and concerns of the Committee. I stand ready to answer any 

further questions that you and the Committee may have. Thank 

you. 

[The prepared statement of Mr. Wallace follows:] 

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PREPARED STATEMENT OF BURT WALLACE


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Mr. CONYERS. Thanks for your presentation. It is beginning to introduce, between you and Mr. Mullen, the other side of this economic challenge that we have here. We begin to get a little balance 

in. It does not answer all the questions by a long shot. Well, it 

hasn’t answered any of the questions. But stay tuned. 

Captain Ross, David Ross, president of Teamsters Local 1224. A 

former Air Force pilot, earned all kinds of distinguished military 

honors and awards and commendations. Served in Operation 

Desert Storm and others. 

We welcome you to the hearing and are delighted to share your 

perspective on the problem that confronts us. 

TESTIMONY OF DAVID ROSS, PRESIDENT, TEAMSTERS 

LOCAL 224, ON BEHALF OF THE PILOTS OF ABX AIR 

Mr. ROSS. Thank you, sir. 

Mr. Chairman, Congressman Chabot, distinguished Members of 

the Committee, I am grateful you have called this hearing because 

this issue is so terribly important to our national economy and so 

many workers, not just in Ohio but across the country. 

Proof of that is that you have called the hearing. Further proof 

of that is that I have had the distinct privilege of personally briefing both Presidential candidates in the election, Senator John 

McCain and Senator Barack Obama. I personally heard them express their concerns about the antitrust issues and job losses generated by this anticompetitive deal between DHL and DHS. 

As you know, Mr. Chairman—— 

Mr. CONYERS. I notice that you mentioned Senator McCain’s 

name first. Can we read anything into that? 

Mr. ROSS. Sir, I have got Senator Obama’s name first in my 

notes, sir. I am not sure how that happened. 

Mr. CONYERS. Oh, okay. 

Mr. ROSS. But I will get back to Senator Obama. 

Mr. CONYERS. Freudian slip, I dare say. All right. Thank you 

very much. 

Mr. CHABOT. Mr. Chairman, I am sure it was just alphabetical 

order. 

Mr. CONYERS. Oh, all right. 

Mr. ROSS. There we go. Thank you, Mr. Chabot. 

Mr. CONYERS. More than likely. 

Mr. ROSS. As you know, Mr. Chairman, Senator Obama wrote 

the White House and Senator McCain wrote the Senate and Antitrust Committee, both expressing their concerns about the anticompetitive effects of this deal. 

Senator Obama had requested an additional meeting with me 

this morning in Ohio. I couldn’t jeopardize my testimony here, so 

the Chairman of my governmental affairs committee is pinch-hitting for me. However, Senator Obama’s continuing interest demonstrates how important this issue is. 

Also this morning, Senator McCain was in Lebanon, Ohio, a 

neighboring town of Wilmington. 

Mr. Chairman, the effect of this proposed transaction will be to 

reduce the competition in the air express market from three to two. 

DHL, with the smallest market share and the greatest incentive to 

94 

compete on price and service, is being neutered as a legitimate 

competitor. 

Why do I say this? First, if this transaction is consummated, 

DHL will have to rely on its supposed competitor, UPS, for its most 

vital operations: air transport, tracking and sorting. 

Second, a key element of the express delivery business is in package tracking. It is the backbone of the service process. By combining efforts in this process, DHL will be transferring highly sensitive proprietary commercial information about its customers and 

about its market to UPS. A critical element of the express package 

delivery is scanning the bar code. Once the bar code is scanned, an 

incredible amount of proprietary commercial information is exchanged between the different segments of service, from pick-up to 

final delivery. 

We, the employees of ABX Air who sort, transport and track 

DHL packages, have 5 years of detailed knowledge of the information DHL transfers through ABX necessary for those functions. We 

know firsthand what information will have to be passed from DHL 

to UPS in order for UPS to perform the functions currently done 

by ABX Air. Having watched express packages go through the sort 

for over 16 years and being in constant contact with the people 

doing the sorting, I can tell you there is no way UPS can transport, 

sort and track DHL packages without material and proprietary 

commercial information being transmitted by DHL to UPS. 

From a notional view, it makes no sense to rely on a major competitor for key elements of your service, especially in such a consolidated marketplace. Indeed, there is every incentive for DHL 

propriety information to be disseminated throughout the sales and 

corporate organizations of UPS to the competitive detriment of 

DHL. 

Perhaps DHL will seek to construct a Chinese wall, perhaps in 

the form of confidentiality agreements, that limit the dissemination. Unfortunately, Chinese walls leak and confidentiality agreements are breached. A deal like this would leave the UPS-DHL 

strategic alliance with 54 percent of the express delivery market 

and FedEx with 43 percent of the market, resulting in a monster 

duopoly and a combined market share of 96 percent. This will 

eliminate the competition in this consolidated industry that supports thousands of small businesses and millions of consumers 

across America perhaps forever. 

DHL says they must pursue this agreement because they have 

a cost problem, but not once have they approached me for labor 

concessions either directly or indirectly. As a labor leader, I am 

honored to represent the hardworking and professional pilots of 

ABX Air and the workers of the community of Wilmington, Ohio. 

They don’t want handouts and false promises; they want jobs. They 

are loyal and committed employees who consistently perform just 

as well, if not better, as anybody in the industry. Give them a 

chance. 

Mr. Chairman, you and this Committee can help give them that 

chance. We respectfully request that you ask the Antitrust Division 

of the Justice Department to review this transaction. I was pleased 

this morning to hear that they are, in fact, going to voluntarily go 

in front of the Department once the deal is done. I would ask them 

95 

to take one further step and, once the deal is done, go in front of 

Justice Department and do not implement the deal until it has 

been cleared by the Justice Department. 

I look forward to answering your questions about our capabilities 

and past performances, our discussions with DHL and air express 

operations. Thank you very much for the opportunity, sir. 

[The prepared statement of Mr. Ross follows:] 

PREPARED STATEMENT OF DAVID ROSS

Mr. Chairman and Members of the Committee, I am grateful you have called this 

hearing because this issue is so terribly important to our national economy and so 

many workers in Ohio. Proof of that, is you have called this hearing. Further proof 

of that, is I have had the distinct privilege of personally briefing both Presidential 

candidates in this election, Senator Barack Obama and Senator John McCain. I 

have personally heard them express their concerns about the antitrust issues raised 

and job losses generated by this anticompetitive deal between UPS and DHL. As 

you know, Mr. Chairman, Senator Obama wrote the White House and Senator 

McCain wrote the Antitrust Subcommittee in the United States Senate, both expressing their concerns about the anti-competitive effects of this deal. We are grateful this issue has raised such an important and necessary policy discussion as it impacts the workers I am honored to represent. Mr. Chairman, I respectfully request 

that this Committee demand that this Justice Department initiate an investigation 

and enforce the antitrust laws of this country. 

My name is Dave Ross, and I am a Captain with ABX Air. I am also the President 

of Teamsters Local 1224 that represents pilots who fly for ABX Air. I graduated 

from the United States Air Force Academy in 1983, I flew as an instructor and an 

evaluator in the T-37 and B-52, and I flew in Desert Storm where I was awarded 

two Air Medals and the Distinguished Flying Cross. I only mention my military credentials because I want to emphasize that I am proud of my service and defense 

of our American way of life. Mr. Chairman and members of the Committee, thank 

you for inviting me to testify before you on the elimination of competition in the 

domestic air express market brought about by a proposed transaction between two 

dominant air express carriers—DHL and UPS. DHL’s restructuring announcement 

threatens the careers of our members and their ability to provide for their families. 

As the President of Teamsters Local 1224, with the backing of the International 

Brotherhood of Teamsters, I testify before you on their behalf. Also, I am hear to 

speak about a potential economic crisis that threatens a small town in Ohio called 

Wilmington. This pending economic crisis was brought about by two global corporate 

giants who seek to merge their services and destroy competition as we know it in 

the air express market. 

You probably remember our airline as Airborne Express. Airborne Express entered the express delivery business in the forties, delivering tropical flowers from 

Hawaii. Airborne rapidly expanded with a domestic focus while serving the shipping 

needs of business customers and specialty services. Airborne purchased Clinton 

Country Air Force Base in 1980, and developed it as the Wilmington Air Park. 

While enjoying a relatively low cost structure, Airborne was a consistent third competitor in the domestic express delivery market that offered a lower priced alternative to consumers and small businesses. 

Airborne Express and DHL had reciprocal strengths. While Airborne established 

itself as a strong competitor in the U.S., DHL dominated the international market. 

DHL began in California, and even though they were strong internationally, they 

represented only a small share of the U.S. market. Deutsche Post World Net invested in DHL, and gradually increased their investment until gaining 100% ownership in 2002. Soon thereafter, DHL purchased Airborne Express promising to increase market shares and profitability of both partners, improve services for consumers, and increase competition. At the time of the purchase, Deutsche Post 

praised the complimentary service portfolios of the two airlines and Airborne’s broad 

ground network. 

After the purchase, DHL operated two airlines in the U.S.—Airborne Express and 

DHL Airways. In Europe, DHL operates two airlines—European Air Transport 

based in Brussels and DHL Air UK based in East Midlands. Accordingly, any suggestion they can’t operate successfully in the U.S. with two airlines is contradicted 

by their operations elsewhere. DHL also operates DHL Middle East based at Bahrain and DHL Latin American based in Panama City. More recently, DHL announced plans to forge an alliance—a joint venture—between it and Lufthansa 

96 

Cargo called AeroLogic, with each having a fifty percent share and flying cargo from 

a new sort hub at Leipzig/Halle airport. The opening ceremony for that hub was on 

May 26th, and attended by the Mayor of Wilmington, Ohio. That was two days before DHL’s announcement that will devastate Wilmington, Ohio. 

DHL’s entry into the U.S. market triggered a proceeding before the Department 

of Transportation because of well-established citizenship laws for U.S. air carriers, 

and the airlines that carry express packages for DHL were renamed. Airborne Express became ABX while operating at the Wilmington Airport, and DHL Airways 

become Astar while operating sixty miles southwest at the Cincinnati/Kentucky 

International Airport. DHL effectively controlled these two express cargo airlines 

through two separate long-term contracts called ACMI Agreements, whereby the 

airlines provide services for aircraft, crew, maintenance and insurance. Through 

these ACMI Agreements, DHL controlled the routes, the on-time performance criteria, third party services, and any changes of ownership (changes of control). The 

two airlines provided express delivery service on a cost plus basis, with ABX reimbursed for all expenses plus a base markup of 1.75% of revenues and an incentive 

for performance which could increase the markup to 2.5%. ABX also has a Hub 

Services contract with DHL to operate the sort center in Wilmington and other regional sort hubs in cities like Roanoke, Virginia. 

Through the control exercised by DHL, service declined and market share suffered. While DHL proposes this alliance with UPS because of cost problems, the reality is they’ve created a revenue problem because they mismanaged the business 

of express delivery service. 

In the air express business, on-time-performance is critical to customer service. 

At the time DHL purchased Airborne Express, Airborne had an 18.4% share of the 

market. From 2003 to 2007, with DHL in control, rather than realizing the 

synergies and complimentary strengths of Airborne and DHL International, service 

declined and package volumes declined. Market share at DHL/Airborne declined 

more than 25%, while FedEx and UPS gained 10.3% and 11.2% respectively. A catastrophic service collapse occurred in September 2005, when DHL mismanaged combining the two sort facilities into one at the Wilmington Air Park. Rather than integrate the sort facilities over time, they tried to do it in one night. In a service industry like this, where on-time-performance is measured in tenths of percentage points, 

on-time-performance dropped below 70% and did not recover for months because of 

decisions made by DHL managers and the effective control they exercised through 

contractual Agreements. 

While Deutsche Post spoke of increased competition and expanded service when 

they purchased Airborne Express, the reality is service declined and they now propose to no longer compete. As a result, competition itself is threatened in the express package delivery business. When on-time-performance declined, market share 

declined. Market share for the dominant players, one brown and the other purple, 

increased commensurately. While problems arose with the consolidation, DHL continued their managerial pursuits with unswerving determination but with negative 

results. They operated two airlines, with two divergent CEO’s, two middle management structures, two airline support structures, and two very different aircraft 

fleets. 

At ABX, we fly more than forty fuel-efficient Boeing 767 aircraft that have Category II and III capability which allows us to land in nearly all weather conditions. 

ABX has an established history of delivering high margin express packages for the 

lowest cost with impeccable reliability. DHL has expressed concern that some of our 

aircraft are equipped to handle packages in ‘‘C’’ containers rather than ‘‘A’’ containers. First and foremost, express delivery customers are concerned with consistent on-time-performance. Second, some customers specifically request ‘‘C’’ container handling to ensure security of high-value shipments. Third, FedEx recently 

deployed a ‘‘Micro A’’ container which is essentially six ‘‘C’’-like containers that are 

fastened together before loading to realize the benefits of the ‘‘C’’ container. Our system benefited in through-sort capability by using the smaller container, and provided more security and breakage protection. 

Friction between senior management at DHL and ABX publicly surfaced when 

DHL withheld a pre-payment of about $9 million to ABX under the ACMI Agreement because they believed ABX was exceeding a 10% revenue threshold from nonDHL customers and demanded reallocation of overhead expenses related to nonDHL business. ABX declared DHL in default. Before that, Astar CEO John Dasburg 

attempted to acquire ABX for $7.75 per share in August 2007, but ABX CEO Joe 

Hete rejected the offer without a counter-offer and with minimal, if any, rationale. 

