2004/236/EC: Commission Decision of 13 March 2001 declaring a concentration to be compatible with the common market and the functioning of the EEA Agreement (Case COMP/M.1915 — The Post Office/TPG/SPPL) (Text with EEA relevance) (notified under document number C(2001) 721)
Date: 2001-03-13
Institutions: European Commission
Subjects: economic concentration, exchange of information, merger control, postal service

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 13 March 2001

declaring a concentration to be compatible with the common market and the functioning of the
EEA Agreement
(Case COMP/M.1915 — The Post Office/TPG/SPPL)
(notified under document number C(2001) 721)

(Only the English text is authentic)

(Text with EEA relevance)

(2004/236/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Com-
munity,

Having regard to the Agreement on the European Economic
Area, and in particular Article 57(2)(a) thereof,

Having regard to Council Regulation (EEC) No 4064/89 of
21 December 1989 on the control of concentrations between
undertakings (1), as last amended by Regulation (EC) No 1310/
97 (2), and in particular Article 8(2) thereof,

Having regard to the Commission's decision of 15 November
2000 to initiate proceedings in this case,

Having given the undertakings concerned the opportunity to
make known their views on the objections raised by the
Commission,

Having regard to the opinion of the Advisory Committee on
Concentrations (3),

Whereas:

(1)

(2)

On 24 July 2000 the Commission received a notifi-
cation of
to
Article 4 of Regulation (EEC) No 4064/89. The notifica-
tion was completed on 10 October 2000.

concentration pursuant

a proposed

Through the notified transaction the undertakings The
Post Office (TPO), United Kingdom, TNT Post Group
NV (TPG), the Netherlands, and Singapore Post Private

(1) OJ L 395, 30.12.1989, p. 1; corrected version in OJ L 257,

21.9.1990, p. 13.

(2) OJ L 180, 9.7.1997, p. 1.
(3) OJ C 69, 19.3.2004.

(3)

(4)

(5)

Limited (SPPL), Singapore, will
acquire within the
the Council Regulation
meaning of Article 3(1)(b) of
joint control of two newly created joint ventures (Delta
and NewCo).

By decision dated 15 November 2000, the Commission
found that the notified operation raised serious doubts
as to its compatibility with the common market and
initiated proceedings pursuant to Article 6(1)(c) of Regu-
lation (EEC) No 4064/89 and Article 57(2)(a) of
the
EEA Agreement.

I. THE PARTIES' ACTIVITIES

the national postal operator

in the United
TPO is
Kingdom.
It provides the full range of postal services
including domestic and outbound cross-border mail as
well as domestic and outbound cross-border parcels.
TPO also has commercial activities, including outbound
in a wide range of other
cross-border mail services,
countries such as Germany, France, Netherlands and the
USA.

TPG is the national postal operator in the Netherlands.
It resulted from the splitting of the former Koninklijke
PTT Nederland NV (KPN) group into KPN (telecom) and
TPG. TPG contains the logistics, express and mail busi-
the former KPN-group. TPG is the parent
nesses of
company of Koninklijke PTT Post BV (PTT Post), the
Dutch postal operator. TPG provides outbound cross-
border mail services through PTT Post in the Nether-
lands and through its TNT International Mail business in
more than 45 countries including the Netherlands.

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(6)

SPPL is the national postal operator in Singapore.
currently has extremely limited activities in the EEA.

It

II. THE OPERATION

The operation consists of the formation of two joint
ventures between TPG, TPO and SPPL which are to be
active in the provision of outbound cross-border mail
services and to a limited extent in providing outbound
cross-border parcel
services. They will not provide
express services.

The joint venture Delta will be active in the provision of
the said services throughout the world except the Asia
Pacific region. The joint venture NewCo will provide
these services in the Asia Pacific region.

TPG will contribute its TNT International Mail division
those activities of TNT Inter-
to the joint ventures:
including
national Mail outside the Asia Pacific region,
those in the Netherlands, will be contributed to Delta,
those in the Asia Pacific region to NewCo. The TNT
International Mail Division carries out outbound cross-
border mail activities and to a limited extent outbound
cross-border parcel services (Easy Parcel product). TPG
will retain inter alia the outbound cross-border mail
activities of PTT Post in the Netherlands and domestic
and cross-border parcel delivery services.
It will also
retain the TNT Express business.

TPO will contribute its International Mail Division to
Delta, which carries out outbound cross-border mail
its activities
services outside the United Kingdom. All
are outside the Asia Pacific region. TPO will furthermore
contribute Royal Mail US Inc, which is active in
outbound cross-border mail services in the United States
of America. TPO will
its United
retain,
Kingdom domestic and outbound cross-border mail
business, domestic and cross-border parcel business.
TPO furthermore retains its European Domestic Di-
vision, which includes the Red Mail Group (France),
which is owned by TPO, and the CityMail Sweden AB,
in which TPO holds an 67 % stake. Even though they
provide some outbound cross-border mail services in
their
their main
activities.

respective countries,

these are not

inter alia,

legally not

SPPL is
in a position to contribute its
outbound cross-border mail activities to NewCo. There-
fore SPPL will contribute its outbound cross-border mail
business through a contract with NewCo, under which
NewCo will carry out SPPL's outbound cross-border
mail activities as a sub-contractor on behalf of SPPL.
SPPL will retain,
its domestic mail business,
inbound cross-border mail and local and cross-border
parcel service.

inter alia,

For a transitional period of three years, Delta will sell
from other
outbound
countries with a destination in the United Kingdom on

cross-border mail

services

(7)

(8)

(9)

(10)

(11)

(12)

behalf of TPO under a sales and marketing agency
arrangement. For
the same transitional period Delta
will be appointed as Koninklijke PTT Post BV's agent to
sell and market its mail services to customers abroad for
their mail with destination in or via the Netherlands. At
this period the agency agreements will
the end of
terminate and the relevant businesses will be contributed
to Delta.

III. CONCENTRATION

1. JOINT CONTROL

(13)

The joint ventures will be jointly controlled by TPO,
TPG and SPPL.

(14) Delta's share capital will be held by the parents in the
following proportion: TPG will hold 51 % of the shares,
whereas TPO and SPPL will hold 24,5 % each. The joint
venture agreement gives each parent a veto right with
regard to strategic decisions, such as the contents of the
business plan, the business strategy and the budget.

(15) NewCo's share capital will be held jointly by Delta and
SPPL at 50 % each. Delta and SPPL therefore jointly
control NewCo. Since Delta is in turn jointly controlled
by TPO, TPG and SPPL,
three companies
ultimately control NewCo together.

the latter

2. FULL FUNCTIONALITY

(16)

The joint ventures will perform on a lasting basis all the
functions of an autonomous economic entity.

(17) Delta will carry out all

and

collect

customers. Consolidators

the functions necessary to
provide outbound cross-border mail services. Delta will
act as a consolidator, putting together either services
provided by themselves or by subcontractors in order
to provide outbound cross-border mail services to busi-
ness
group
outbound cross-border mail
to a specific destination
and subsequently negotiate a special rate with public
postal operators or with local delivery companies in
order to distribute the consolidated mail in the country
of destination. According to the parties, consolidators
outsource approximately 80 % of their operating costs.
Delta will not be obliged to outsource services to its
parents. However, Delta will enter into agreements with
its parents which provide that
the parents provide
delivery services for Delta within the parents' home
countries. They furthermore provide that
the parents
accept outbound cross-border mail from Delta for distri-
bution to the final recipient in the destination country.
With the businesses transferred to Delta by TPO and
TPG, Delta will have the resources to operate on a
market for outbound cross-border mail, performing the
functions normally carried out by undertakings oper-
ating on the same market.

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(18) NewCo will also carry out

the functions generally
carried out by competitors providing outbound cross-
border mail services. Like Delta it will act as a consoli-
its
dator. Even though SPPL does not
contribute
outbound cross-border mail business to NewCo,
the
joint venture will have sufficient resources to compete
on the market through the business contributed by TPG.

IV. COMMUNITY DIMENSION

(19)

in

excess

turnover

world-wide

The undertakings TPG, TPO and SPPL have a combined
of
aggregate
EUR 5 000 million (4) (TPG, EUR 8 468 million; TPO,
EUR 11 839 million and SPPL, EUR 176 million). Two
of them have a Community-wide turnover in excess of
250 million EUR each (TPG, EUR […]* (*); and TPO,
EUR […]*), but they do not achieve more than two-
thirds of
turnover
their aggregate Community-wide
within one and the same Member State. The notified
operation therefore has a Community dimension. It does
not constitute a cooperation case under the EEA Agree-
ment, pursuant to Article 57 of that Agreement.