On the last day of 2007, ABX acquired two airlines made up largely of old and fuelinefficient aircraft for $332 million and created a holding company, Air Transport 

Services Group, of which ABX is now under. DHL demanded full repayment for a 

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1 ‘‘FedEx Eyeing Deal to Buy DHL’’, Ken MacFadyen, Mergers & Acquisitions Report, Feb. 4, 

2008. 

$90 million note because of a change of control at ABX. Today, ATSG stock is valued 

at a small fraction of its worth at the time DHL purchased Airborne Express and 

ABX shareholders have suffered. The relationship between DHL, ABX and Astar involves conflicting corporate egos, clashing cultures, and inconceivable blunders that 

have brought great pain to employees and surrounding communities. Yet, nobody 

has taken responsibility for the failures that have occurred. Airborne Express was 

a profitable company that never had a losing year and only one losing quarter. How 

can a thriving global corporation such a Deutsche Post World Net turn such a consistently competitive company into a venture they now claim stands to lose more 

than 1 billion dollars a year, while themselves, made pre-tax profit of more than 

3.2 billion euros last year and more than 3.8 billion euros the year before that? 

If this third competitor in the air express market is lost, competition in the air 

express industry will be gone forever and the express package delivery market will 

be permanently changed. Antitrust laws exist to ensure competition in the free market system. They prohibit anticompetitive behavior, monopolies, and unfair business 

practices. As an operator in express delivery business for more than sixteen years, 

there are two important things I have observed. First, impeccable on-time-performance is nearly everything in this business. Second, competition in this business is 

good. FedEx and UPS are fierce competitors, and without a reliable third consumer 

choice they would no longer have to contend with pricing pressure. The total revenue for the U.S. air freight and express industry was more than $32 billion last 

year, an industry record. The two industry giants, FedEx and UPS, continue to advertise strongly for express delivery customers. In a letter to the U.S. Justice Department, the Chair and Ranking Member of the Senate Judiciary Subcommittee on 

Antitrust, neither of whom are from Ohio, have said there may be antitrust issues 

raised by the proposed deal between DHL and UPS, and we agree. According to 

Mergers & Acquisitions Report, FedEx backed out of a deal with Deutsche Post earlier this year because of antitrust concerns.1

A key element of the express delivery business is package tracking. It is the backbone of this service process. By combining efforts in this process, DHL and UPS will 

be sharing highly sensitive proprietary information that would normally be closely 

guarded by real competitors. Even if barriers to information sharing could be erected, the temptation for collusion would be too risky for consumers. A critical element 

of express package delivery is scanning the bar code. Once the bar code is scanned, 

an incredible amount of secret proprietary information is exchanged between the 

different segments of service—from pick-up, to transit, to sort, to transit, and to 

final delivery. Having watched express packages go through the sort for sixteen 

years, and being in constant contact with the people doing the sorting, there is no 

way UPS can sort and deliver DHL packages without material commercial proprietary information being transmitted to UPS. True competitors erect every guard 

possible against exposing such sensitive proprietary information from the public, 

and now DHL proposes to make it freely available to a supposed competitor. While 

a technological ‘‘Chinese wall’’ may be developed to guard against information sharing, the same technology may be used to look over, around, or through that wall. 

Consistent customer service and real pricing pressure will come only from true competition. 

From a notional view, it makes no sense to rely on a major competitor for a key 

element of your service, especially in such a consolidated marketplace. It makes no 

sense to announce a deal like this before the terms of the deal are agreed upon. 

It defies belief that a competitive choice will be available, even to DHL, when the 

ten year proposed contract with UPS ends. A deal like this would leave the UPSDHL strategic alliance with 54% of the express delivery market and FedEx with 

42% of the market; resulting in a monster duopoly having a combined market share 

of 96%. This will eliminate competition in this consolidated industry that supports 

thousands of small business and millions of consumers across America—perhaps forever. When considering the size and ferocity of the competition, and the long-term 

capital investment required for an airline, the FAA and other licensing requirements, and many other barriers to entry, stopping this anticompetitive deal is the 

last chance for three competitors in the U.S. air express market. Another potential 

harm is to the Civil Reserve Air Fleet. ABX has seventeen fuel-efficient Boeing 767’s 

dedicated to the Civil Reserve Air Fleet, and Astar has another seventeen aircraft 

so dedicated, which could be lost. 

Since their restructuring announcement, according to the dhl-usa web-site, the 

earliest DHL can deliver express packages at many locations is 5 pm. For more remote areas, the earliest DHL can deliver ‘‘DHL Next Day’’ service is one week. The 

98 

earliest DHL can deliver an express package from D.C. to a district office in Lorain, 

Ohio is noon. The earliest they can deliver an express package from D.C. to La 

Crosse or Ladysmith, Wisconsin is 5 pm, but still listed as ‘‘DHL Next Day 12 pm’’. 

The earliest they can deliver from D.C. to Harrisonburg or Staunton, Virginia is 5 

pm. For Big Stone Gap or Pulaski, Virginia, as well, the earliest they deliver is 5 

pm. The type of service DHL offers since their restructuring announcement is no 

longer competitive in the air express market and consumers are responding appropriately. If this trend continues, consumers and small businesses will be left with 

only two viable choices since the market will be 96% dominated by a duopoly with 

FedEx and a constructively merged UPS-DHL. Specialty services, such as a very 

late pick-up for a cancer treatment drug maker who shipped out of Nashville and 

a very early delivery for a drug testing company in Kansas City, are being lost. WalMart announced they ended their agreement with DHL from their jewelry division 

because DHL changed their flight route patterns. 

A justification given by this profitable global corporation for their restructuring 

decision is the foreign ownership restrictions in the U.S. The citizenship rules for 

U.S. airlines are well-established. As became apparent in 2001, after fanatics decided to use airplanes as their weapon of choice, the airline business is different 

than other businesses. Our citizenship laws ensure close oversight of U.S. air carriers to ensure the highest level of safety and security for the traveling public and 

the people living below America’s airspace. The airline industry has unique labor 

concerns because of the mobile labor dynamic involved, and the citizenship laws 

allow our labor laws to be properly applied. Finally, our citizenship laws ensure our 

passenger and cargo airlines are fully available to the Civil Reserve Air Fleet 

(CRAF) to fulfill the unique interrelationship between civil and military use. Furthermore, it is doubtful Deutsche Post and DHL Express would have done anything 

differently if they had a 51.1% or greater ownership interest in Astar rather than 

the 49% ownership interest they have. 

The restructuring proposed by Deutsche Post, if allowed, will be an economic disaster for Wilmington, Ohio. More than 8,200 jobs will be unnecessarily destroyed 

in a small town of about 13,000 people. Many of the maintenance workers and sorters have worked at the DHL Air Park, formerly the Airborne Air Park, for decades. 

Many work through the night while living on their family farms in rural Ohio. Their 

jobs provide health insurance that has allowed them to work those farms in addition 

to earning a paycheck. The tax base will be devastated, medical and school funding 

will suffer, and small businesses will suffer. The psychological impact on families, 

with layoffs of this scale, will be long-term. For wage earners who support their 

families, there will be trauma when they are no longer able to provide for their children. For many, this will be the most traumatic event in their lives. 

DHL says they have a cost problem, but not once have they approached me for 

labor concessions, directly or indirectly. As a labor leader, I am honored to represent 

the hard-working and professional pilots of ABX Air and the community of Wilmington, Ohio. These are Ohioans. These are Americans. Even after DHL’s devastating announcement, they continue to provide impeccable performance. They 

show up every day, holding onto hope that DHL will change its mind. They hope 

that their willingness to work hard will be recognized, and that DHL will do the 

right thing. They work hard. They keep performing. They don’t want meager handouts and false promises, they want jobs. They are loyal and committed employees 

that can perform just as well, if not better, than anybody else in this business. Give 

them a chance. 

Mr. Chairman, you and this Committee can help give them that chance. We respectfully request you ask the Antitrust Division of the Justice Department to review this transaction. And Mr. Mullen, if you are so confident of your position, why 

don’t you voluntarily submit to a Department of Justice review and silence your critics. 

Mr. CONYERS. Thank you, Captain Ross. 

The international president of the Air Line Pilots Association is 

Captain John Prater, a 29-year veteran in his association and also 

a member of the executive council of the AFL-CIO. 

We welcome you here today, sir. 

TESTIMONY OF JOHN PRATER, PRESIDENT, 

AIR LINE PILOTS ASSOCIATION, INTERNATIONAL 

Mr. PRATER. Thank you, Mr. Chairman. 

99 

Chairman Conyers, Members of the Committee, the remarks reminded me of a story. I met Larry Hillblom, one of the founders 

of DHL, over a labor issue. The labor issue was that they were 

going to change the deal that they had in Guam. I flew to Guam, 

I met with Larry Hillblom and the Governor, and in 1 day we had 

saved the jobs, we had protected the entity and the community that 

was in our home, Hagatna, Guam. It can be done. There are solutions. But they have to be willing to talk. 

On behalf of the 53,000 ALPA pilots in the United States and 

Canada, I am certainly honored to testify on their behalf today. I 

am here specifically to speak on behalf of 500 pilots that ALPA represents, but we are concerned about all of the workers in the communities that will be affected by this transaction. 

I am reminded that the last time I was before the chairman we 

were talking about bankruptcy and its impact on workers and communities. Here we have today another transaction. They can’t quite 

find the name for that transaction, but I haven’t heard any level 

or any balance. What I do know is this is one bad deal. It is bad 

for my members, it is bad for ASTAR, it is bad for Air Express 

competition, it is bad for southwestern Ohio, and it is bad for 

American workers. For that reason, it is important that Congress 

look carefully at the proposed arrangement and ensure that it is 

thoroughly reviewed by antitrust authorities before it is consummated. 

The overall impact of the transfer of all DHL flying from the 

ASTAR and ABX hub operations in Wilmington will be enormous: 

a loss of more than 10,000 jobs and a dramatic reduction in the 

economic activities in southwestern Ohio. 

I want to thank all of the elected officials from Ohio, from both 

sides of the aisle, that have given this so much interest. But I 

would especially like to thank Senator Brown, who spent a lot of 

time with me trying to seek and find a solution. 

My written testimony contains a detailed roadmap through a 

confusing set of corporate decisions that lead to one destination: 

disaster. That map includes secret discussions between UPS and 

Deutsche Post which they hid from affected companies, employees 

and public officials. In ALPA’s case, the secrecy was clearly intended to deprive us of the chance to protect our members’ jobs, 

both in bargaining and litigation. Neither the result nor the procedure used to achieve it is in the interest of the U.S. economy. 

Our first clue came on May 28th of this year when Deutsche 

Post, the German-based parent company of DHL, announced that 

it was negotiating to transfer all North American flying presently 

performed by ASTAR and ABX to its competitor, UPS. We were 

surprised for several reasons. 

First, Deutsche Post has a 49 percent ownership stake in ASTAR 

and representatives serve on its board of directors. Despite those 

close ties, the company utterly failed to inform either ASTAR or its 

employees that it had been negotiating with UPS for 6 months. 

While Deutsche Post was cutting its deal with UPS, ASTAR was 

negotiating a collective bargaining agreement with ALPA that was 

potentially paving the way to raid our pilots of their jobs. 

In 2003, Deutsche Post sought to expand its North American operations to become a bona fide competitor to FedEx and UPS by 

100 

purchasing Airborne, merging its ground operations into DHL’s and 

spinning off its air operations as ABX Air. But once Deutsche Post, 

or DHL, entered into the same sort of commercial arrangement 

with ABX as it had with ASTAR, they renounced any obligation to 

adhere to the collective bargaining agreement with my union. This 

led to several years of litigation. 

Meanwhile, negotiations over a new contract between ASTAR 

and ALPA began in 2005 and continued through the beginning of 

this year. The central issue in these negotiations was no great surprise; it was job security. What we did not realize—and this was 

one very important detail—was that DHL and its parent, Deutsche 

Post, were negotiating to hand over all flying to UPS. 

Meanwhile, DHL was making demands for revisions in the job 

security provisions of the tentative agreement between ASTAR and 

ALPA, including settlement of our litigation, which we see now was 

designed to clear the way for this secret arrangement with UPS. 

As I said, one bad deal. 

I will close by reminding the Committee what DHL, which had 

been acquired by Deutsche Post, said in justifying that acquisition 

back in 2003 prospectus. And I quote, ‘‘The UPS-FedEx duopoly 

today has a 79 percent share of the U.S. air express delivery market verses Airborne and DHL’s combined 21 percent market share. 

The Airborne-DHL combination will act as stronger third competitor in the expedited door-to-door delivery of small packages and 

documents, and will have the ability to bring reduced prices and 

better service to small- and medium-sized businesses.’’ 

No aspect of this prediction turned out to be true. Deutsche Post 

managed to take two niche competitors with a portfolio of premium 

business customers and likely survivors in the industry, consolidate 

and restructure them to its needs, and then run them into the 

ground. Now, after stripping both carriers of their ground operations, it proposes to leave the airlines and our workers for dead. 

It is hard to see how the proposed DHL-UPS alliance will benefit 

consumers. As I said, this is one bad deal. 

We ask the Committee to ask the parties not to implement their 

deal until it has been reviewed by either the Department of Justice 

or the Federal Trade Commission. 

I thank you and look forward to answering any questions the 

Committee may have. 