V. COMPATIBILITY WITH THE COMMON MARKET

A. BACKGROUND

(20)

This transaction has to be seen in the light of
ongoing and future liberalisation of the postal sector.

the

1. REGULATORY ENVIRONMENT

(21) Under Council Directive 97/67 of the European Parlia-
ment and the European Council of 15 December 1997
on common rules for the development of the internal
market of Community postal services and the improve-
ment of quality of service (5), which is currently in force,
Public Postal Operators (PPOs) can be granted a legal
monopoly for the provision of certain services, to the
extent necessary to ensure the maintenance of universal
service. These services are the provision of domestic and
cross-border mail weighing less than 350 grams and
costing less than five times the standard rate. Above
these price and weight limits (non-reserved area), the

liberalisation process has already taken place. Below the
limits, the Council Directive leaves open the possibility
for Member-States to further liberalise the postal sector.

(22) Although the Council Directive does not make any
distinction between inbound and outbound cross-border
mail, in the postal sector there is a distinction between
the two. While inbound cross-border mail can be
defined as the international mail entering in a given
country, outbound cross-border mail is the international
mail sent from a given country. Outbound cross-border
mail, which represents less than 5 % of total mail and
3 % of the total revenues of PPOs from the universal
service, is, according to the notification, de facto liberal-
ised in ten Member-States, except for Portugal, Spain,
the Netherlands,
Italy, Greece and Austria. Denmark,
Sweden and Finland are the only Member-States where
outbound cross-border mail is also de jure liberalised. In
the United Kingdom, outbound cross-border mail will
be de jure liberalised starting from March 2001 when
the Postal Services Act 2000 will enter into force.

(23) On 30 May 2000,

the Commission put

forward a
proposal for further liberalisation of the postal sector (6).
According to the proposal, the weight and cost limits
for domestic and inbound cross-border mail under
which the incumbent PPO exercises a legal monopoly
should be reduced by 2003 to a weight of 50 grams
and a cost of
less than 2 ½ times the standard rate.
Furthermore, the proposal envisages a full liberalisation
for all Member-States of outbound cross-border mail by
2003. The European Parliament adopted an opinion to
amend the draft directive which did not allow for the
liberalisation of outbound
cross-border mail. The
Council did not agree on the compromise proposal
that was put to it on 22 December 2000. Timing and
extent of
the postal sector is
currently not clear.

future liberalisation of

2. OUTBOUND CROSS-BORDER MAIL

(*) Parts of

this text have been edited to ensure that confidential
information is not disclosed; those parts are enclosed in square
brackets and marked with an asterisk.

(4) Turnover calculated in accordance with Article 5(1) of Regulation
(EEC) No 4064/89 and the Commission Notice on the calculation of
turnover (OJ C 66, 2.3.1998, p. 25). To the extent that figures
include turnover for the period before 1 January 1999, they are
calculated on the basis of average ECU exchange rates and translated
into euro on a one-for-one basis.

(5) OJ L 15, 21.1.1998, p. 14.

(24) With the liberalisation of outbound cross-border mail
the incumbent PPOs have started to face competition in
this area from third country PPOs and consolidators.

(6) Proposal of 30 May 2000 for a European Parliament and Council
Directive amending Directive 97/67/EC with regard to the further
services, Com-
opening to competition of Community postal
mission(2000) 319 final: OJ C 337 E, 28.11.2000, p. 290.

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(25)

is

international mail.

In these OEs, mail

infrastructure to transport and
PPOs use their postal
deliver outbound cross-border mail to the final desti-
nation. As UPU (7) members they can and do operate so
called Offices of Exchange (OEs), by which they intro-
duce the mail into the PPO of the destination country
tagged
as
according to UPUrequirements, the necessary UPU forms
are filled in, enabling the sending PPO to introduce the
mail
into the PPO of destination as international mail.
The receiving PPO is then required to distribute this
mail within its own country, without being able to
impose its domestic postal requirements on it, which,
unlike the uniform UPU requirements, may vary from
country to country. Payment is covered by UPU rules,
unless other modalities are agreed. The tariffs that are
paid for mail within the EU are determined by the
II agreement (8) applicable between all Com-
Reims
munity PPOs except TPG (9).

either to the incumbent post office in their country, or
to a PPO established in that country. This third country
PPO can process this mail either through the OE it
operates in that country or via an OE in its home
country. Alternatively the mail can also be distributed
for the consolidators by a PPO not established in the
consolidator's country of residence (even though that
seems to be the exception).

(30) Outside

the UPU system consolidators

can — as
described above for PPOs — introduce their mail via
direct injection as domestic mail into the postal system
of
they can use
alternative private delivery networks in regions where
they exist.

the country of destination. Equally,

(26) OEs

are operated from the PPO's home

country,
however they can also be operated outside that country
enabling the PPO in question to take advantage of better
transport facilities in the host country. In the latter case,
the mail which a third country PPO has collected in the
host country or in another country can be fed through
the OE into the UPU system as if it were originating in
the PPO's home country.

(27) Alternatively, PPOs can choose to inject the outbound
cross-border mail entrusted to them by their customers
(either in their home countries or in countries in which
they have a subsidiary, either with or without an OE) as
domestic mail directly into the postal system of the PPO
of the destination country as domestic mail. For busi-
ness mail that is addressed to recipients in large urban
centres, private delivery networks that deliver the mail
often also provide an alternative to the traditional postal
routes.

(28)

Consolidators are not PPOs. They are private companies
from business cus-
that collect and consolidate mail
tomers,
thereby getting higher volume rebates from
PPOs than the business customers might get individu-
ally. The PPOs, who in turn deal with consolidators,
have the advantage of dealing with a limited number of
than with innumerable small
large customers rather
business customers.

(29) Not being PPOs, consolidators are not eligible to operate
their own OEs under the UPU rules. They are therefore
dependent on PPOs for access to distribution of their
the UPU system.
outbound cross-border mail under
they have collected
They can therefore give the mail

(7) Universal Postal Union, established by a treaty under public inter-

national law and to which countries are the signatories.

(8) See Commission Decision 1999/695/EC of 15 September 1999
relating to a proceeding under Article 81 of the EC Treaty and
Article 53 of the EEA Agreement (Case No IV/36.748 — Reims II),
OJ L 275, 26.10.1999, p. 17.

(9) The PPOs of the following countries are signatories to the Reims II
agreement: Austria, Belgium, Denmark, Finland, France, Germany,
Greece, Iceland, Ireland, Italy, Luxembourg, Norway, Portugal, Spain,
Sweden, Switzerland, United Kingdom, i.e. all EEA countries except
the Netherlands and Liechtenstein.

(31)

(32)

(33)

represented in a graph that

through the various operators

The number of alternative ways for the distribution of
that has been
mail
summarised here is
is
annexed to this Decision (Annex I). This description
represents abstract alternatives for the various operators.
Whether and to what extent these various alternatives
can and are in fact used by them depends largely on
their economic viability for the individual operator. The
operator, be it the incumbent PPO, a third country PPO
or a consolidator, has to decide which way of routing its
mail is economically viable and supported by the prices
that
the ultimate customers are willing to pay. This
decision making process is the industrial know-how of
the individual operator. The decision is not only deter-
mined by parameters such as the service required by the
customer (speed, reliability, cost) but also by the size of
the operator, the volumes it is capable of generating and
the main destinations which are being served.

for

the

that

competing

In looking at the various players on the market it is
noticeable
final business
customer, i.e. the sender of the mail, are the incumbent
to third country PPOs as well as consoli-
PPO, next
dators. At the same time consolidators will be customers
of those same PPOs for the distribution of their mail
through the UPU system. They will also be customers of
those PPOs that have chosen not to compete for the
ultimate customers, but concentrate on distributing
consolidators' mail
through their access to the UPU
system.

B. RELEVANT PRODUCT MARKETS

1. OUTBOUND CROSS-BORDER MAIL

relevant market definition in the

The
for
outbound cross-border mail has been assessed by the
Commission on the basis of
the different product
market definitions proposed by the parties as well as
on the basis of the results of the market investigation.

sector

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(34)

(35)

(36)

(37)

(38)

a. Market for outbound cross-border mail

The notifying parties stated in the notification that there
is a relevant product market for outbound cross-border
mail. Outbound cross-border mail services involve the
collection of mail from customers, sortation of mail and
its distribution to any destination country in the world.
The parties included in this market definition personal
items of correspondence as well as business mail. Busi-
includes letters, direct mail, printed matter/
ness mail
publications and small packets from business customers
(B[usiness]-to-B[usiness] and B[usiness]-to-C[onsumer]).

b. Market for outbound cross-border business mail

for

a market

The market investigation has shown, however, that the
relevant product market
all
is not
outbound cross-border mail, but
is no wider than a
market for outbound cross-border business mail. Busi-
ness customers require and receive different services
compared to private customers. The latter have to buy
a stamp at a post office on the basis of a set tariff and
mail their letters through mailboxes or post offices. On
the basis of special agreements with postal operators
customers negotiate
business
and/or
rebates and receive additional services such as pick up
of mail on the premises, franking etc. The level of work-
share provided by the business
customer will be
reflected in the price.

consolidators,

Private customers are limited to the standard tariffs and
services of the local post office, whereas most business
customers have the choice of either sending their mail
at the standard public tariff or on the basis of special
agreements with postal operators and/or consolidators.
Those smaller businesses that pay for their mail to be
sent abroad by buying stamps are unlikely to have
access to alternative service providers due to their small
volumes of and expenditure on outbound cross-border
mail services.

in its Statement of Objections, the
For these reasons,
Commission adopted a product market definition for
outbound cross-border business mail
excluded
private consumers and business expenditure on stamps.

that

identifying a specific market

In their reply to the Statement of Objections the parties
contested the market definition adopted by the Com-
mission. The parties proposed a new product market
for outbound
definition,
cross-border contract mail services. This market would
include only cross-border mail services provided under
contract and would therefore exclude not only the
outbound cross-border business mail sent at the stan-
dard public tariff but also cross-border business mail
sent using a franking machine.

(39)

The parties have provided market share data for an
in the
outbound cross-border contract mail market

United Kingdom and the Netherlands. As all the mail
sent at public tariff rates and with franking machines
represents business for the incumbent PPO, the main
effect is to reduce the market share of the parties in
their
in relation to their
competitors.

respective home countries

(40)

The Commission maintains its product market definition
of outbound cross-border business mail as set out above
for the following reasons.

(41)

(42)

(43)

For the calculation of the market share of TPO and TPG
in their respective home markets, the parties propose to
consider as contract mail only the mail that meets the
thresholds necessary in order to get a rebate as business
customers. These thresholds are unilaterally fixed by the
two incumbents
in their home markets, and thus
accepting such a market definition would mean defining
the product market
referring purely to supply-side
criteria.

It should be also noted that the thresholds necessary in
order to get a rebate as business customers are very
different from country to country. In the present case,
the annual threshold fixed by TPG in the Netherlands is
equivalent to NLG 25 000 (approximately EUR 10 000)
and the annual threshold fixed by TPO in the United
Kingdom market is equivalent to GBP 2 500 (approxi-
mately EUR 4 000). As a consequence, a business
customer who is looking for a rebate contract in the
Netherlands is faced with a threshold that is 2,5 times
higher
than in the United Kingdom. With the new
proposed product market definition, which takes into
account these different thresholds, the parties artificially
define their market shares, considering as contract mail
business customers only the ones that meet their thresh-
olds.

Evidence that these thresholds should not be taken to
delineate the market is provided by the fact that con-
solidators offer their cross-border mail services to all
business customers, irrespective of their annual expendi-
ture for mail services. Mercury International and Belgian
Mailhouse, which are two consolidators active both in
the United Kingdom and in the Netherlands, confirmed
during the hearing that they will accept mail from any
kind of business customer. TNT itself stated in the
hearing that as a consolidator
it would consider as
potential customers all the business customers, without
having any specific predefined threshold.

(44) Under the parties' proposal for a ‘contract’ market, it is
assumed that none of the franking machine customers
have a choice, whereas the Commission considers that
there are business customers who fall below the thresh-
olds set by the parties and are using franking machines
who would be able to switch to other providers of
outbound cross-border mail services.

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(45)

(46)

(47)

(48)

(49)

Such business customers may use franking machines
even though they would be eligible to transfer their
business to consolidators or third country PPOs, because
they generate enough turnover and volume of outbound
cross-border mail. During the course of the investigation
the Commission has not been able to identify how
much of the business derived from business customers
with franking machines could realistically have been
spent with competitors to TPO or TPG. Therefore it is
considered appropriate to adopt a market definition for
outbound cross-border mail which has an upper and
lower limit. The upper limit
includes all expenditure
under contract plus that spent via franking machines.
The lower limit includes all expenditure under contract
but excludes that spent via franking machines.

c. Product market conclusion

that

and a

In the light of the above reasoning, the product market
definition retained by the Commission is
for
outbound cross-border business mail. This product
market definition has an upper limit (including franking
machines)
franking
machines). For the purposes of this decision it is not
necessary to further delineate this range, because regard-
less of whether the precise boundary of the market lies
the lower limit or somewhere in
at
between,
assessment would not be materially
affected.

the upper limit,
the

(excluding

lower

limit

2. OUTBOUND CROSS-BORDER PARCELS

its TNT International
TPG will contribute by way of
mail business its Easy Parcel Product. The Easy Parcel
product is a service that is accessory to the outbound
cross-border mail services TNT provides to its cus-
tomers. The service is geared towards business cus-
tomers, with a pick-up service from the customer's
premises,
faster delivery times and is not available in
post office counters, but provided to business customers.
It is not a time-certain service.

The parties state that the relevant product market for
this product is the market for outbound cross-border
expedited parcels. The parties argue that, while their
product is not an express service, since it is not time
certain, it has to be distinguished from standard parcel
services. Unlike standard parcels, expedited parcels are
collected from the business customers' offices and they
are not available through post office counters.

the Commission has not
In its previous decisions,
defined a separate market
for expedited parcels as
opposed to standard parcels. For the purposes of this
decision it is also not necessary to further delineate the
relevant product markets because in neither market
definition considered, would effective competition be
significantly impeded in the EEA or any substantial
part of that area.

C. RELEVANT GEOGRAPHIC MARKETS

1. OUTBOUND CROSS-BORDER BUSINESS MAIL

(50)

The notifying parties stated in the notification that the
relevant geographic markets are national. The market
investigation confirmed this view.

(51)

(52)

(53)

(54)

In the past the Commission considered that the relevant
geographic market for outbound cross-border mail could
be characterised as national (10). However,
the Com-
mission also considered that the national dimension of
the geographic market could be expected to change as a
result of a possible trend towards a demand by cus-
tomers for global accounts.

for

shown that national
investigation has
The market
in place, even though
market characteristics are still
some suppliers might have global accounts
the
provision of the different delivery services: the outbound
cross-border mail services are perceived by the cus-
tomers as a national service, the distribution networks
are national, the rate cards provided by the parties show
that pricing is national and that
the price levels are
different in different countries, marketing is mainly done
on a national level and there are significant variations in
market share distribution of the main suppliers across
the different Member States. In addition, the fact that
there are different eligibility criteria in different countries
in order to qualify for a contract
is an
additional argument in favour of national markets.

(see above)

In their joint reply to the Commission's Statement of
Objections the parties stated for the first time that the
should be characterised as either
geographic market
a new
In proposing
European or
geographic market definition,
to a
the parties
number of multinational companies which they say are
increasingly shopping around among competitors based
in different countries in order to obtain the best combi-
nation of price and service levels.

international.

refer

If the Commission were to dismiss a wider geographic
the parties consider there to be a
market definition,
single geographic market which includes at
the
Netherlands and Belgium. The parties base their con-
clusion on the fact that three of the competitors in the
Dutch market — TNT, Belgian Mailhouse and De Post/
La Poste — run their operations in Brussels and not in
the Netherlands. Furthermore, the parties also indicated
that Belgium-based bulk mail customers bring their
business mail to the Netherlands.

least

(10) See the following Commission decisions:

IV/M.102 — TNT/GD
Net; IV/M.787 — PTT Post/TNT-DG Net; IV/M.843 — PTT Post/
TNT/GD Express Worldwide; IV/M.1168 — Deutsche Post/DHL; IV/
M.1410 Deutsche Post/Danzas.