[The prepared statement of Mr. Prater follows:] 

PREPARED STATEMENT OF JOHN PRATER

Good afternoon. I am Captain John Prater and I am President of the Air Line 

Pilots Association, International (ALPA) representing some 53,000 pilots in the 

United States and Canada. I am testifying today on behalf of the 500 pilots ALPA 

represents at ASTAR Air Cargo, a group of pilots which has flown packages and 

cargo for DHL for over twenty years, on the proposed arrangement between Deutsche Post, (recently renamed DPWN) and United Parcel Service to provide all lift 

for DHL’s air overnight service. 

I believe our concern is well known. On May 28th, 2008, Deutsche Post, the German-based parent Company of DHL, announced that it was negotiating to transfer 

all North American flying presently performed in its service by ASTAR—as well as 

that performed by ABX—to United Parcel Service. Despite the fact that Deutsche 

Post had, and continues to have, a 49% ownership stake in ASTAR and representatives on its Board of Directors, it did not inform either ASTAR or its employees that 

it had been in negotiations with UPS for the previous six months to arrange to have 

it perform all of ASTAR’s services until that press conference. If the transaction anVerDate Aug 31 2005 15:13 Mar 26, 2009 Jkt 000000 PO 00000 Frm 00104 Fmt 6633 Sfmt 6621 H:\WORK\FULL\090908\44325.000 HJUD1 PsN: 44325
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nounced on May 28th is consummated and the government chooses to ignore the 

obvious anticompetitive impact of the deal, ASTAR will cease to exist and every one 

of our members at this carrier will be on the street. However, ALPA represented 

pilots and other ASTAR employees will obviously not be the only affected group. The 

state of Ohio has estimated that the immediate impact of the transfer of all DHL 

flying from the ASTAR and ABX hub of operations in Wilmington, Ohio will be a 

loss of over 10,000 jobs and a dramatic reduction in economic activity in Southwestern Ohio. In short, the impact on both our membership and on their friends 

and neighbors in the region will be catastrophic, and for that reason alone it is important that Congress and the Department of Justice look carefully into this matter. 

BACKGROUND

Three U.S. entrepreneurs established DHL in the late 1970s as a provider of 

freight forwarding and courier services. It established air operations to support its 

delivery service in the 1980s and, by the end of that decade, had sorting operations 

and a hub in the Greater Cincinnati/Northern Kentucky Airport. DHL, along with 

Airborne Express, became competitors to FedEx and United Parcel Service in the 

domestic express package industry. In 1990 the DHL pilots voted to be represented 

by the Air Line Pilots Association and, since that time, ALPA has negotiated four 

collective bargaining agreements with DHL and its successors, culminating in the 

2008 Agreement. 

In 2001 Deutsche Post purchased DHL and spun off its airline subsidiary, DHL 

Airways, which was later renamed ASTAR Air Cargo. Based on the requirements 

of the 1998 collective bargaining agreement it signed with ALPA, DHL was still 

bound to assign its flying to ALPA represented pilots on the ASTAR seniority list 

and it continued to do so pursuant to what is known as an Aircraft, Crew, Maintenance, and Insurance (ACMI) Agreement with ASTAR. Under that agreement DHL 

reimbursed ASTAR for the costs of the collective bargaining agreement with ALPA, 

and the labor contract was incorporated by reference into the ACMI Agreement. In 

addition, pursuant to federal aviation statutes, majority ownership in ASTAR was 

transferred to American citizens and eventually ended up in the control of former 

Northwest Airlines CEO John Dasburg and his investor colleagues. 

However, in 2003 Deutsche Post, seeking to expand its North American operations 

in order to become a bona fide competitor to FedEx and UPS, purchased Airborne 

Express, merged its ground operations into DHL’s, and spun off its air operations, 

which became ABX Air. It entered into the same sort of commercial arrangement 

with ABX as it had with ASTAR, and then renounced any obligation to adhere to 

the requirements in the collective bargaining agreement it had signed with ALPA’s 

ASTAR pilots. This lead to several years of litigation based on an absurd ruling 

from the National Labor Relations Board barring ALPA from taking its contractual 

claim against DHL to a neutral arbitrator—a ruling which was eventually reversed 

by a unanimous Court of Appeals in 2008. 

While this dispute was working its way through the NLRB and the courts, negotiations over a new collective bargaining agreement between ASTAR and ALPA 

began in 2005 and continued through the beginning of 2008. The central issue in 

these negotiations was, not surprisingly, job security and the extent to which our 

members could continue to perform the flying they had performed throughout the 

history of DHL. What we did not realize as we reached the crucial stage of this negotiation in January of 2008 was that DHL and its parent, Deutsche Post—which 

in the summer of 2007 had extended its ACMI agreement with ASTAR through 

2019 and, at the same time, also took a 49% ownership interest in ASTAR and 

placed representatives on its Board of Directors—were in negotiations with United 

Parcel Service to have UPS perform all of ASTAR’s flying operations. DHL not only 

withheld knowledge of these negotiations from both ASTAR and ALPA, it also made 

demands for revisions in the job security provisions of the tentative collective bargaining agreement between ASTAR and ALPA—including settlement of litigation 

between ALPA and DHL—that in retrospect were obviously designed to clear the 

way for its secret arrangement with UPS. 

The misrepresentations and material omissions made by DHL to ASTAR and 

ALPA in order to influence our negotiations is now the subject of litigation and we, 

of course, understand that these issues are not the subject of this hearing. However, 

in reviewing the competitive impact of the proposed arrangement between DHL and 

UPS, as well as its impact on the southern Ohio communities which have depended 

on the employment provided by both ASTAR and ABX for several decades, the fact 

that this deal was made in secret without the opportunity for competitive bidding, 

and with the clear intent of depriving the affected parties of an opportunity to proVerDate Aug 31 2005 15:13 Mar 26, 2009 Jkt 000000 PO 00000 Frm 00105 Fmt 6633 Sfmt 6621 H:\WORK\FULL\090908\44325.000 HJUD1 PsN: 44325
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tect themselves or respond, is obviously relevant in assessing the legitimacy of what 

Deutsche Post is doing. 

THE IMPACT OF THE ARRANGEMENT 

Prior to the acquisition and integration of DHL and Airborne Express in 2003 by 

Deutsche Post there were four major private sector players in the U.S. express package industry: FedEx, UPS, Airborne Express, and DHL. The United States Postal 

Service also supplied a competitive service, the fate of which will be discussed later 

in our testimony. As can be seen from attached Table 1, at that time FedEx and 

UPS were the major providers of service, but each of the other competitors had established niches. 

When DHL, which had already been acquired by Deutsche Post, further consolidated the industry by purchasing Airborne it made the following representations 

justifying the decision in a 2003 prospectus: 

The UPS/FedEx duopoly today has a 79% share of the U.S. air express delivery 

market (versus Airborne and DHL’s combined 21% market share). 

The Airborne/DHL combination will act as a stronger third competitor in the expedited door to door delivery of small packages and documents and will have the ability to bring reduced prices and better service to small and medium-sized businesses. 

In the markets Airborne competes in today, made up primarily of large, corporate 

accounts, its price levels are substantially lower than its competitors. The expanded 

DHL company will have the capital and resources to leverage this value into the 

small to mid-sized marketplace. 

No aspect of this prediction turned out to be true. The air express market is more 

concentrated than ever, with what DHL described as the FedEx/UPS ‘‘duopoly’’ in 

control of an even greater share of express package volume and revenue than in 

2003. (See attached Tables 2–4.) 

As can also be seen, the consolidation of DHL and Airborne has diminished, not 

enhanced, the market share of the combined entity, which now controls less than 

10% of express package revenue. The bottom line of this is clear—Deutsche Post 

managed to take two niche competitors with a portfolio of premium business customers, both of which were likely survivors in the industry, consolidate and restructure them to its needs, and then run them into the ground. Now, after stripping 

both carriers of their ground operations, it proposes to leave the airlines for dead. 

This is an unconscionable result simply based on it’s ramifications for affected employees and consumers. However, we also note ASTAR provides major support for 

the Civil Reserve Air Fleet (CRAF), and if this deal is allowed to go through, our 

government will be denied access to a substantial part of the lift it is counting on 

and, in fact is using on routine basis. This Committee should understand that the 

CRAF contract in place is between United States and ASTAR, not DHL. 

Why has this happened? Both ASTAR and ABX have met all performance targets 

set for them by DHL and have provided 99% on time performance. The pilot 

workforces at both carriers, while reasonably compensated, are not as well compensated as pilots at UPS or FedEx. DHL’s problem in North America is not the 

cost or effectiveness of its air operations. Its problem has been providing effective 

enough service on the ground to take market share from UPS or FedEx. This problem will not be solved by switching to another provider of lift, much less by transferring this responsibility to DHL’s principle competitor. To put it simply, DHL’s difficulties in North America are not due to the cost or effectiveness of its lift, but rather with its inability to effectively implement the ambitious business strategy it announced in 2003. 

In this respect, Deutsche Post has pointed to the contract for lift between the 

United States Postal Service and FedEx as an example of and precedent for what 

it is trying to do. This precedent is inapplicable. To begin with, the USPS is not 

even covered by US antitrust laws and the cost and rendition of its service is carefully regulated. More important, less than one percent of the USPS’ volume is express or expedited delivery. Hence, the Postal Service only competes with FedEx in 

a very narrow portion of its product line. By contrast, UPS offers a competing product for virtually every DHL offering. Finally, as can be seen in the tables we have 

presented, while FedEx has supplied excellent service to the USPS, the USPS/ 

FedEx contract has not been an effective formula for preserving market share for 

the Postal Service’s express mail product. 

In this matter, it strikes us as obvious that relying on your principle competitor 

for your primary mode of transportation and giving it close to perfect information 

on your pricing strategy is not a good way to maintain, much less enhance, a corporation’s market share. Indeed, the erosion of DHL’s market share is probably already occurring. Many DHL customers have been targeted by UPS and have been 

told that DHL’s service is now dependent on UPS and pointing out the comparable 

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services provided by UPS. DHL has not yet provided investors with a tally of the 

impact of the announcement of the DHL/UPS deal on reduced volume run through 

DHL’s Wilmington hub, but the feedback we are getting from flight crews and sort 

personnel is that the negative impact of this announcement has been significant and 

volume has been appreciably diminished. It is obvious that DHL products will lose 

market share, and the so-called ‘‘duopoly’’ that Deutsche Post claimed that it wished 

to address will become more entrenched as the result of this arrangement. 

CONCLUSION

As pointed out earlier, the discussions between UPS and Deutsche Post occurred 

in secret and neither the providers of lift nor public officials in Ohio were told anything about it until the May 28, 2008 press conference. The reason for this seems 

obvious: the company officials promoting this arrangement did not want to provide 

adversely impacted parties or citizens with an opportunity to point out the flaws in 

the plan or develop alternatives. Indeed, the flaws in the announced plan are so obvious that we suggest DPWN may have additional components to the strategy which 

it has not yet made public. 

In ALPA’s case, the secrecy was clearly intended to deprive us of the chance to 

attempt to protect ourselves both in bargaining and by continuing litigation that we 

undoubtedly would have maintained had we known of DHL’s true plans. In short, 

we have an arrangement which will inevitably eliminate competition and employment, cooked up in secret in order to bypass affected companies and US citizens. 

Neither the result nor the procedure used to achieve it are good or in the interest 

of the US economy. For these reasons, we believe the transfer of DHL’s lift to UPS 

requires, at the very least, careful scrutiny by this Committee and the agency it 

oversees, the Department of Justice, before the deal is consummated. 

Thank you for your time and interest in this important matter. I will be happy 

to answer any questions. 

ATTACHMENT 


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Mr. CONYERS. Thank you so much, Captain Prater. 


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Mr. CONYERS. Attorney David Balto is one of our leading independent antitrust experts. For more than 20 years, he has been an 

attorney of antitrust law in the private sector. He has worked in 

the Department of Justice. He has plied his trade in the Federal 

Trade Commission and currently he is a senior fellow at the Center 

for American progress. We have your statement and we welcome 

you to this hearing. 

TESTIMONY OF DAVID A. BALTO, ATTORNEY AT LAW 

Mr. BALTO. Thank you, Mr. Chairman and other distinguished 

Members of the Committee, for the privilege of testifying before 

you today. I am here representing consumers and the Consumer 

Federation of America and, as detailed in my testimony, I am here 

testifying because this alliance raises serious competitive concerns 

that could potentially lead to significantly higher prices for millions 

of consumers, businesses—large and small—that use express delivery package services. I base my testimony on my 19 years of experience as a trial attorney at the Antitrust Division and a senior 

antitrust enforcer at the Department of Justice. 

Let me be clear about this. If this was a merger, this hearing 

wouldn’t occur today. Why? Because these parties would be in court 

right now with the Justice Department, because this merger would 

be clearly anti-competitive. It reduces the number of competitors 

from 3 to 2. You don’t have to be a Ph.D. economist to realize that 

the easiest way to dance the waltz of collusion is when there are 

only two partners on the dance floor. That is why in 100 years of 

Clayton Act jurisprudence, no court has approved a merger to duopoly except where entry was easy, and entry ain’t easy in this 

case. 

So is the alliance they have formed a big enough difference to 

justify this under the antitrust laws? I don’t think so. First of all, 

they suggest that alliances between competitors are somehow not 

immune from the antitrust laws. Anytime that UPS and DHL 

enter into any kind of agreement, either tacit or explicit, it is scrutinized under section 1 of the Sherman Act. The critical question 

is how that impacts the incentive and ability of those two firms to 

compete. 

In this case, those questions are clearly answered in the negative. First, DHL will be dependent on UPS for its entire air transportation services. As the Ohio delegation has observed through 

this arrangement, DHL will surrender control over cost and service 

quality to one of its chief competitors. We are not talking about 

buying a few seats on an airplane. We are talking about the heart 

and arteries of these two firms’ businesses. In this setting, it is 

hard to imagine how DHL will have the ability to challenge UPS 

and FedEx by lowering prices or improving service. In response, 

UPS can easily discipline DHL by mismanaging delivery, increasing costs, or reducing services. 

Second, as Captain Ross has testified, through this arrangement 

UPS can gather a wealth of competitively sensitive information 

about DHL’s customers’ pricing and competitive initiatives. With 

this information, UPS can selectively target DHL customers, offering them special discounts and other services. 

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The parties may say there are firewalls. I give you an example 

in my testimony of a situation where a judge rejected a promise of 

a firewall to approve an otherwise anti competitive merger. 

Third, through this arrangement UPS can engage in price 

squeezes, basically lowering prices to its customers, raising the cost 

to DHL, diminishing its ability to compete. 

I understand the parties say this deal is not problematic because 

the Postal Service entered into a deal with FedEx, I think that 

proves the point. How has the Postal Service done since that deal? 

Rather poorly. They are becoming competitively inconsequential. 

Why should this Committee, why should the Antitrust Division 

assume that there should be anything different from an UPS-DHL 

agreement? My testimony goes into great detail about why the 

weakened financial status of DHL cannot justify this merger as an 

antitrust enforcer. That is an argument I heard over and over 

again. 

I wrote a law review article, looking back at cases where that argument was made. And you know what, Mr. Chairman? In every 

case those companies survived. They found better managers, better 

financing, they kept competing. 

Finally, I am concerned that the Antitrust Division has not 

opened an investigation of this merger. I could be wrong, but if 

they haven’t, it is a mistake. This deal can be consummated the 

moment that agreement is signed. The moment that agreement is 

signed, this market will be changed irretrievably. The time to secure information about the potential effects of this arrangement is 

now, not after DHL becomes a captive passenger on the UPS railroad. Once that deal is consummated, it is going to be extraordinarily difficult to unscramble the eggs. Once that deal is consummated, it is going to be really hard for the antitrust agencies 

to get customers to give an independent view and to complain 

about the merger. 

What these parties should do is they should enter into a voluntary agreement to have the Justice Department investigate, and 

not consummate that agreement until the government completes 

their investigation. 

You might think that is unusual. It actually is not that unusual. 

Google and Yahoo are doing it right now with the Justice Department. What with Google and Yahoo, no one is going to lose their 

job if that agreement gets reached. With Google and Yahoo, no one 

is going to lose their health care if that agreement is reached. 

If DHL and UPS believe in their obligations as corporate citizens, 

they should go and enter that agreement to give the Justice Department a chance, a fair chance to make a full evaluation of the 

competitive effects. That is what the purpose of the antitrust laws 

are. That is why consumers need an investigation. Thank you. 

[The prepared statement of Mr. Balto follows:] 

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PREPARED STATEMENT OF DAVID A. BALTO


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Mr. CONYERS. Thank you, Attorney Balto. 

I notice in our guests here today there are a lot of white shirts 

and epaulets. Would all the pilots and those connected with the airlines please stand up? Are you here to exercise your first amendment rights or intimidate the Committee? Please sit down. Thank 

you for coming. 

Before I turn this over to Steve Chabot, our distinguished colleague from Cincinnati, I would like to invite Mr. Mullen and Mr. 

Wallace in this conversation we are having today to make a few 

comments that they may choose to make about anything they have 

heard or wanted to add to their own testimony. 

Mr. WALLACE. Yes. Thank you for the opportunity. Just a couple 

of observations. You know, there have been comments made regarding the sharing of information and how that could be detrimental as an example. We are still negotiating our potential agreement with DHL, but we understand the importance of competition 

and we have talked a lot about making sure that customer information, as an example, is not shared between the organizations, 

that the only information that would be shared would be information that is necessary to physically transport and sort the package 

safely and efficiently. 

In terms of our information technology systems, again with the 

proposed agreement, we would maintain independent information 

technology systems and only pass back and forth, again, that information that would be required for the safe and efficient transportation of the package, and would be limited information. It would 

not include a customer-specific detail. 

That is one thing I wanted to spend a minute on and get some 

additional clarification on. In regards to the thought of a merger, 

it is our intention to continue to compete vigorously with DHL. I 

believe that is Mr. Mullen’s intention as well, to continue to compete vigorously with UPS. UPS will be providing one portion of the 

transportation services that are necessary to accommodate the 

package delivery business. DHL will maintain control of their customer relationship, their pricing, their ground network, the pickup 

and delivery of their packages to their customers, and rely on UPS 

for the air transportation part. We will not have access to each other’s cost structures as part of this proposed agreement. We will 

simply act as a service provider for DHL, which presumably will 

reduce their cost and allow them to remain competitive in the industry going forward. 

Mr. MULLEN. Thank you, Mr. Chairman. I would echo what my 

colleague to my left has just said. Our two companies are very 

strong competitors all around the world. We operate in over 200 

countries. We are fierce competitors in all of those. This is one capacity sharing arrangement in one country albeit, obviously, a very 

significant and important one. 

We have heard a number of things today that I would respectfully like to try to correct. I have heard that it is a merger, an alliance. It is in no way a merger or an alliance. It is purely a capacity 

sharing operational outsourcing agreement. We have heard that 

UPS will perform deliveries on our behalf, effectively taking over 

all of DHL’s deliveries. That has never, ever been part of this arrangement. This is purely a line hold sharing arrangement. 

121 

We have heard that UPS will have access to our proprietary information such as pricing, such as details about customers, about 

our costs, et cetera. None of that is true either. We will only make 

available what information is necessary for UPS to perform its contractual commitment to move our packages in their aircraft. That 

does not include anything to do with pricing or sensitive customer 

data. So even without a Chinese firewall, even if that wasn’t there, 

we won’t simply be providing enough information for that to be an 

issue in the first place. So we are very confident that we can structure an agreement. We are still working on it. But all of the risks 

to us in terms of the diminution of our competitiveness in the U.S. 

market are addressed. We haven’t finalized that yet, but we are 

very confident we will be able to achieve that. 

Mr. CONYERS. Thank you very much. I am now going to turn this 

over to the distinguished gentleman from Ohio, Cincinnati, Steve 

Chabot. 

Mr. CHABOT. Thank you, Mr. Chairman. And thank you for holding this very important hearing. I want to thank all the witnesses 

for taking the time to testify. I know many people, members—I 

know Mike Turner in particular has been very involved in this because it is in his district, but many other members as well, and obviously our Senators and, Mr. Fisher, we certainly do appreciate 

your interest and your insight in this. 

You know, at a time when the national unemployment rate is 

over 6 percent and the State of Ohio’s is over 7 percent, something 

like this really couldn’t come at a worse time, especially for a relatively small community like Wilmington where the impact could 

be up to almost 10,000 jobs, as the mayor indicated, and the impact 

that that will have on so many people’s lives. 

So I think it is important that we are taking this with the utmost seriousness. And although there is not a clear solution and 

we haven’t, obviously, resolved anything today, getting all facts out 

and leaving no stone unturned in considering what impact this will 

have and how we can lessen that impact on real people’s lives I 

think is important. 

I would commend the Chairman for taking the time in doing this 

and making this effort because it really is important. 

Just a couple of questions. Mr. Mullen, first of all, the airport is 

privately owned by DHL, and given the immense loss of jobs expected as a result of this decision and the significant antitrust implications of your pending agreement with UPS, would DHL consider relinquishing ownership of the airport as part of a settlement 

with the city and the State so the facility could be redeveloped? 

And in addition to that, is the sale of the air park an option that 

could be pursued, given your financial state and the benefit it could 

bring to Wilmington, and it would seem like that would be a winwin. Could you comment on that? 

And, finally, does the contract with UPS involve exclusive dealings—and wouldn’t a nonexclusive agreement so you could negotiate, say, with, for example, ASTAR or ABX, wouldn’t that seem 

to help to come to a reasonable solution here? 

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sonally at the time flew to Columbus and met with the Governor 

to offer—that would be very much on the table. And so I think the 

working group that is now interacting between the two sides have 

that as one of the issues for discussion. If we can help mitigate the 

impact by either ceding that airport or being involved in some form 

of sale, as you have said, we will willingly do that. 

Mr. CHABOT. As to the exclusivity and—— 

Mr. MULLEN. The second part of your question, yes, we do have 

a commitment to complete this negotiation with UPS at the moment. 

Mr. CHABOT. Thank you. And to anyone who would like to comment on this, why shouldn’t the agreement be met with skepticism, 

especially since it is an agreement between two of the industry’s 

dominant companies, and in many ways isn’t it just an act of industry consolidation? I know that Mr. Mullen objects to the term 

‘‘merger,’’ so I will call it industry consolidation. How does this 

agreement differ from other agreements that are in place in the industry, for example, contracts with the United States Post Office, 

for example? Do the benefits of this agreement outweigh the negative impact that this agreement will have on the Wilmington community and the State of Ohio? Or is it clear that the negative impacts would outweigh the agreement? 

And I would be happy to hear from any of the members of the 

panel who might like to comment. Mr. Mullen, and then Captain 

Ross. 

Mr. ROSS. Yes, sir. Just a little bit—we have talked the 

outsourcing—we will call it a vendor relationship, and I would like 

to differ. We are a vendor for DHL as ABX Air. The product we 

vend is the transport, sorting, and delivery of that package. In 

order to do that, we have got the addresses, we have got the 

names, we have got the businesses, we have got the book of business of DHL. We are a vendor. 

We also provide as a vendor some very interesting things. Tracking—some DHL packages are tracked as many as 12 different locations as they travel from one location in the country to the other. 

Without the information of who that customer is and what the contact is for that customer, that customer cannot update that package 

tracking. So I guess if they want to contract with UPS and not provide all the customer information, they can get rid of the tracking 

portion of the DHL package. 

Something else we do in the sort is called dimming. As a package 

goes through the sort—because now we can send a package from 

home, we can print our own labels—there has got to be a check on 

that package and what was paid for that package. In the sort, 

those packages are dimmed. It is resized and it is checked to see 

what was paid for that package. In addition to that, you have to 

know the service level of that package. So all those packages are 

dimmed as they go through the sort. 

Currently at ABX Air, the dimming of packages saves DHL $1 

million per week, $52 million a year by dimming those packages. 

But to dim the packages you have to know where that package 

came from, who shipped it, what the service level was. We can give 

up that too, I guess, if we go to just a bland label with UPS. I don’t 

think that it is good business. 

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I think to provide the level of service the customers demand in 

today’s market and to protect the company, DHL, I think we need 

those two capabilities of tracking and dimming. 

As far as the USPS portion of this goes, I had an opportunity to 

talk to the gentleman that helped structure the movement of the 

Postal Service to Federal Express. Most of the packaging that goes 

for USPS is through sort. It goes containerized from aircraft to aircraft. There a small amount of actual individual package sorting, 

and that is done with a blander label; we are going from San Francisco to Seattle. They do a small portion of that. 

And also the USPS, it is a mom-and-pop, it is an occasional shipper, and I don’t really think it is a target of—something that UPS 

or FedEx would want to go after. And as said by the gentleman 

down at the end, Mr. Balto, UPS has suffered and lost significant 

business since Federal Express took over the sorting of that package. 

Mr. CHABOT. Thank you. Captain Prater. 

Mr. PRATER. I will be very brief. DHL purchased two U.S. companies, drove them into the ground, walked away from them, walked 

away from the communities and the workers that were employed 

there to provide those services. I have no way of knowing the full 

extent of the DHL holdings, but I do know they own a significant 

portion, 49 percent of another air transport U.S.-based company 

flying between the U.S. and Japan and China. So where does this 

all go? I think we need to get our hands wrapped around it. 

Mr. CHABOT. Mr. Mullen. 

Mr. MULLEN. When addressing the question of the value of this, 

I would just like to stress one thing again respectfully, that we face 

an extremely serious situation here as a company. While this type 

of capacity sharing is common in many industries, it is a first for 

us. We would not be doing this unless there was considerable 

value, obviously, to our company, and that main value is that we 

wish to stay in business in the United States. With losses at 1.3 

billion a year, clearly it is completely unsustainable. 

While obviously the impact on the community directly affected is 

huge, we also have many tens of thousands of other employees in 

this country to worry about. And, you know, one of the very disagreeable parts of the role of an executive in a company is to make 

these sorts of decisions, that we are jeopardizing the future of nearly 40,000 DHL employees in the United States unless we can reach 

an acceptable resolution of our loss situation. We are not even 

seeking to eliminate the loss. 

The proposal that we have here, the combination of the restructuring of our ground operations as well as the outsourcing with 

UPS, will save about a billion. That is still going to leave us in a 

loss situation of several hundred million dollars a year, which is a 

lot of money by anyone’s standards. But we are prepared to continue to bear that level of loss because we wish to maintain a global network, we wish to maintain our business in the United States. 

But we cannot go on losing over a billion. It is simply 

unsupportable for a company of any size. 

Mr. CHABOT. Yes, sir, Mr. Balto. 

Mr. BALTO. Look, there is always a temptation to go and try to 

tailor arrangements to let the businesses do what they want. And, 

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you know, I think that would be a real mistake in this case. No 

one has asked the question of these folks yet: Why won’t they enter 

into a voluntary agreement not to consummate the deal? There is 

irretrievable harm that will occur if they consummate the deal and 

it is anticompetitive. If you can’t trust them to go and do that, how 

can you trust them to live up to any of the commitments that they 

are willing to make in terms of not sharing information, not abusing rights, you know, UPS not abusing DHL. I don’t know what the 

answer to that question is. 