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(55) After considering the arguments presented by the parties
in order to justify a wider geographic market definition
than that which they had originally proposed,
the
Commission has decided to retain the geographic
market definition as being national. The following
reasons are pertinent in this context.

D. EFFECT OF THE CONCENTRATION

1. OUTBOUND CROSS-BORDER BUSINESS MAIL

(56)

(57)

(58)

the market

existence of

Concerning the
a wider Netherlands/
investigation
Belgium geographic market,
has shown that the customers of the different competi-
tors active in the Dutch market are mainly Netherlands-
based business customers. In particular the parties have
been unable to provide evidence that their Dutch oper-
ations derive significant business from outside the Neth-
erlands.

of

existence

The
a wider Netherlands/Belgium
geographic market can also not be justified on the
grounds that some of the competitors operating on the
Dutch market have their production facilities in Belgium.
In so far as these operators carry out their marketing
and sales activities in the Netherlands, the fact that they
process the mail in facilities in Belgium does not affect
the geographic market definition.

companies purchase

investigation also does not bear out

The market
the
statement of the parties according to which large multi-
their outbound cross-
national
inter-
border mail
shown
national basis. The market
that, while the occasional company may do so,
the
general purchasing pattern for outbound cross-border
mail services remains national even for large multina-
tional companies.

requirements on a European or
investigation has

(59)

In the light of
considers that the market is national in scope.

the above reasoning, the Commission

2. OUTBOUND CROSS-BORDER PARCELS

(60)

(61)

the geographic scope for

The parties consider
inter-
national parcels to be national. This is in line with the
the Commission. The results of
previous decisions of
the market
for a
different geographic market definition.

investigation gave no indications

It
is not necessary to further delineate the relevant
geographic markets because, in all alternative geographic
market definitions
competition
would not be significantly impeded in the EEA area or
any substantial part of that area.

considered effective

(62)

The combined market share of the parties for outbound
cross-border business mail is below (in many countries
considerably below) 15 %, except in the home countries
of TPO and TPG, namely the United Kingdom and the
Netherlands. Therefore only the latter two markets show
grounds for a more substantial assessment.

(63)

(64)

(65)

a. Intra-group competition

The effects of the concentration have been analysed on
the basis of the addition of the market shares of TPO
and TPG in the United Kingdom and the Netherlands
respectively. In both countries one of the parents of the
joint venture will remain active in the same market
where the joint venture will operate. Even if the joint
venture and the respective parent would compete with
each other in those countries, this would have to be
considered as intra-group competition and, in the light
the economic arguments outlined below, not as
of
competition on the market.

In their notification the parties state that competition
between the parents and subsidiaries should be taken
into account in the Commission's assessment and that
in reality there will be no structural change on the
parents' markets as the joint venture, Delta will continue
to compete with its parents. The parties acknowledge
that the incentives for such competition may be limited
when the subsidiary is 100 % owned. However, they
argue that
the incentives for Delta to compete will
the change in TPG's
actually increase as a result of
shareholding (100 % to 51 %) since TPG will only
receive a 51 % share of any business that it loses to
Delta, rather than the 100 % it would receive if the mail
was sent via TPG.

that

The Commission considers, however,
the fact of
joint control, over TNT,
TPG retaining control, albeit
refutes these arguments. Whether and to what degree
companies that belong to the same group do in fact
compete with each other, depends ultimately on
company policies and not on the market forces. Further-
there exist no elements to suggest that excep-
more,
tional circumstances prevail, according to which intra-
group competition can in this case be considered as
equivalent to competition on the market. The fact alone
to
that customers
another is not such a factor.

switch from one group member

L 82/8

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Official Journal of the European Union

19.3.2004

b. United Kingdom

(68)

aa. Market position

(1) Market shares

(66)

Table 1a gives market shares for outbound cross-border
franking
business mail,
machines (11), column 2 excluding franking machines.

including

column

1

Table 1.a

United Kingdom market for outbound cross-border busi-
ness mail by value 1999

(69)

Outbound cross-border business
mail

(1)
Including
franking
machines

(2)
Excluding
franking
machines

Competitor

Total market value

EUR [...]*

EUR [...]*

TPO — retained business

[50-60]* %

[40-50]* %

TPG — contributed business

[5-10]* %

[5-10]* %

(70)

TPO/TPG combined

[60-70]* %

[40-50]* %

Deutsche Post Group Total
(includes DHL & Herald)

[10-20]* %

[10-20]* %

Mercury

[5-10]* %

[10-20]* %

La Poste (France)

[1-5]* %

[1-5]* %

Pharos

Swiss Post

Others

[5-10]* %

[5-10]* %

[1-5]* %

[1-5]* %

[5-10]* %

[10-20]* %

(71)

(67)

If franking machine customers are included, the parties
would have a combined market share of [60 to 70]* %,
and the increment that would result from the concen-
tration is [5 to 10]* %. Two other players have a market
share of approximately [5 to 10]* %, Deutsche Post and
Mercury, while a number of other players (La Poste,
Pharos and Swiss Post) have market shares of up to [1
to 10]* %.

(72)

(11) These data update the figures that the Commission had previously
included in the Statement of Objections. The figures have been
revised to remove EUR […]* spent by business on stamps to send
outbound cross-border mail.
It had not been the Commission's
this expenditure had been included in the
understanding that
market shares.
In addition, the data previously supplied to the
Commission for the United Kingdom had been based on the
following constant GBP/EUR exchange rates: TPO (1.722) and TPG
(1.65). All data presented in Table 1a has now been based on the
official ECB average exchange rates for 1998, 1999 and 2000
respectively. Nevertheless,
structure
between the resulting market shares is not great, due to certain
additional adjustments that the Parties also made to the figures
previously provided.

the difference

in market

If franking machine customers are excluded, the most
significant difference is that TPO's initial market share is
smaller [40 to 50]* %. The increment that would result
from the concentration would be [5 to 10]* %, therefore
the market would be [40 to
the combined share of
franking machine
50]* %. TPO's share is smaller
customers are excluded because all of the income from
mail sent via franking machines accrues to TPO.

if

(2) Other competitors

The number of players on the market is not affected by
the choice of market definition. On both markets it is
clear that there are currently a number of players in the
market. Some of these players are consolidators, such as
Mercury International and Pharos; there are at least five
third country PPOs from the EEA present (12), as well as
a number of non-European PPOs (e.g. Philippine Post,
Hong Kong Post and SPPL). Two remaining competitors
have higher market shares than TPG, which is currently
only the fourth largest player on the market.

For the purposes of the consumer,
it does not appear
relevant whether their service provider is classified as a
consolidator or as a PPO, as long as they provide a
postal service which offers a consistent quality and
which is available at a competitive price. Nevertheless,
the third-country PPOs has the ad-
the presence of
ditional benefit
consolidators with
that
alternative points of access to the UPU system (see
below).

it provides

(3) Dynamics of the market

TNT (subsequently acquired by TPG) entered the United
Kingdom market in 1986. In addition, as it entered the
market earlier and has achieved a lower market share
than a number of other players, the parties argue that
TNT's growth rate is one of the slowest in the United
Kingdom market.

in the last

The following third-country PPOs have all entered the
United Kingdom market
five years or so:
Deutsche Post opened a sales office in the Midlands
towards the end of 1998 but had sold from a distance
for about a year before that.
In 2000 Deutsche Post
acquired the United Kingdom consolidator Herald and as
a result has grown rapidly. La Poste has also been active
in the United Kingdom for about
four to five years.
Swiss Post has been present in the United Kingdom for
the last three years. Belgian Mailhouse, previously Nordic
Mail, which is a joint venture between the Danish and
Swedish PPOs has been active in the United Kingdom
for about three to four years and the Philippines Post
has started operating there in the last six months.

(12) TPG, Deutsche Post, Swiss Post, La Poste, and Belgian Mailhouse, a
joint venture between Post Danmark and Posten Sverige AB.

19.3.2004

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Official Journal of the European Union

L 82/9

(73)

the market

investigation has shown that
In addition,
several of
the PPOs currently active in the United
Kingdom were positive about their intentions to expand
their United Kingdom operations in the next three years.
Others indicated their intention to enter this market in
this time period.

to its own office of exchange (OE) in its home country,
is then sorted for domestic delivery in
where the mail
the PPO's home country or
for consolidation with
domestic-originating mail
for outbound cross-border
delivery.