Mr. CHABOT. Any other panel members that would like to comment? Okay. If not—yes, Mr. Fisher. 

Mr. FISHER. Mr. Chairman, Congressman Chabot, just a point 

that I think is worth making. That is, as I said in my testimony, 

with all due respect to what Mr. Mullen said, that they looked at 

all different alternatives, they did not look at all different alternatives. Because if they had looked at the different alternatives 

they would have sat down with the State of Ohio. We engage in 

these kinds of discussions with companies as large as DHL on a 

regular basis. 

I am not suggesting that we would have had a magic solution, 

but I am suggesting that we were prepared, and remain prepared 

even to this moment, to sit down with them. 

It is my understanding and I have not yet had this confirmed, 

Congressman, that the agreement between UPS and DHL prohibits 

them from talking to the State of Ohio or anyone else about any 

alternative. And if I may ask you to ask them about that, unless 

I am allowed to ask them from sitting here, I would be interested 

to know if that is the case, because I think that would be unfortunate because it really means that they are not really exploring all 

different alternatives before pursuing this transaction. 

Mr. CHABOT. Thank you. Mr. Mullen or Mr. Ross, would you 

want to respond to that? 

Mr. MULLEN. Prior to the final negotiations with UPS, we explored every opportunity that we could see was conceivably possible 

of delivering a saving of the scale that we were looking for in the 

United States. Now we are in our final negotiations with UPS. We 

do have an obligation for confidentiality and exclusivity until that 

contract is either signed or is not signed. So currently we are 

bound by that. 

Mr. CHABOT. Mr. Fisher, let me just ask one final question. It is 

my understanding that the State of Ohio responded when this initially happened a number of years ago, and I think DHL had invested about 1.2 billion in the infrastructure, and the State I think 

gave around $400 million in tax credits and incentives. And it was 

in doing that, I think, everybody thought of this as a long-term 

venture that was going to be a long relationship that was going 

benefit the community for many years to come. And obviously at 

this point it hasn’t come to that. But is that—was that the State’s 

investment, approximately, in this? 

Mr. FISHER. Yes. That is true. That was our offer and I think 

that all parties had every expectation that this would be a longterm relationship. And although DHL did not actually accept and 

receive all of the incentives that were offered—we did offer close 

to $400 million—it is not unusual that a company will not accept 

125 

over a certain period of time all those incentives. I believe that if 

DHL were not to pursue this transaction with UPS and were to reconsider for whatever reason, DHL, if it were to remain, would 

probably end up accepting many of the incentives that we have offered. But at least as of this point, they have accepted some, but 

not all. 

Mr. CHABOT. Thank you. And then finally before I yield back my 

time, Mr. Chairman, Mayor Raizk, did you want to comment? 

Mr. RAIZK. Well, a couple of things, Congressman Chabot. I think 

it is important to note that I have heard it mentioned several times 

here today that DHL is contracting now with two contractors, but 

they created those contractors by their acquisitions of DHL Express 

and Airborne Express. The two air carrier contractors were created 

because of the law that says that a foreign-owned company cannot 

hold a flying certificate and operate an airline. So it is different in 

that respect because these two contractors were separate independent companies at one point in time. And so by their acquisition, these were created. 

So I don’t think it is the same relationship between UPS and 

DHL as it is between DHL and ASTAR Air Cargo and ABX Air, 

Inc. 

Secondly, you asked the question about the air park and I would 

like to thank Mr. Mullen because I explained to you about receiving the news on the 28th and he did graciously—and I want to 

thank him—give me an audience with him after that announcement. And we did discuss at that time the possible transfer of the 

air park. And the community is very interested in that. Even if we 

retain all or part of these jobs, we still would like to have that 

piece because we can then redevelop and diversify our economy in 

the Wilmington area. 

This air park came from the Federal Government to the citizens 

of Wilmington, and I think it should return there. Thank you. 

Mr. CHABOT. Thank you very much. Mr. Chairman. I yield back 

the balance of my time. 

Mr. CONYERS. The Chair recognizes Steve Cohen from Memphis, 

Tennessee. 

Mr. COHEN. Thank you, Mr. Chairman. Captain Prater, you 

made some kind of statement, it really was a question, but I guess 

it was your begging a question statement about the world and a 

company that they have a relationship with. Would you explain 

what you were kind of alluding to, kind of rhetorical? 

Mr. PRATER. I believe you’re asking about the 49 percent investment that DHL has made into Polar Worldwide Air Cargo, which 

is a 747 operator flying air cargo for DHL out of this country to 

Japan and China. 

Mr. COHEN. What is your concern about that? 

Mr. PRATER. The concern is when you watch DHL run two of 

their companies into the ground and put their workers on the scrap 

heap, where are they going to go with the next one? I am certainly 

concerned about it. I am not saying it is the same kind of system. 

It is international versus domestic. But the fact is they’ve shown 

themselves for what they are here. They want to get rid of companies they bought, get rid of them out of the marketplace completely. There will no longer be an ASTAR or ABX who can supply 

126 

transportation small package services. They will be gone. They will 

be gone and there will not be any competitors. 

Mr. COHEN. The only competitor—FedEx would still be a competitor, would they not? 

Mr. PRATER. If you call working that close as a competitor. Now, 

I know UPS is, obviously from some of their own literature, trying 

to take advantage of the situation that their new partner DHL is 

trying to do and say. DHL customers, you can’t trust DHL because 

they are undergoing these big problems. They may have potential 

rate fluctuations, potential pickup and delivery. They are no longer 

a single carrier responsibility. Maybe question their customer service. 

On the one hand they are trying to show they are competing 

with them or driving them into the ground. And on the other hand 

they are cutting deals with them. So who are you going to believe? 

What side of—you know, what side of this deal is good for anyone, 

except we have heard DHL. They don’t want to take care of anybody else but their company. They do have a responsibility. They 

have been doing business in this country as a U.S. company, and 

yet they want to walk away from certain responsibilities. 

Mr. COHEN. Mr. Wallace, you heard what Captain Prater said. 

I guess it is really Mr. Mullen. DHL owns 40 percent of Polar; is 

that correct? 

Mr. MULLEN. That is correct. 

Mr. COHEN. Is there any grain of a truth to what he is saying, 

that maybe all would kind of not—kind of continue Polar? 

Mr. MULLEN. Obviously we don’t buy companies to try to drive 

them into the ground. We regret more than anybody the difficulties 

that we have had here in the United States. The Polar case, we 

previously used Northwest Airlines for carriage across the Pacific. 

Northwest Airlines itself has gone into financial difficulties, as you 

probably know. That started to put intense pressure on the service 

levels and the security of our lift to and from the United States and 

Asia. As a result, we made a strategic decision to invest in Polar 

in order to have some more security over that lift, without which 

we felt that any time Northwest could go into the final stages of 

bankruptcy or other things could happen and we would be left with 

no capabilities whatsoever between the Pacific and the United 

States. That is why we invested in Polar. 

Mr. COHEN. Do you have any intentions, or do you think it might 

be that you want to switch from Polar and switch your business to 

UPS? 

Mr. MULLEN. We have not had any discussion with UPS about 

any of that type of intercontinental lift. Polar, we have a long-term 

arrangement with the aircraft. We have committed to a very large 

fixed commitment and we have no such intention at the current 

time. 

Mr. COHEN. So is Polar a successful venture for you? 

Mr. MULLEN. Polar was a general cargo carrier when we acquired it. The purpose of acquiring it, as I said, is to transform it 

into an express timetable in order to support our express business. 

We will continue to offer some general cargo services, but we will 

change the nature of the company so that it supports our intercontinental express business. 

127 

Mr. COHEN. Did you ever consider the same kind of agreement 

that you want to enter into with UPS and considered looking at 

FedEx to do it? 

Mr. MULLEN. We have talked off and on with almost every player 

in the United States, trying to find a solution to this. 

Mr. COHEN. And ‘‘every player’’ means FedEx and UPS? Is there 

a third? 

Mr. MULLEN. FedEx, UPS, the United States Postal Service and 

others. 

Mr. COHEN. Okay. Thank you, Mr. Chairman. 

Mr. CONYERS. Bob Goodlatte of Virginia. 

Mr. ISSA. Mr. Chairman, with Mr. Goodlatte’s permission, I will 

be going next. 

Mr. CONYERS. All right. We are delighted to recognize the gentleman from California, who has served this Committee with such 

distinction. 

Mr. ISSA. I thank the gentleman from Michigan, my colleague. 

And as a former Ohioan and a Member of Congress who represents, at least to the south, March Air Force Base, a major gate, 

a DHL facility, I find myself with the same problem that the first 

panel had, portions of the second panel had, and many Members 

on the dais. We are as conflicted as a Congress in this situation 

as any of you at the table. And I say that because I would like to 

be able to say, oh, isn’t this going to be great? We are going to gain 

huge efficiency for people who get packages delivered, we are going 

to save money. We are talking about our economy and we are not 

going to lose 13,000 jobs here, many jobs north of San Diego and 

my district at March Air Force Base. It is all going to be perfect. 

I don’t think it is going to be perfect. So let me walk through a 

couple of things that appear to be here because we are looking at 

this as an antitrust task force, but we are obviously all looking at 

it parochially. It seems like Wilmington really wants their air base 

back. They would like to keep the job, but they would like to have 

the alternate opportunity and it seems like DHL is willing to participate in that in a very aggressive way. 

For DHL you are a global giant, a postal company, a postal government company, as I understand it as a parent, and you operate, 

as you said, in 200 nations. If you continue to lose $5 million a day, 

how long before you would have to evacuate—and this is for Mr. 

Mullen—how long before you would have to evacuate the United 

States in some way, shape, or form if you don’t do something? 

Mr. MULLEN. We obviously haven’t made a specific decision on 

a date or on any particular scenario. 

Mr. ISSA. But your pockets do have limits to their depth? 

Mr. MULLEN. They most definitely do. And that is the point I 

was trying to make before. Unless we find a way of reducing our 

current level of losses to a manageable level, then we would have 

to take far more radical action. I can’t say what that would be, but 

it would obviously be—— 

Mr. ISSA. And we are all operating in veiled ‘‘what ifs.’’ But I am 

concerned for the U.S. economy, but I am also concerned for competitiveness, which is the primary thing here. If you are able to 

stem your losses with this alliance, does this in general bolster 

your global ability to compete against FedEx and UPS because the 

128 

rest of the system is comparatively less of a problem or at least, 

let’s just say, this makes this portion not as much of a problem as 

it has been; is that correct? 

Mr. MULLEN. That is correct. We have a—— 

Mr. ISSA. And you are going to save approximately how much, 

would you guess, not including one-time charges on this conversion? 

Mr. MULLEN. The UPS arrangement is part of quite a complicated restructuring plan with quite a number of other components to it, including restructuring ground operations and other 

things. But the total of all of that, we aim to save $1 billion a year. 

Mr. ISSA. Okay. That is $3 million a day, plus or minus. It could 

add up to real money even here in Washington. That is supposed 

to be an applause line, but it is awfully old. 

Mr. Wallace, are you going to make money on this? Is that UPS’s 

intention, to make a pretty good chunk of money on carrying this 

vast amount of packages? 

Mr. WALLACE. It is our intention to be profitable with this, yes. 

Mr. ISSA. And the only way for you to do that is in fact to increase efficiencies, because you are saving somebody over their current level of efficiency, right? 

Mr. WALLACE. That is correct. We would be utilizing our existing 

air networking facilities. 

Mr. ISSA. And you will add less jobs than are taken away, but 

you will add jobs in this transaction? 

Mr. WALLACE. We are still working through the—— 

Mr. ISSA. There has to be a pilot or two somewhere there. 

Mr. WALLACE. We are still working through the details of the 

agreement. So it is difficult at this point for me to estimate the 

number of jobs that could be created. 

Mr. ISSA. Right. I am not asking for that. But those jobs presumably would be in Ontario, California, Louisville, Kentucky. They 

would be throughout the United States, maybe Georgia, wherever 

you have an operation related to their backbone; is that correct? 

Mr. WALLACE. That is correct. 

Mr. ISSA. So on a net basis, America should be more competitive 

because DHL will be buying a product for less than it presently 

does it itself. You will be making a product that will be an efficiency, but jobs will be lost on a net basis if you two achieve what 

you are trying to achieve? 

Mr. WALLACE. I can’t speak to the total job loss, but deficiencies 

will certainly be improved. 

Mr. ISSA. And I am used to efficiencies meaning job losses. And 

Ms. Kaptur looks at that as a bad thing. I am a native Clevelander 

and I also realize that we can’t compete if we can’t be as competitive as the rest of the world in the total number of jobs. 

So, since my time is going to expire, with the indulgence of the 

Chairman, very quickly, the question that I really have is at the 

present time between the two parties, conceivably, is DHL as a result of this arrangement going to be not a global competitor of 

UPS’s? And that is—my real question is, is there anything in this 

arrangement—we realize it is domestic at this point. Is there anything that would make your two companies not global competitors? 

129 

Mr. WALLACE. No, there is not anything I am aware of. We will 

be vigorously competing in the global market. 

Mr. ISSA. I am going to tell you in closing, and I will ask the others to comment because I don’t want to leave them out, March Air 

Force Base is a major commitment of DHL and I expect we will 

lose it to Ontario, if I understand corporate restructuring the way 

it is probably going to happen. 