(80)

(81)

(82)

(83)

(84)

(85)

bb. Barriers to entry

(74)

The information available to the Commission shows
that
in the United Kingdom are
relatively low.

the entry barriers

(75)

(76)

(77)

(78)

(1) Role of consolidators

The market in the United Kingdom is characterised by a
large number of consolidators. Consolidators have been
present in the United Kingdom for over 25 years and
their existence is due to TPO's decision to encourage the
growth of
such as consolidators, by
offering them significant volume discounts. The effect
this large body of consolidators on the market is
of
twofold.

intermediaries,

Consolidators compete with the PPOs for the ultimate
thus giving the latter a larger choice of
customers,
service providers. This is shown by the market shares
achieved by consolidators as shown above.

The other effect is that the presence of consolidators
facilitates entry for potential entrants, because access to
one consolidator in effect provides access to the mail of
many business customers. The recent acquisition of
(a top-5 United Kingdom con-
Herald International
independent
solidator) by Deutsche Post
consolidators
in the United Kingdom provide third
country PPOs with a relatively easy means of market
entry by acquisition. Therefore, the existence of many
consolidators on the United Kingdom market signifi-
cantly lowers the barriers to entry that third country
PPOs would have to overcome.

shows that

Consolidators in the United Kingdom have expressed
concerns about the effect of the transaction. The market
source of
investigation highlighted that one major
concern is TPO's development of
the Langley facility.
This is a processing/distribution centre, which is due to
become operational in 2002. However, since the Langley
facility will not be contributed to the joint venture this
development is unrelated to the present transaction and
it is therefore not a relevant factor for the assessment of
the joint ventures. Further concerns expressed by the
consolidators are dealt with in the assessment below.

(2) London Heathrow

(79)

The United Kingdom market is an attractive market for
a third country PPO to enter. London's Heathrow
airport is the leading European airport and offers very
good connections with European cities and with other
destinations around the world. A European PPO can
easily fly United Kingdom mail from Heathrow straight

volumes

provided

sufficient

Furthermore,
can be
achieved, a third country PPO can increase the efficiency
with which it deals with outbound cross-border mail
from the United Kingdom by opening an OE near
Heathrow. Such efficiency improvements can therefore
improve their ability to compete. In the United Kingdom
a number of European and non-European PPOs which
are present also have an OE near Heathrow where they
handle and process the outbound cross-border business
mail according to the UPU rules.

The market
investigation has also shown that some
postal operators that are not presently operating an OE
in the United Kingdom are planning to do so within the
next three years.

(a major part) of United Kingdom outbound
Finally,
cross-border business mail
is originated in London,
which is one of the major business centres in Europe.
This makes for a third-country PPO even easier to enter
the United Kingdom market. In fact, third country PPOs
can easily develop sufficient volumes in order to open
an OE nearby Heathrow, without the need to develop a
national sales force.

(3) English language

substantial

the English language
The world wide importance of
for
creates
publishers located in the United Kingdom. This is a
further element
into the United
to attract entrants
Kingdom.

cross-border mailing needs

cc. Vertical relationships

The Commission has received allegations that TPO will
be able to offer Delta better terms and conditions than
are available from TPO to other players on the market.
According to the information available to the Com-
mission it will be unlikely that
the incumbent PPO,
TPO, will be able to discriminate in favour of Delta to
the detriment of other competitors.

(1) Ability to discriminate

TPO currently has a strong position as an entry point
into the UPU system as is shown by the fact
that
consolidators in the United Kingdom use the TPO as
distributor for nearly (a major part) of their mail. The
remainder (a minor part) of the mail collated by the
consolidators
injected into the system via third
country PPOs either in the United Kingdom or else-
where, via alternative distribution networks or via direct
injection into the local PPO of the recipients' country.

is

L 82/10

EN

Official Journal of the European Union

19.3.2004

(86)

The high proportion of outbound cross-border mail
directed via TPO has been one of the main concerns
expressed in the market
investigation. This injection
point is seen as a bottleneck, control over which enables
TPO to exert control over an important element of the
to
consolidators'
compete. In particular, consolidators are concerned that
as a direct result of this concentration TPO will have
greater incentives to offer itself (including Delta) better
terms and conditions than will be offered to the con-
solidators.

and therefore

ability

costs

their

(87) As outlined above, there are several different routes that
outbound cross-border mail can take between its sender
and its recipient, the majority of which pass through the
investigation has
UPU/Reims networks. The market
shown that consolidators have viable alternatives
to
TPO for routing their mail out of the United Kingdom.
A number of United Kingdom consolidators uses already
their consolidated
now for a considerable part of
outbound cross-border business mail
third country
PPOs in order to inject their mail in the UPU system.

(88)

(89)

In their joint reply to the Statement of Objections, the
parties by referring to a ‘UK international consolidator
survey’ of February — May 2000 (13) have shown that
consolidators in the United Kingdom,
in addition to
third country PPOs, such as
TPO, use a variety of
Deutsche Post, La Poste, Swiss Post, USPS, Mail Africa,
Italian Post, Spanish Post, La Poste/De Post (Belgium),
Post Denmark, Hong Kong Post and the Indian Post.
The survey also suggest that the services offered by third
country PPOs in the United Kingdom are in a number
of respects considered by consolidators and third party
mailers as being superior, more flexible and cheaper
than that offered by TPO.

the market

investigation has confirmed
Furthermore,
that consolidators could switch 5 to 10 % of
their
business to alternative PPOs in a matter of weeks if
that
necessary. Therefore,
consolidators can switch a sufficient proportion of their
mail away so as to act as an effective disincentive to
prevent TPO discriminating against them.

the Commission considers

transparency. The prices

(90) Not only are consolidators able to react, this ability is
enhanced by the fact that the market in which consoli-
dators operate in the United Kingdom is characterised
that
by a high degree of
consolidators pay to TPO are set out
in the Duet
agreement and are set at a fixed level, depending on
the extent of volume rebates achieved by the consoli-
dator (minimum 6 %, maximum 10,5 %). If TPO were
to favour one of the consolidators to the detriment of
another, this would become quickly obvious to the rest
of the market participants.

(91)

the terms and
The parties have explicitly stated that
conditions according to which Delta will have access to

(13) A survey that has been carried out by independent consultants for
TPO based on 20 face-to-face interviews with consolidators/third
party mailers.

TPO will be the standard terms and conditions set out
in the Duet agreement and the standard rate card. There
will be no individual agreement between Delta and TPO.

(92)

The market investigation has shown furthermore that it
is known in the market to whom a customer is lost that
switches suppliers.

(2) The role of SPPL's London office of exchange

(93) Developing Countries (as defined in the UPU agreement)
have access to lower Terminal Dues rates under UPU
rules than those to which Industrialised Countries have
access. SPPL — Singapore is considered a Developing
Country under the UPU agreement — has an OE in the
United Kingdom, and could therefore provide a low-cost
route to Delta.

(94)

(95)

(96)

[Description of the use made by SPPL of
its London
OE]*. [Description of the business purpose of SPPL in
London]*.

Furthermore, as outlined by the Parties in the joint reply
the UPU Convention
to the Statement of Objections,
contains protection mechanisms to limit the opportunity
terminal dues system (Articles 43
for exploitation of
and 48 to 51 of
In the UPU
the UPU Convention).
Convention there is a cap on the average number of
items of mail being sent by Developing Countries and a
cap on the annual weight of
the mail received from
the PPO of a Developing
Developing Countries.
If
Country exceeds one of
then the
these two caps
receiving Industrialised Country PPO can increase the
rate of
the terminal dues. Therefore, Delta will be
prevented from exploiting this opportunity by the fact
that there is a two-pronged cap system.

Finally,
there are also other non European PPOs (i.e.
Philippines Post), which have an OE in the United
Kingdom, where they handle and process the outbound
cross-border business mail according to the UPU rules.
These OEs will offer to the competitors of Delta the
opportunity to have access to the lower terminal dues,
eliminating the possibility that Delta through its privi-
leged access to the SPPL OE in the United Kingdom
the margin, which will
could have a cost benefit at
further
its
advantage over
competitors as a result of the transaction.

competitive

increase

its

(3) The role of the regulator

the regulator, Postcomm,

(97) With regard to the forthcoming United Kingdom regu-
is currently
latory regime,
undertaking a public consultation to consider a wide
range of
its role of
promoting competition with regard to postal services.
The terms of the license under which TPO (whose new
name will be Consignia Ltd) will operate are also

including how to fulfil

issues,

19.3.2004

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Official Journal of the European Union

L 82/11

currently under consultation. The draft licence has not
yet been finalised, however,
it does contain a clause
effectively providing that the Licensee does not unfairly
discriminate between persons having access to its postal
facilities or show undue preference towards any such
person.

Competitor

(98) While the existence of such sectoral regulation is not, by
itself, a reason to allow a concentration that would
strengthen a dominant
it does
represent a further check and balance against TPO's
future ability to discriminate.

incumbent's position,

Dumaco

Mercury

Other

Outbound cross-border business
mail

(1)
Including
franking
machines

(2)
Excluding
franking
machines

[1-5]* %

[1-5]* %

[1-5]* %

[1-5]* %

[1-5]* %

[5-10]* %

dd. United Kingdom — Summary

(99)

the concentration
The above arguments indicate that
will not
lead to the creation or strengthening of a
dominant position which is likely to constitute a signifi-
cant impediment to effective competition in the market
for outbound cross-border business mail
in the United
Kingdom.

c. The Netherlands

(100) TPG is dominant on the market for outbound cross-
border business mail
in the Netherlands. This trans-
action would strengthen this position of dominance.
The
in this
context:

following considerations

are pertinent

aa. Market position

(101) Table 1.b sets out the market structure for outbound
cross-border business mail in the Netherlands, column 1
including
column 2 excluding
In calculating the market shares,
franking machines.
data provided by the parties has been adjusted to take
account of information obtained from Deutsche Post.

franking machines,

(102)

(103)

(104)

Table 1.b

Dutch market for outbound cross-border business mail, by
value 1999

(105)

Outbound cross-border business
mail

(1)
Including
franking
machines

(2)
Excluding
franking
machines

Competitor

Total market value

EUR [...]* m EUR [...]* m

TPG (retained business)

[70-80]* %

[40-50]* %

TPG (contributed business)

[5-10]* %

[10-20]* %

TPO (contributed)

[10-20]* %

[20-30]* %

TPO/TPG combined

[80-90]* %

[70-80]* %

Total Deutsche Post Group
(including DHL)

[5-10]* %

[10-20]* %

Overseas Courier Service

[1-5]* %

[1-5]* %

Adjusted to remove Parties' estimate of turnover achieved by Deutsche
Post in relation to a contract incorrectly classified as outbound cross-
border mail from the Netherlands.

If franking machine customers are included, TPG had a
market share in the Netherlands of [70 to 80]* % in
1999, of which TNT accounted for [5 to 10]* percent-
age points. The addition of TPO's market share of [10
to 20]* % would result in a post-concentration market
share of [80 to 90]* %.

If franking machine customers are excluded, TPG had a
market share in the Netherlands of [50 to 60]* % in
1999, of which TNT accounted for [10 to 20]* percent-
age points. The addition of TPO's market share of [20
to 30]* % would result in a post-concentration market
share of [70 to 80]* %.

In the Netherlands, Deutsche Post, Belgian Mailhouse, La
Poste (France) and Swiss Post are all active. The other
players in the market, such as Overseas Courier Service,
Mercury and Dumaco, are consolidators. With regard to
these other players, Table 1.b shows clearly that, regard-
less of whether or not franking machine customers are
included, the other players are all relatively small and
that they have been unable to achieve significant market
shares.

is also clear

that none of

the PPOs other

It
than
Deutsche Post have achieved market shares greater than
[1 to 5]* %. The competitive pressure created by these
other players is therefore relatively limited. The rest of
the European PPOs do not have any relevant operational
presence abroad and do not appear to have any plan to
enter in the Dutch market in the next three years.

it

(106) With regard to Deutsche Post, the parties argue that its
business is comparable in the Netherlands to that of
TPO and that
is particularly well placed to target
customers in the direct mail and publishing sectors
in the light
with large volumes to Germany. However,
of the existing disparity between their market positions,
it appears unlikely that the presence of Deutsche Post
will act as a significant constraint on the combined
TPG/TPO entity.

(107) The main effect of the concentration in the Netherlands
would therefore be to eliminate competition between
the dominant player, TPG, and the most successful
entrant into the Dutch market.

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Official Journal of the European Union

19.3.2004

bb. The market position of TPO in the Netherlands

(108) As shown in the table, TPO has an estimated market
share of [10 to 20]* % if franking machine customers
are included, rising to a maximum of [20 to 30]* % if
they are not. TPO has
therefore been the most
successful entrant into the Dutch market.

(109) The parties have argued that TPO plays a narrower role
in the Netherlands market than suggested by its market
shares because over [a major part] of the mail that it
takes from the Netherlands is for destinations in the
United Kingdom. Therefore, the parties argue that TPO
is competing in the Netherlands more as a niche player
than as a provider of outbound mail services regardless
of its destination.

(110) For the purposes of this decision, the destination of the
mail is not a relevant factor in determining the strength
of competition provided by TPO, or indeed of any other
operator. Indeed, the fact that nearly [a minor part] of
the mail handled by TPO is not for a destination in the
United Kingdom is a clear indication that TPO provides
a wider service and a wider competitive force.

(111) Secondly, the high volume of mail that passes through
TPO's channel between the Netherlands and the United
Kingdom (approximately [a major part] of
the Dutch
originating mail handled by TPO goes to or via the
United Kingdom) means that TPO could achieve econ-
omies of scale on this route, lowering significantly the
cost for ABB and ABC mailing via the United Kingdom,
in other words the mail that TPO takes to the United
Kingdom and subsequently mails to other countries.
Delta could also benefit
from these lower costs and
obtain a competitive advantage that is not available to
the remaining consolidators and third country PPOs.

(112) TPO, which is the most important active competitor of
the incumbent PPO, would be eliminated as a
TPG,
competitor as a result of the concentration. As a result,
Delta (TPG/TPO) and Deutsche Post would be the only
two players to have the necessary network and the
resources to compete in the Dutch market for outbound
cross-border business mail. However, in the light of the
existing disparity between their market positions,
it
appears unlikely that the presence of Deutsche Post will
act as a significant constraint on the combined TPG/
TPO entity.

cc. Barriers to entry

(113) The barriers to entry into the Dutch market are rela-
tively high. While entry does not require the investment
of
to be a viable
competitor an entrant needs to have instant access to
volume.

sunk costs,

significant

in order

i.e.

transport

collection,

largely on the volumes

that an
European, depends
operator can generate. This applies to every stage of
the process,
and delivery.
Provided that the network is in place, each additional
item routed through that network raises revenue more
than it raises costs. This is because once the costs of
investing in the network have been incurred,
the
marginal costs incurred would vary little whether, say,
100 000 items, or 200 000 items are being handled.

(115) Customers

volumes have

and, with them,

to be
purchased, either by a better price/service combination
or by the acquisition of existing participants in the
market. In order to do so an entrant needs access to
resources
and an established distribution network,
enabling the operator to attract customers with a more
advantageous offer. Alternatively new entrants have to
purchase market share by acquiring existing operators.

(116) Owing to the limited number of consolidators and their
small market shares, consolidators do not facilitate entry
for potential operators in the Dutch market. Given this
the only
lack of consolidators on the Dutch market,
means of entry is by acquiring customers on an in-
cremental basis. This significantly slows the process of
entry, which in turn has adverse effect on the viability
of entry due to the lack of volume. Furthermore, the
relatively weak position of the consolidators means that
it
for business customers to switch
away from TPG to other suppliers of outbound cross-
border mail services.

is more difficult

dd. Size of the Dutch market

small. Whatever

(117) While the Dutch market is the fifth largest in Europe, it
is nevertheless
the
comparatively
precise boundaries of the relevant product market are
considered to be, the Dutch market is approximately a
quarter of the size of the United Kingdom market. It
furthermore does not have the geographic advantages of
a conveniently located airport with direct connections to
most parts of the world which would compare with the
advantages of London Heathrow outlined above.