So after Wilmington, probably Temecula and Paris are the next 

areas that are going to see job losses. So I am not happy about that 

as a parochial matter. What I want to know is—from the others— 

if we look at this based on their assurances, is there any reason 

today that we believe that DHL will not be a global competitor of 

UPS? 

And the reason I ask this for the other people on the panel is 

proprietary information has been batted around, and I am very 

concerned about that. But as long as you are global competitors, I 

am going to assume that your two companies are going to make 

sure that you have that so-called Chinese firewall. 

So if the Chairman will indulge me to allow the others—I don’t 

want to shut them out, because to be honest, in a perfect world, 

I would rather your side win than the other side. I just don’t see 

that as likely at this moment. Yes, sir. 

Mr. ROSS. Sir, if I may. We do a lot of flying out of Riverside and 

we appreciate what you have done for that facility there. So thank 

you very much. I know Mr. Mullen has mentioned this is the first 

of the coloading as he refers to, globally. So I guess the question 

would be: Are we going to coload with UPS in Europe, UPS in Asia, 

is it going to be TNT? I guess if this is a start of a global coloading, 

who is the rest of the world going to be coloaded with, with DHL? 

Mr. ISSA. Yes, sir. 

Mr. BALTO. Yes. I just wanted to make, you know, one point. The 

concern from an antitrust perspective is solely that of American 

consumers. And your constituents in San Diego are ultimately 

going to pay more for the—you know, having express delivery services. This is not just a problem that can be solved just through a 

Chinese firewall. These two firms will now be contented in a symbiotic fashion, unlike the way they are now. Are you really going 

to try to steal sales from your supplier? That is highly unlikely if 

you are very dependent on them and if they are sort of in the catbird seat of being able to discipline you. My experience as a trial 

attorney in the Antitrust Division, when we uncovered cartel arrangements, there often was that element of firms being in the 

supply relationship. That is how they were able to enforce the cartel. That is why you have to be very concerned about any kind of 

supply arrangement like this. 

Mr. ISSA. Thank you. Thank you, Mr. Chairman, and I look forward to looking at the Yahoo situation in the same light, as these 

are important issues. 

On the reauthorization tomorrow, Mr. Chairman, I will obviously 

support the good work that this task force has done. I yield back. 

Mr. CONYERS. I thank you, Darrell Issa, for your contributions 

this afternoon. The Chair recognizes Bill Delahunt of Massachusetts, a Member of this Committee, as well as a very effective 

Member on the Foreign Affairs Committee. 

130 

Mr. DELAHUNT. I thank you, Mr. Conyers. Mr. Balto, I hear what 

you are saying about the concerns and I agree with that. But I 

think what I have noted since I have been here six terms, almost 

12 years, is there has to be an effective monitoring post for any 

merger that requires the resources in the Antitrust Division of the 

Department of Justice that simply doesn’t exist today. And if you’d 

care to comment on that. 

I am just going to follow up with one other question and it deals 

with this Chinese firewall. But I have always been concerned that 

in Justice there is not sufficient resources to adequately reveal the 

potential or real negative consequences for the American consumer. 

There are just not enough bodies. Would you care to comment on 

that? 

Mr. BALTO. That is correct. The Antitrust Division is not a regulator. That is why, as a general matter, they strongly prefer structural remedies rather than behavioral remedies. If given a choice, 

we prefer—the antitrust agencies would prefer firms not to merge 

if the condition that is necessary is some kind of regulatory relief. 

Mr. DELAHUNT. There are mergers that do occur and for all intents and purposes are free from any oversight, free from any scrutiny thereafter. 

Mr. BALTO. Yes, lots of mergers are procompetitive and pose no 

anticompetitive issues. 

Mr. DELAHUNT. So I think in terms of this particular task force, 

that is an issue that ought to be looked at. In terms of the firewall 

and the relationship between UPS and DHL—and I guess I would 

direct this to either Mr. Wallace or Mr. Mullen. In terms of the 

sensitive information that is out there about pricing and other—I 

don’t know if it is a correct term, but ‘‘proprietary’’ information, 

how do you construct that firewall? How do you maintain that competition, given an alliance between yourselves that would create a 

whole different relationship? 

Mr. MULLEN. Well, the first thing I would say to that is we don’t 

intend to provide sensitive information such as pricing at all. So 

there is no need for a—it just simply won’t occur. The only data 

that will be provided is operational data that is required by UPS 

to allow them to physically move the package. They don’t need access to details on pricing or particular customer arrangements or 

any of those matters that have been raised. 

Mr. DELAHUNT. Mr. Wallace. 

Mr. WALLACE. I agree with that. And the only additional comment is—— 

Mr. DELAHUNT. How can we be reassured that that is not going 

to happen, I guess, is what I am saying. 

Mr. WALLACE. Well, first of all, in the proposed contract that 

we—— 

Mr. DELAHUNT. Particularly given what I noted earlier about the 

lack of resources available in terms of ensuring compliance with 

that kind of an alliance, that kind of a contract. 

Mr. WALLACE. Well, UPS structures its business deals to ensure 

that anticompetition is not an issue. I am sure that the proposed 

contract will also address that competitive sensitive information 

very specifically in the contract. We are competitors, as we talked 

about, and even today we are trying to compete for additional exVerDate Aug 31 2005 15:13 Mar 26, 2009 Jkt 000000 PO 00000 Frm 00134 Fmt 6633 Sfmt 6601 H:\WORK\FULL\090908\44325.000 HJUD1 PsN: 44325
131 

press business while we are in negotiations on this other transaction. Our IT people have spent a lot of time looking at what they 

can do technically and mechanically to create that firewall and 

have spoken with confidence that is achievable. The only information that we will pass between our organization is the information 

necessary, as Mr. Mullen said, to transport the package and move 

it through our network. 

Mr. DELAHUNT. Okay. Mr. Conyers, I thank you for the time. I 

have to run to another hearing and I yield back. Thank you. 

Mr. CONYERS. Thank you very much. The Chair recognizes Hank 

Johnson, an attorney from Georgia, a magistrate in Atlanta, and 

a very valued Member of this Committee. 

Mr. JOHNSON. Thank you, Mr. Chairman. How many employees 

are at the Wilmington facility, Mr. Mullen? How many employees 

does DHL employ at the Wilmington facility? 

Mr. MULLEN. We employ just over 1,000 ourselves directly. All of 

the other employees belong to subcontractors of—— 

Mr. JOHNSON. I see. So including the subcontractors, how many 

jobs would there be at risk in Wilmington should that facility close? 

Mr. MULLEN. I obviously don’t have all of the details of those two 

companies, but I would answer approximately 10,000. 

Mr. JOHNSON. And that would take place over what period of 

time? 

Mr. MULLEN. We are still discussing that as part of the implementation phasing that is being negotiated as part of the contract 

at the moment. But most likely by the middle of next year. 

Mr. JOHNSON. Does anyone dispute the assertion that DHL’s ex- pected loss of $1.3 billion in 2008 is accurate? Does anybody dispute that? 

Mr. FISHER. We don’t dispute that is a loss. We don’t have any 

basis for determining whether or not that amount is accurate. 

Mr. JOHNSON. Nor have any reason to doubt that it is accurate, 

do you? 

Mr. FISHER. I think that is as far as I will go. We just have no 

way to verify one way or the other. 

Mr. JOHNSON. Let me ask, how has the price of jet fuel impacted 

the package delivery industry? 

Mr. MULLEN. It has impacted us very significantly. It has impacted us in a number of different ways as well. Firstly, obviously, 

it increases your cost quite materially. Our whole industry, much 

of the passenger airline, industry was built around oil prices of sort 

of 20, $30 a barrel. We survived the passage up to the eighties and 

nineties. And once it got into—over the 100’s, as we are seeing 

now, it is a complete shift of business model for our industry. So 

it is putting huge pressure on us from an operational cost point of 

view. 

The other thing it is doing, which is equally significant and potentially more significant in the long run, that it is changing our 

customers buying behavior. So in a market, particularly an integrated market like the United States, one of the main reasons why 

the air market has been shrinking and continues to shrink is because customers migrate from more expensive air products to deferred ground products. They simply can’t afford the cost of the express transport any more. 

132 

Furthermore, we see on the global scale that that is starting to 

affect even supply chains of some of our customers. So one byproduct of this may well be that you see companies who outsource capacity production to the Far East, to China, may start to bring that 

back closer to home, either to her market itself, or in the case of 

the United States maybe Central America or whatever. In Europe 

we see our customers shifting capacity production back to eastern 

Europe and other closer locations. So it is having a pretty dramatic 

effect on our industry aboard. 

Mr. JOHNSON. Mr. Fisher and Mr. Raizk, even though there may be some reluctance to accept this $1.3 billion loss assertion, assuming that it is true that the company is losing $1.3 billion a year, 

would the State or local government be able to offer any economic 

incentives that would cancel out that loss on a yearly basis? 

Mr. FISHER. Congressman Johnson, I think that when we face 

situations like this, it is not so much that the State says we will 

cancel your losses out, it says that we will partner with you to address your losses. A combination of loans, grants, tax credits, processes that we can offer to the company free of charge with regard 

to distribution and logistics, additional ways that we can help facilitate transactions like the one that they pursued several years 

ago, where I believe ASTAR attempted to purchase ABX, so that 

they would have one carrier they could deal with as opposed to two. 

Those are all roles that we could, and frankly want to, play in 

trying to address these transactions. So the answer is I don’t know 

whether we could cancel out, as you say, all of their losses. What 

I do know is that we could help address those losses, alleviate them 

both short term and long term in a partnership arrangement. It 

wouldn’t be the first time that our State has done something like 

that. 

Mr. JOHNSON. Well, I tell you, 10,000 jobs over the next 9 or 10 

months is certainly a devastating blow to any State’s economy. 

How can DHL and UPS work together to accomplish your objective, 

but at the same time save jobs in Ohio? And I have just got to believe there is some way for you all to do that. How could it be done? 

Mr. MULLEN. Congressman Johnson, the leverage that this arrangement has is the utilization of capacity that exists in the existing UPS network. Were we simply to transfer all of the jobs from 

one party to the other, we would not obviously be addressing the 

ongoing loss that we have been talking about. And the reason that 

UPS can offer us an arrangement like this is they have some spare 

capacity which we want to obviously avail ourselves of. 

So it is very hard. Their hub is in a different location than our 

hub. Their operation runs different from ours. And I am not privy, 

obviously, to how they manage the details of that operation, but it 

is not simply a question of being able to transfer the jobs with the 

work, I regret. 

Mr. JOHNSON. Any response from UPS? 

Mr. WALLACE. Any loss of jobs in the U.S. Is very unfortunate. 

And, as Mr. Mullen spoke to, our capabilities and our network at 

UPS are designed as such that we have the capability through our 

regional air hub network to add more volume into that system. By 

adding that volume into those strategic locations, we will eventually create jobs. At this time, we don’t know what the number of 

133 

jobs will be or exactly what the jobs will consist of. But clearly we 

will create jobs in those locations. Our primary air hub location, 

Louisville, Kentucky, which is not that far from Wilmington, Ohio, 

but there would be no opportunity for us to leverage the Wilmington, Ohio facility in our network. 

Mr. JOHNSON. Thank you. Mr. Chairman, I yield back. 

Mr. CONYERS. Thank you. Attorney Congresswoman Betty Sutton, distinguished Member of the Rules Committee and Judiciary. 

Ms. SUTTON. Thank you, Mr. Chairman. And thank you all for 

being here to testify, Lieutenant Governor Fisher, Mayor, all of 

you. I appreciate this information coming to light. 

Mr. Mullen, I have heard you on that—about how there were no 

options but to cut costs, and we have heard the extent of that need 

as you express it. And that you looked at every alternative before 

you proceeded down this path. But we have also heard testimony 

from people on the panel, and Lieutenant Governor, talking about 

how they never had the opportunity, the State of Ohio really didn’t 

have the opportunity, you didn’t go to them to talk about how there 

might be another path. 

We also heard from Captain Ross and Captain Prater. We heard 

from Captain Ross that he was never approached about reducing 

costs. And Captain Prater in his written testimony talked about 

during the negotiations between UPS and Deutsche Post, they were 

entered into in secret and that neither ABX or ASTAR were given 

a chance to make competitive bids. 

So if the ultimate goal was cost savings on all of this, please respond to those lapses in effort. Because why didn’t DHL, for example, negotiate with all parties to obtain the best deal possible? Why 

didn’t DHL, after all the State of Ohio has done to try to be a partner, go back to the State of Ohio and talk to them about what 

might be able to be done? Why didn’t DHL talk to Labor about how 

to potentially cut costs? 

And now if I understand correctly, and I would like you to address this too, after all of that and the failure to even bother to do 

any of those things, you have now bound yourself with the confidentiality agreement that will protect you from having to answer 

a lot of these questions. Could you just respond to that? 

Mr. MULLEN. Of course I can, Congresswoman Sutton. 

Firstly, with respect to the State of Ohio, we looked at all of the 

options that we felt could realistically deliver the scale of savings 

that we needed. We are talking here about hundreds and hundreds 

of millions of dollars. Yes, we did not go and sit down with the representatives of the State of Ohio and say, can you save us a billion 

dollars? We generally thought that was pretty unlikely, and given 

confidentiality, our customer base, employees, et cetera, we ruled 

that out as a likely alternative. 