(118) Therefore the incentives for potential entrants to make
an effort to position themselves in the Netherlands in
to be able to compete in a future liberalised
order
market that would comprise a larger geographic scope
than is presently the case are limited.
is therefore
unlikely that the strengthening of TPG's position that
will be the result of
transaction in the
Netherlands is likely to change in the future due to
inherent dynamics of the market.

the present

It

ee. Discrimination against others in favour of Delta

and NewCo

(114) Volume is an important factor for the operation of an
outbound cross-border mail service. The profitability of
operating a postal network, whether it be national or

(119)

the
[Characterisation of
contracts TPG has with TNT and consolidators]*.

contractual details

in the

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(120) With the information available to the Commission it has
not proved possible to validate whether or not
the
terms available to TNT can be fully justified on the basis
of cost grounds. However, it is clear that — unlike in
the United Kingdom — the terms and conditions that
consolidators pay to TPG in the Netherlands are not set
out in a contract that is as open as the Duet contract.
The market
is
therefore lacks the transparency that
present
in the United Kingdom. Evidence about dis-
crimination is therefore harder to gather and the incen-
tives not to discriminate are commensurately lower.

(121) The Commission therefore considers that

the concen-
tration will not only strengthen TPG's incentives to
favour the activities carried out by its own consolidator,
TNT, but that the lack of transparency in the market
will also enable TPG to extend this favourable treatment
to Delta. This would aggravate the competitive situation
facing other operators on the Dutch market further.

ff. Netherlands — Summary

(122) The above arguments indicate that

the concentration
will
lead to a strengthening of a dominant position,
which will constitute a significant impediment to effec-
for outbound cross-
tive competition in the market
border business mail in the Netherlands.

commitments is set out in Annex II which forms an
integral part of this Decision.

A. SUMMARY OF THE COMMITMENTS

(127) The commitments offered by the parties consist of the
divestment of the business of TNT International Mail in
the Netherlands.

1. THE BUSINESS

(128) The business to be divested is that currently undertaken
by TNT International Mail in the Netherlands (TNT IM
Netherlands). This is the part of TPG in the Netherlands
that was originally intended to be contributed to the
joint venture, Delta. The parties describe the business to
be divested as
assets
tangible
(excluding the brand) of TNT IM Netherlands in respect
of outbound cross-border mail services in the Nether-
lands. This
the
customer list, the know-how, and the personnel involved
in the business, in addition to all the assets and facilities
that are used in the business.

and intangible

the goodwill,

in particular

includes

the

2. OUTBOUND CROSS-BORDER PARCELS

2. MEASURES TO ENSURE THE TRANSFER OF THE BUSI-

NESS

(123) On the basis of the product market definition of the
i.e. a market for expedited parcels, the trans-

parties,
action would not lead to a dominant position.

a. Access to the network

(124) The highest

combined market

expedited
parcels can be observed in Austria with [10 to 20]* %.
the combined
In the home markets of
market shares of the parties are [5 to 10]* % in the
Netherlands and [1 to 5]* % in the United Kingdom.

the parties

share

for

(125) On the basis of a wider market definition for all parcels
that would include expedited and standard parcels the
transaction would not
lead to a dominant position
either. The parties are not active in providing standard
parcel services except in their respective home countries.
In a market which includes standard and expedited
parcel
the
the combined market
parties in the Netherlands are at [20 to 30]* %, whereas
in the United Kingdom the combined market share
would be just above [1 to 5]* %.

shares of

services

VI. COMMITMENTS SUBMITTED BY THE PARTIES

(126) On 27 February 2001,
to remove

the parties offered certain
commitments
competition concerns
the
which the Commission had identified in its Statement
retained in this decision in
of Objections and has
relation to the Netherlands. The full text of the final

(129) The business that is being divested is the provision of
outbound cross-border mail services from the Nether-
lands. In order to provide this service, TNT IM Nether-
lands has a network of agreements
in place both
the
upstream (largely with TPG for the collection of
mail) and downstream, for the transport (with trucking
companies and airlines) and for delivery (with receiving
PPOs or alternative delivery companies). According to
this
the parties over [a major part] of
business are outsourced. For a purchaser of this business
which does not have a similar network to be able to
compete effectively with TPG from the day that
the
business is sold, it is vital that TPG enables the business
to continue to benefit from its network of agreements
for a transitional period and that the purchaser is in a
position to demonstrate that its own network can be or
become similar to that of TPG after the transitional
period.

the costs of

(130)

In order to provide this possibility for the purchaser the
parties commit to providing to the network currently
available to TNT IM Netherlands at the same conditions
to the divested business for a period of two years after
the date of divestment. This covers the services that are
currently provided to TNT IM Netherlands both by TPG
itself, and those provided to TNT IM Netherlands by
third parties under terms and conditions negotiated by
the wider TPG group.

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b. Access to the know-how

(131)

the business is based on know-how.

In addition,
In
particular, the technical aspects of this know-how are
condensed into a matrix which provides the routing
options available to TNT IM Netherlands. Again, for a
purchaser to be able to compete with TPG from the
date of purchase,
it is vital that it is given continued
access to this routing matrix for a transitional period on
comparable terms to those currently available to TNT
IM Netherlands. The parties have committed to give the
divested business access to these routing options for a
period of two years after the date of divestment.

c. Personnel

(132)

the commitment

In order to ensure that the business is transferred with
includes a
the necessary personnel,
non-solicitation clause. This clause includes a commit-
ment
the
to take all reasonable steps to ensure that
current staff transfer with the divested business, and that
they will not be employed in
if
competing lines of business for a certain period after
the divestment.

they stay in TPG,

d. Non-compete

(133) The parties have committed to not compete for existing
the divested business during a certain

customers of
period with two exceptions:

(i) that TPG has to be able to respond to requests from
customers under the Universal Service obligation it
faces as the Dutch postal operator under Dutch law,
and

(ii) that TPO or the JV should be able to continue to
provide services to those customers that it currently
serves, but who also buy services from the business
to be divested. However, the value of the services
provided by TPO and the JV must not exceed […]*.

e. TNT Name

(134) The divested business may refer to itself as the former
business of TNT IM Netherlands and TPG will, for the
same duration, not allow any third party, including the
JV, to use the TNT name or logo for the purpose of the
provision of outbound cross-border mail services in the
Netherlands.

3. MODALITIES OF THE SALE

a. Up-front buyer

solution. The parties commit to suspend the implemen-
tation of the notified transaction and not to complete
the notified concentration until a binding sale and
purchase agreement has been reached with a buyer that
has been approved by the Commission. The commit-
ment specifies a relatively short period in which this has
to be achieved.

b. Speaking clause

(136) The parties have included in their commitments a
‘speaking clause’, which provides the possibility for the
Commission to review the extent of the commitments
upon request from the parties showing good cause. This
clause is intended to extend the divestment period, to
waive one or more of the conditions and obligations of
the commitments and to enable the Commission to
agree to a divestment which does not include all the
parts of the business.

4. INTERIM PRESERVATION OF THE DIVESTED BUSINESS

(137) TPG has committed to preserve the full economic
viability, marketability and competitiveness of the busi-
ness during the divestiture period. However, this does
not include a commitment to keep the business separate
from the business retained by TPG, nor a commitment
to ensure that the business is managed as a distinct and
in the Notice on Rem-
saleable business as set out
edies (14). The usual provisions enabling a trustee to
supervise the implementation of the commitments have
been proposed.

B. ASSESSMENT OF THE COMMITMENTS

1. TPO'S BUSINESS IN THE NETHERLANDS

(138) The transaction will combine TPG's business with that
of TPO in the Netherlands. At first sight a divestment of
TPO's business in the Netherlands would completely
remove the overlap and restore the pre-concentration
situation. However, the market share of the TPO busi-
ness does not fully reflect its market position and, even
though the TPO business has a higher market share
than TNT IM Netherlands,
is not a viable option for
divestiture.

(139) TPO's business in the Netherlands is not an independent
and viable business since it is almost entirely based on
the infrastructure,
the market position and the repu-
tation of TPO in the United Kingdom and its Royal
in this
Mail brand. Five main factors are relevant
context.

(135)

In order to ensure the transfer of the business to the
purchaser the parties have proposed an up-front buyer

(14) Paragraph 51 of the Commission Notice on remedies acceptable
under Council Regulation (EEC) No 4064/89 and under Com-
mission Regulation (EC) No 447/98 (OJ C 68, 2.3.2001, p. 3).

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(140) Firstly, [a major part]* (by value) and [a major part] (by
volume) of TPO's business in the Netherlands is destined
for the United Kingdom. Since the distribution of this
the postal
mail
monopoly enjoyed by TPO there,
its Dutch branch
merely acts as a feeder for TPO's Royal Mail.

in the United Kingdom falls under

(141) Secondly,

its TPO parent

in the United Kingdom.

the business carried out by TPO in the
Netherlands at present relies largely on the infrastructure
It has
of
practically no infrastructure in the Netherlands.
In so
far as the smaller proportion of TPO's Dutch mail that
is not ultimately destined for
the United Kingdom,
nearly all of it is distributed via the TPO in the United
Kingdom and as part of a mailing shot containing
predominantly mail destined for the United Kingdom.