With respect to our other subcontractors, that is not the case; we 

had extensive discussions with ABX and ASTAR trying to find a 

solution to this. There was one solution that would have offered 

considerable savings, which is where ASTAR would have acquired 

ABX; we would have put the two businesses under ASTAR’s management combined, would have been combined. That would have 

saved quite a lot of money. That option was not driven directly by 

us, because ASTAR, obviously, is an independent company. They 

134 

launched public takeover bid for ABX that was rejected by ABX directors. That opportunity was closed off. 

We subsequently had a reverse type discussion where ABX came 

to us with a proposal. I personally met with some of the senior 

management of the company in Germany. We followed that up 

with several discussions here in the United States. And while that 

was an attractive offer, it came nowhere near as close to the level 

of scale of savings that we think we can generate from the combined proposal that we now are looking at. So we really did talk 

to all of the other parties. 

We didn’t talk directly to labor. The gentlemen on my left are not 

employed by DHL; they are employed by our subcontractors. It’s 

not our prerogative to directly go to the labor directly. We do talk 

to the direct employers about how we can generate such savings. 

I think we exhausted every option that we could see that had a 

material leverage in solving this problem. 

Ms. SUTTON. Okay, I tend to disagree, but I appreciate your response. 

Since your competitor at UPS is going to sort the packages, isn’t 

it the case that you will then have to shutdown many of your sort 

facilities across the country under the restructuring? 

Mr. MULLEN. We only have two real air hubs in the United 

States. One is in Wilmington. The other one is Riverside in California. 

Ms. SUTTON. Okay, let me just ask this question a different way. 

How many jobs, direct DHL jobs and otherwise, will be affected by 

this in terms of loss? Can you give this Committee a complete list 

of the jobs that could be affected by this restructuring plan? 

Mr. MULLEN. I can’t give you a precise number because the process is that we terminate a contract with our subcontractor, and 

that subcontractor in turn then decides how many redundancies it 

makes amongst its workforce. For instance, in ABX’s case, I can’t 

speak for them clearly, but I am aware that they intend to continue 

in business. They intend to continue employing pilots and other 

employees. So we are working with them. I think I mentioned in 

my statement, on the mitigation package, although we are not contractually obliged in ABX’s case, for instance, with air crew to offer 

severance payments—that is the responsibility of the subcontractor 

ABX—we are more than willing to offer that as part of the mitigation. 

I realize you want some numbers. My best understanding of the 

impact is somewhere in the 8,000 to 10,000 jobs that are at risk 

across our own direct employees and the majority being employees 

of other subcontractors, but you would have to speak to each of 

those directly to get a precise number. 

Ms. SUTTON. You are talking about Wilmington only? 

Mr. MULLEN. Well, we are doing a whole number of things. We 

have been closing some of our ground stations in remoter areas in 

the country, restructuring pick up and delivery routes and consolidating stations. In some cities, we maybe have three stations and 

are consolidating that down to two. And we are replacing the two 

airline subcontractors with one being UPS. So it is a number of different components. 

135 

Ms. SUTTON. Since no one responded to Mr. Balto’s question 

about voluntarily entering into an investigation under DOJ, will 

you answer it for me? You said you are very confident it is not a 

merger, very confident. So why don’t you enter into a voluntary investigation with DOJ? 

Mr. MULLEN. Well, firstly, we obviously got extensive advice 

when this idea was first mooted and have been informed very comprehensively there is not an antitrust issue. Despite that we voluntarily did go to the Department of Justice and informed them about 

this. But up until we are told we cannot complete it or are prevented from doing so, there is no reason for us not to. The Department is aware. 

Obviously, from our perspective, the counterbalance is that employees and customers and other stakeholders are very unsettled 

by all of this, and it behoves us to complete the transaction as fast 

as we can. Should the Department see otherwise, then of course we 

would cooperate fully in whatever investigation they chose to 

launch. 

Ms. SUTTON. Since, sort of in your answer there, I heard a hint 

of you weren’t really—you weren’t really asked. Let me ask you directly, will you enter into a voluntary investigation with DOJ? 

Mr. MULLEN. Well—— 

Ms. SUTTON. Are you willing to? 

Mr. MULLEN. We have already spoken to—— 

Ms. SUTTON. I understand. 

Mr. MULLEN. We can’t launch an investigation on ourselves. We 

have provided all the information. Anything that they wish to know 

about the transaction, we will provide of course, voluntarily. 

Ms. SUTTON. So you don’t really object to the idea of undergoing 

a voluntary investigation? You don’t object to that? 

Mr. MULLEN. No. We obviously have to follow the rule of the law. 

Ms. SUTTON. I understand. 

Mr. MULLEN. Whatever the Department of Justice requires us to 

do, we will obviously do. Until such time as they rule one way or 

another or oblige us to do something, we will continue as we are. 

Ms. SUTTON. I understood your answer. 

Would anybody else like to respond? 

Mr. BALTO. I just hope it is clear from Mr. Mullen’s answer. You 

know, what companies frequently do is they enter into an agreement with the agencies not to consummate the deal until the agency has completed its investigation, is that what you are promising 

to do? 

Mr. MULLEN. Mr. Chairman, should I respond? No, if I can try 

to be more precise. We are and will continue to cooperate with the 

Department of Justice in any shape or form or any way that the 

Department requires. We will provide any information. We will cooperate with any request that they place upon us. 

To date, they have not asked us to do anything other than continue with—that would prevent us from continuing with this transaction. As and when they do so, then of course, we would respect 

that. But failing that, we will continue to try to conclude as fast 

as we can. 

Ms. SUTTON. I thank the chairman for the time. And I would just 

encourage the consideration of this Committee to do all that it can 

136 

do to get the Department of Justice to look into this de facto merger, and obviously, they are willing to undergo it if we can get the 

Department of Justice to take on the responsibility that is its responsibility. 

Thank you. 

Mr. CONYERS. Well, it occurred to us, Congresswoman Sutton, 

that there might be an agreement between them to have a temporary suspension because the work of this Committee cannot be 

considered concluded at the end of this hearing. 

Congressman Brad Sherman has come in. I am going to recognize him in a few minutes. 

But the fact of the matter is, we need to go, quite frankly, a lot 

deeper into this than we have. There are some documents that 

occur to our lawyers on the staff and there are—there’s some additional testimony that it seems that I—that we would feel more 

comfortable with in trying to determine what happens. 

If we had another hearing and brought in further authorities involved in the kinds of questions that have been presented here 

today, we want to go through this transcript with great care. And 

so it occurs to me, piggybacking off your solution, if we could hold 

all this in abeyance, I think there is a lot of discussion that could 

be entered into between the seven parties that constitute the witnesses, not to mention the five other legislators from Ohio. I mean, 

we would like nothing better than to get you all in a room with appropriate refreshments and John Coltrane in the background, and 

let’s just sit down and put this on the table. 

You don’t have to read your testimony, which is very brilliantly 

contrived and will go into the record. But, I mean, let’s get down 

on the ground with this, because I think, I mean, there has been 

some very strong expressions from the Lieutenant Governor representing the State of Ohio, the mayor and from all of you. 

We can all leave here saying we got a little bit off our chest, 

which is always therapeutic, but that doesn’t change the nature of 

what brought us here in the first place. And I think, in view of the 

fact that we have got to have more hearings, I would like to try 

to see if there could be some consensus about holding this in abeyance until such time as we at least have one more hearing. 

Now we have yet to hear from the Department of Justice, the 

Antitrust Division. There are a number of other people that could 

help us see where we are here. Now this is a real crisis that attacks many other areas of our country just in a different form. It 

is not the same kind of business or anything, but the whole country, many parts of our Nation, are under the same stress. 

Now, that being the case, I would like to hope that we could, 

without being formal about it, get you parties before the Judiciary 

Committee. We made an excellent start at sitting around the table 

today, and I applaud you. There has been no personality problems 

or vindictiveness. There are clearly distinct differences of opinion, 

but that is what brings us here. That is what the legislature is for. 

If there were any differences of opinion, there would be no hearing. 

If there were a lot of no hearings, there would be no Judiciary 

Committee. I mean, that is what we do. 

So I would recommend that all of the parties that have honored 

us with their presence today give that some thought. 

137 

And I thank the Congresswoman from Ohio for putting that on 

the table. 

And I would like to turn now to our distinguished colleague from 

California, Brad Sherman. 

Mr. SHERMAN. Thank you. 

Mr. Mullen, perhaps you could describe for me a little bit your 

hub in Riverside, California. Is it served by the Ontario airport, 

and is it that close to the airport, and how many jobs you got 

there? 

Mr. MULLEN. I don’t have all the details about Riverside to hand. 

I can provide you those afterwards in writing if you would like. But 

what I can tell you is that it is our West Coast aviation hub. It has 

about seven or eight aircraft that service deliveries that are made 

between the States west of the Rockies, so as to avoid packages to 

move from, say, San Francisco all the way back to Wilmington and 

then back again to Los Angeles. That is the purpose that it fulfills. 

Mr. SHERMAN. Is it your tendency to have your sorting hubs 

within a mile of a major airport, because Riverside is not all that 

close to a major airport? 

Mr. MULLEN. No, it is on March Air Force Base, and we have our 

sorting facility on the airport itself. 

Mr. SHERMAN. So your planes land at the Air Force Base. 

Mr. MULLEN. It used to be an Air Force Base. I don’t know—— 

Mr. SHERMAN. So there is a lesser known airport that is—and 

your facility in Ohio, is that located close to Wilmington—— 

Mr. MULLEN. The facility in Wilmington, Ohio, is our main sort 

center. That is where we own the airport ourselves, and it solely 

operates for our two subcontractors. 

Mr. SHERMAN. We have focused on the 8,000 or so jobs that are 

in the transportation industry to the delegation of Ohio. And because that has been covered so much, I want to focus not on the 

jobs in the transportation industry but the jobs and the economic 

effect on your customers, because there are a lot of businesses that 

have located near your hub because their business plan required 

them to be at a major transportation hub. These folks may be in 

the warehousing business. These folks may operate repair facilities, 

and so people have to ship stuff that is broken, and obviously they 

need it back as quickly as possible; they want it repaired as quickly 

as possible. What effect would this non-merger agreement have on 

your customers in the greater Wilmington area? How—would either the amount you charge them be affected because they are no 

longer at your hub, or how much lower would their service be? 

Mr. MULLEN. Firstly, in that context, what is so really difficult 

and distressing about this whole situation is that all of the stakeholder groups, from customers to the community and to the employee groups, have been outstanding supporters and partners. I 

could not have asked any more from the State and from the local 

community. And we couldn’t ask for better cooperation than we 

have with Captain Ross and some of his colleagues there who have 

been simply outstanding employees. That makes it, as you can 

imagine, extremely, extremely difficult. 

In the case of customers, it is exactly the same. We have some 

very long-standing and good customers who will be affected by this. 

We are negotiating individually with the customers that will be diVerDate Aug 31 2005 15:13 Mar 26, 2009 Jkt 000000 PO 00000 Frm 00141 Fmt 6633 Sfmt 6601 H:\WORK\FULL\090908\44325.000 HJUD1 PsN: 44325
138 

rectly impacted around the airpark. For some, it shouldn’t be too 

much of a problem because they will be able to truck to Louisville 

in time, but for others, it will be a major problem, and they are 

going to have to make decisions—— 

Mr. SHERMAN. Well, let’s say somebody used to truck from your 

facility in Wilmington, and that was a 1 or 2 mile truck to transportation, and now they are trucking from Lexington. Not only is 

that a delay, but let’s focus on the cost. Are they going to end up 

being out-of-pocket for the transportation cost from Lexington to 

the greater Wilmington area? 

Mr. MULLEN. Well, clearly, I don’t know what new arrangements 

those companies will have to make, but I think it is safe to say it 

is unlikely to be favorable. 

Mr. SHERMAN. So you’re not—obviously, if somebody happens to 

be in Lexington already and for some reason wants to use DHL— 

they might have used UPS in the past, and of course UPS is creating more competition for themselves in the Lexington area—they 

are going to get the fastest and cheapest DHL transportation because they are right there at your hub. People who located their 

businesses or built their businesses around the Wilmington area, 

you are not prepared to say that you are going to do anything for 

them other than negotiate at arm’s length. 

Mr. MULLEN. Well, as part of the total mitigation plan that we 

are working on, there are three components. I think I mentioned, 

one is to be as generous as we can in terms of severance. 

Mr. SHERMAN. And that you have quantified in the quarter billion dollar range. 

Mr. MULLEN. The second component is to try to work with local 

community and businesses that are affected by this decision. Individual cases is different, and we haven’t yet made any—— 

Mr. SHERMAN. So you have quantified what you are going to do 

for the employees and the employees of your subcontractors, but 

you have given me only the vaguest comments as to what you are 

going to do for your customers, other than of course negotiate with 

them at arm’s length. Can you quantify your reassurance, other 

than the fact that you love and respect your customers and want 

to help them in every way possible? 

Mr. MULLEN. Obviously, we would like to keep the customers 

where we can. And we will do everything in our power to do that. 

If we can help them reorganize the supply chain sources or manufacture elsewhere or whatever it is. Every one is different, so there 

is no blanket answer to that. Some will undoubtedly—— 

Mr. SHERMAN. Have you—you have budgeted a quarter billion 

dollars for the employees of yourself and your subcontractors. How 

much have you budgeted to help to cut costs for, to give cost breaks 

to, to provide free trucking transportation to or whatever? Is there 

anything in your budget to mitigate the effect this has on your customers? 

Mr. MULLEN. We have not budgeted any specific amount. 

Mr. SHERMAN. We have a quarter billion for the employees and 

0.0 for the affected businesses. I hope you revise this budget. You 

know, you are transportation, you have a huge ripple effect, and 

you cannot draw a line in your mitigation and say, well, our employees, the employees of our subcontractors are affected, but the 

139 

businesses and the employees of the businesses of our customers 

who have built their business around the fact that you have got a 

hub there. You have invited them there. You have given them 

lower transportation costs and faster transportation to be there. 

That is why they are there. And you have got a budget that, as far 

as I can tell, is 0.0 but includes warm words to help those customers who have been your customers, your partners, whatever, 

who have built their businesses in this area. And it sounds like 

they are going to have to move—we are not talking 8,000 jobs; they 

are going to have to move 80,000 jobs to Lexington or to the hub 

of yourself or one of your competitors in order to enjoy the transportation speed and the transportation cost that they are used to. 

What can you do to quantify for me what you are going to do for 

your customers? 

Mr. MULLEN. As I said, we have to sit down with those directly 

affected around the airpark. 

Mr. SHERMAN. I assume there will be Coltrane music at those 

meetings as well, and maybe the Chairman can suggest other ambiance enhancing aspects at the meeting. You will sit down with 

them. 

Other than that, can you quantify? I see the Lieutenant Governor here, and I know he’s focused on the 8,000 jobs, and maybe 

it is 10, maybe it is 12, maybe it is 15, in the transportation industry, but you have got the warehousing industry. You have got the 

repair industry. You may be talking about a much bigger economic 

impact. And I realize these companies, the transportation jobs, they 

are going to go if this thing goes forward. The warehousing jobs, 

et cetera, everything is just going to be under strain. The transportation costs of these other businesses will go up 5, 10, 20 percent. 

And maybe they will survive and be able to stay where they are; 

maybe they won’t. But I would sure feel an awful lot better if, in 

designing your mitigation plan, you had more in it for these customers of yours who are located at your hub and did so because you 

are there than, we are going to sit down with them, and there will 

be Coltrane music. 

Mr. MULLEN. We have quantified the direct impact on labor and 

on the contractual obligations we have with our subcontractors, 

that is why I am able to quote a number. We have not quantified 

the impact on other parts of the community, like local businesses, 

et cetera, et cetera. We are working on that, but I am not able as 

a result to give you—— 

Mr. SHERMAN. What can DHL afford to do to mitigate? I mean, 

you are under some economic strain here. You are able to afford 

a quarter billion dollars for the employees in the transportation industry. What can you afford to do for your hub adjacent customers? 

Mr. MULLEN. I generally don’t know, sir. We will have to find out 

exactly the scale of and who and how much people are affected. 

Mr. SHERMAN. I am not asking you what the effect is or what 

they deserve. It could be you calculate it all, and the trucks are 

moving fast and cheap from Lexington, and the total cost is a million bucks and why is Sherman even talking about it. Putting aside 

what the cost is to your customers, how much mitigation could you 

afford for them, assuming that their needs for mitigation tend to 

be pretty high? 

140 

Mr. CONYERS. Could the gentleman yield to the gentlelady from 

Ohio for one final question? 

Mr. SHERMAN. I would be thrilled to yield to the gentlelady from 

Ohio. 

Ms. SUTTON. Thank you. 

Thank you, Mr. Sherman. 

Mr. Chairman, this discussion, as I said, has been extraordinarily enlightening, and I would just like because we have sort 

of talked about the complexities, the far-reaching implications; 

some of the things that have been explored but that there are 

many things that may have not been explored by way of solutions. 

And I really just want to ask our Lieutenant Governor, who we are 

so grateful to have here today, whether in light of all this, are 

there any solutions that we may not have talked about that you 

might want to bring forward? 

Mr. FISHER. Mr. Chairman, Congresswoman Sutton, I do think 

there is one solution that has not been yet discussed today that is 

worth putting on the table. I think it is fair to say that those of 

us who believe that there are antitrust implications of this really 

have two objectives, not one. We don’t stop at our legal objective, 

because that, frankly, would not be particularly effective. We are 

trying to do two things; we are trying preserve and enhance competition in this market, and we are trying to preserve and enhance 

the jobs in southwest Ohio. 

There may be a way to do both, and that would go back to what 

DHL originally tried to do several years ago when it tried to have 

a single airline serving DHL from their hub. It is understandable 

that when DHL cannot own its own airline because of Federal law 

and it has to contract with two different airlines, ABX and ASTAR, 

that does cause some efficiency problems for DHL and some cost 

problems. And DHL, I think, by its own admission at least at one 

point in time had come to the conclusion that the way to solve their 

financial problems was to have ASTAR, in which they have a 49 

percent interest, to acquire ABX and thereby having one air carrier 

to deal with. 

So it seems to me that there are two potential solutions here that 

only DHL themselves can really speak to, but this is from my 

standpoint. The one is to go back to the original kind of transaction 

that DHL at one time felt could solve its problems and explore 

whether or not a similar such transaction at this point in time 

could address, if not all of their challenges, many of them. Because 

one of the things that DHL consistently said to us and others is 

that they have substantial overhead costs that UPS and FedEx do 

not have, because UPS and FedEx own their own airlines. 

The second issue is well above my pay grade, but I throw it up 

here anyway and that is re-exploring or re-examining the whole 

issue about whether DHL should be able to get some sort of narrow 

waiver so that they could own their own airlines and be able to 

truly compete with UPS and FedEx. I don’t know how UPS and 

FedEx would feel about it, but my guess is that they would oppose 

it. And if they did, that would be proof that it would promote competition. So I would suggest that might be one way to solve this 

problem. We keep the jobs in Ohio. DHL would not have one hand 

tied behind its back, maybe even two hands because of a Federal 

141 

law that I don’t think they are happy about, and we could carve 

out an exception and save 13,000 jobs and in the process enhance 

competition in the market for now and in the future. 

Mr. CONYERS. You know, we have enjoyed the Lieutenant Governor so much, I hope you bring back our own colleague from the 

House, Governor Strickland. 

Mr. FISHER. I think I can arrange that. 

Mr. CONYERS. I think you can. For our next hearing. So I want 

to thank everyone for their participation. I hope that you will carefully examine the thoughts that have been exchanged, and we look 

forward to you, if not being on the panel next time, that you would 

follow these hearings as closely and as much as you have contributed to them today. 

Ms. JACKSON LEE. Mr. Chairman. 

Mr. CHABOT. I would ask unanimous consent that the Members 

of the Committee have the requisite number of days put in the 

record either opening statements or other documents. 

Mr. CONYERS. Without objection, so ordered. 

Ms. JACKSON LEE. Mr. Chairman. 

Mr. CONYERS. The gentlelady from Texas, Sheila Jackson Lee. 

Ms. JACKSON LEE. Mr. Chairman, I will simply put a very brief 

statement on the record. I know you are closing and just to acknowledge that I just came from chairing a hearing on transportation security, so I want to emphasize to the witnesses that I will 

submit questions for the record, but I do want to emphasize inasmuch as I have a sizable component of UPS in my constituency, 

that the reason for being for this Committee is they are all committed to oppose anti-competitive actions. I want these jobs to be 

kept in Ohio. And if it takes your solution, Mr. Lieutenant Governor, I will work with you and your esteemed Members of this 

Committee, but if it takes a Department of Justice investigation, 

I will likewise support that because we must support jobs, and we 

must void the monopolistic, if you will, sense of this particular industry. And I know DHL wants to work through this as well. 

Mr. Chairman, I yield back, put my statement in the record and 

my questions. Thank you. 

[The prepared statement of Ms. Jackson Lee follows:] 

PREPARED STATEMENT OF THE HONORABLE SHEILA JACKSON LEE, 

A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. Chairman, thank you for your leadership in convening today’s very legislative 

hearing on competition in the package delivery industry. Welcome to our distinguished panelists. 

The purpose of this hearing is to examine the state of competition in the domestic 

package delivery industry. The package delivery industry (the domestic market for 

the transportation and delivery of packages, parcels, and certain types of mail) has 

both an air and ground transportation component. Virtually all air transportation 

falls within the segment of the industry known as ‘‘express delivery,’’ in which 1- 

or 2-day package delivery is guaranteed. 

Since 2000, the package delivery market has become increasingly concentrated. As 

a result of the acquisition of Emery Worldwide by UPS and Airborne Express by 

DHL, the number of market participants has dwindled from 6 to 4: FedEx, UPS, 

U.S. Postal Service (USPS), and DHL. Currently, USPS outsources ‘‘lift’’ (airport to 

airport air transportation) for its express delivery service to FedEx, UPS, and ABX. 

Recently, DHL announced plans to enter into a 10-year deal to outsource all of 

its lift to UPS. This would result in the critical component of DHL’s most lucrative 

business segment being controlled by one of its competitors. In addition, the proVerDate Aug 31 2005 15:13 Mar 26, 2009 Jkt 000000 PO 00000 Frm 00145 Fmt 6633 Sfmt 6621 H:\WORK\FULL\090908\44325.000 HJUD1 PsN: 44325
142 

posed agreement would concentrate lift for the express delivery segment of the package delivery industry into the hands of two companies: FedEx and UPS. 

The package delivery industry refers to the domestic market for the pick-up, 

transportation, and delivery of packages, parcels, and certain types of mail. Within 

the package delivery market are two components: ground transport and air transport, also known as ‘‘lift.’’ A subset of the package delivery market is the ‘‘express 

delivery’’ market, encompassing those delivery services requiring lift. Those services 

typically include guaranteed next-day and two-day delivery. Historically, the express 

delivery market has represented between 60 and 65% of the package delivery market. It should be noted that although USPS has a virtual monopoly in the mail market, it is also a competitor in the express delivery market. 

By 2000, the domestic package delivery market was divided among six companies: 

USPS, FedEx, UPS, Emery Worldwide, DHL, and Airborne Express. DHL acquired 

Airborne Express in 2003 and UPS acquired Emery Worldwide in 2004. After the 

UPS-Emery Worldwide deal, there were only four major competitors left: USPS, 

FedEx, UPS, and DHL. 

As of 2007, the domestic package delivery industry earned annual revenues of $32.8 billion for an average volume of 6.644 million shipments per day. For 2007, 

the domestic package delivery market was divided as follows, by market share and 

revenue: 

FedEx—42.7% ($14.02 billion) 

UPS—32.3% ($10.60 billion) 

DHL—8.5% ($2.8 billion) 

USPS—2.9% ($950 million) 

Other—13.5% ($4.45 billion) 

The express delivery segment of the market was even more concentrated in 2007, 

with FedEx and UPS combined controlling 81 percent and DHL controlling another 

15 percent. Between 2003 and 2007, FedEx’s share of the express delivery segment 

grew by 10.3% and UPS’ share grew by 11.2%, while DHL’s traffic fell by almost 

27%. 

In 2000, the package delivery industry was divided among six competitors: USPS, 

FedEx, UPS, DHL, Emery Worldwide, and Airborne Express. 

In 2003, DHL acquired Airborne Express, and with it, ownership of the Wilmington Air Park, a regional cargo freight hub located in Wilmington, Ohio. In 

2004, DHL announced its intention to invest more than $300 million in expanding 

the Wilmington facility. Also that year, Emery Worldwide’s successor company, 

Menlo Worldwide Forwarding, was acquired by UPS. In 2007, Germany’s Deutsche Post AG, the owner of DHL, posted a $1 billion loss 

in DHL’s U.S. business, DHL Express. In an interview with the New York Times, 

DHL Express’ CEO, John Mullen, cited rising fuel costs and attendant fuel surcharges as factors in depressing the demand for the more lucrative express delivery 

service and pushing more volume to ground delivery. He further speculated that 

this consumer shift may be permanent. Deutsche Post AG projected a loss of $1.3 

billion in DHL Express’ operations for 2008. However, Deutsche Post continued to 

maintain that the U.S. market was a ‘‘vital’’ part of DHL’s U.S. operations and that 

‘‘pullout [was] not an option.’’ 

On May 28, 2008, Deutsche Post announced a reorganization plan for DHL Express. As part of the plan, DHL Express would terminate its lift contracts with ABX 

and ASTAR and move its air transportation requirements to competitor UPS for all 

domestic shipments. 

The contract would have a duration of 10 years, at a cost of approximately $1 billion per annum. Sorting operations for air transportation would be moved from the 

Wilmington, OH hub, to UPS’ Louisville, KY hub. In public statements, management for DHL and Deutsche Post AG anticipated that the overall restructuring 

plan, of which outsourcing to UPS is a major component, would result in approximately $1 billion in annual savings. By some estimates, however, shuttering the 

Wilmington facility would eliminate more than 8,000 local jobs. 

Although management for DHL hopes to have the agreement in effect sometime 

in 2009, there is currently no agreement in place. 

It is against this backdrop that we invite today’s witnesses to discuss anticompetitive practice in the package delivery industry. I look forward to the insightful testimony of the witnesses and welcome their testimony. 

Thank you, Mr. Chairman, I yield the balance of my time. 

Mr. CONYERS. Thank you very much, Madam. We will also add 

the statement of Senator Barack Obama, who has submitted a 

143 

statement for the record for this hearing. With that, we close the 

hearing and thank everybody very, very deeply for their attendance. 

[The prepared statement of Mr. Obama follows:] 

PREPARED STATEMENT OF THE HONORABLE BARACK OBAMA, A U.S. SENATOR FROM

THE STATE OF ILLINOIS


Obama-1.eps
144 

[Whereupon, at 5:51 p.m., the Committee was adjourned.] 

Æ 


Obama-2.eps