(142) Thirdly,

through TPO's presence in the Netherlands
customers are able to purchase their outbound cross-
border mail services directly from the final distributor.

(143) Fourthly, the Royal Mail brand is important. Many of
TPO's customers in the Netherlands buy their services
from TPO because they want their mail with destination
in the United Kingdom to have a United Kingdom
indicia on it and thus appear as a local company.

(144) Fifthly, TPO's market

share

in the Netherlands

is
is not very
achieved through a customer base that
stable. [A significant part] of
its turnover is achieved
with one very large customer, who at the same time
uses other competitors for its outbound cross-border
mail needs. Were this customer to switch away from
its market share would be [signifi-
TPO Netherlands,
cantly reduced]. It is therefore highly uncertain that this
customer who chose to contract with Royal Mail
directly would remain with a divested TPO Netherlands.
TPO Netherlands has a total customer base of less than
[…]*.

(column 1 including franking machines, column 2
excluding franking machines):

Table 2

Dutch market for outbound cross-border business mail, by
value 1999

Outbound cross-border business
mail

(1)
Including
franking
machines

(2)
Excluding
franking
machines

Competitor

Total market value

EUR [...]* m EUR [...]* m

TPG (retained business)

[70-80]* %

[40-50]* %

TPO (contributed)

[10-20]* %

[20-30]* %

TPO/TPG combined

[80-90]* %

[60-70]* %

TNT IM Netherlands (divested
business)

[5-10]* %

[10-20]* %

Total Deutsche Post Group
(including DHL)

[5-10]* %

[10-20]* %

Overseas Courier Service

[1-5]* %

[1-5]* %

Dumaco

Mercury

Other

[1-5]* %

[1-5]* %

[1-5]* %

[1-5]* %

[1-5]* %

[5-10]* %

Market shares, which take into account the effect of the undertakings,
based on Parties' reply to the SO and adjusted to remove Parties' estimate
of turnover achieved by Deutsche Post in relation to a contract incor-
rectly classified as outbound cross-border mail from the Netherlands.

(145)

In the light of these reasons and given the lack of long-
term contracts in this business, a divestment which
would remove the benefits of the direct link between
TPO in the United Kingdom and its Dutch branch,
would therefore undermine the customer base. A market
share equivalent
to the one presently enjoyed would
thus not be sustainable. This development would be
aggravated by the fact that both parents of the joint
venture are the leading incumbent postal operators and
dominate the sender and destination markets respect-
ively.

(147)

If franking machine customers are included, TPG had a
market share in the Netherlands of [70 to 80]* % in
1999, of which TNT IM Netherlands accounted for [5
to 10]* percentage points. The addition of TPO's market
share of [10 to 20]* % would result in a post-concen-
tration market share of [80 to 90]* %. The proposed
divestment will reduce this share from [80 to 90]* %
[by 5 to 10]* %.

2. EFFECT OF THE PROPOSED DIVESTITURE ON MARKET

POSITION

(146) The distribution of market shares post-merger,

taking
into account the effect of the proposed divestiture of
is displayed in the table below
TNT IM Netherlands,

(148)

If franking machine customers are excluded, TPG had a
market share in the Netherlands of [50 to 60]* % in
1999, of which TNT IM Netherlands accounted for [10
to 20]* percentage points. The addition of TPO's market
share of [20 to 30]* % would result in a post-concen-
tration market share of [70 to 80]* %. The proposed
divestment will reduce this share from [70 to 80]* %
[by 10 to 20]* %.

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(149) While the transaction would still have the effect of
eliminating TPO as the largest competitor of TPG, as
has been detailed above the market position of TPO is
intimately linked with its parent TPO. The elimination
of TPO as
the largest competitor of TPG will be
mitigated by the fact that TPG commits to divest TNT
IM Netherlands. As outlined above, this business was
is now,
intended to be contributed to the JV and it
under
to be
the business
divested.

the Parties commitment,

the distribution of mail.

(150) TNT IM Netherlands has, unlike TPO's Dutch business, a
world-wide focus and does not rely solely on its parent
It has a heterogeneous
for
customer base with more than […]* customers. None
of the customers is in a position to significantly alter
TNT IM Netherlands' market position if it were to shift
its business.

(151) The eventual buyer will acquire a business with a
significant market share ([5-10]* % to [10-20]* %) on
to the one of
both market alternatives, equivalent
Deutsche Post. Therefore,
if operated by a suitable
purchaser who has access to volumes and an established
network similar to that currently operated by TNT, the
proposed divestment of TNT IM Netherlands will thus
form a viable competitor to the parties in the Nether-
lands where, with the exception of Deutsche Post, all the
remaining competitors will have a marginal market
share.

(152)

In conclusion, the strength of the divested business TNT
IM Netherlands at least outweighs the increase in market
share of the combined business through TPO. Therefore
the current position of TPG in the Netherlands will not
be strengthened by the transaction as modified.

3. COMMITMENTS TO ENSURE THE DIVESTITURE

a. Access to the network and the know-how

(153) The commitments provide for access to the network and
the know-how, which are essential parts of the business,
two years after the divestment. This
for a period of
period will give the eventual purchaser
the time to
conclude new cooperation agreements with various
services providers, such as airlines, PPOs and indepen-
dent postal operators and to build up the necessary
know-how implicit in the routing matrix.

(154)

In order to be able to run the divested business as a
the transitional
viable independent competitor after
period a purchaser would have to fulfil a number of
criteria. Such a purchaser would have to have to be able
the upstream and
to establish its own network for
to the
downstream services
divested business by or through TPG within the tran-

temporarily provided

to enable the divested business to sell

sitional period. The purchaser would furthermore have
to be able to generate the necessary amount of mail
volume that would enable it
to purchase network
services which in turn would enable it to sell its services
at competitive prices. These volumes would have to be
its
sufficient
outbound cross-border mail services at prices that are
competitive to those which TNT IM Netherlands is
currently able to offer. This would imply furthermore,
that the purchaser would need to be able to offer mail
distribution at competitive prices globally, like TNT IM
Netherlands currently can, and not
limited to
certain routes on which it might be particularly com-
petitive. The divested business would lose its customer
base and with it its viability, as soon as it would not be
its customers the prices and
able anymore to offer
services which TNT IM Netherlands is presently able to
offer. Since contracts are not long term and not exclus-
ive, customers can and will switch to service providers
that offer the best price/service package.

just

characteristics of

(155) The success of the remedy depends to a large extent on
current
the
proposal suffices to ensure that a viable purchaser is in
a position to continue the business in the short term
and to develop the business in the long term.

the purchaser. The

b. Personnel

services

(156) The non-solicitation clause has the purpose in particular
to protect the goodwill and know-how embodied in the
personnel of the divested business. The divested business
provides outbound cross-border mail
to its
customers.
It is a service industry. Tangible assets do
not constitute the core of the business as might be the
case in manufacturing industries. The business is rather
constituted by its goodwill and the know-how. These are
to a large extent vested in the personnel of the business.
As has been described above the customer relationships
and
are
customer
in such circumstances. This
contacts are therefore vital
is
the proposed divestiture.
ensured by means of
However, the importance of the personnel as indicated
in this paragraph also forms a significant part of the
framework in which the Commission would have to
from the parties and the
judge an eventual
proposed buyer to accept a divestiture without a transfer
of the personnel (see below).

established

Experience

volatile.

request

c. Non-compete

(157) With the commitment not to compete for the existing
customers of the business for the duration committed
to, the existing goodwill of the divested business should
be protected.

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(158) The exception relating to the Universal Service Obli-
gation ensures that TPG through its national postal
operator PTT Post is in a position to comply with the
requirements of the law relating to the Universal Service
Obligation. The Dutch legislation allows PTT Post
to
comply with the Universal Service Obligation by
offering individually negotiated contracts
to its cus-
tomers rather than standard tariffs and rebates. In doing
so PTT Post must act in a non-discriminatory way. This
may lead to an obligation for PTT Post to enter into
such contracts with customers on their request, provided
similar contracts are already in existence. Under
the
terms of the commitments the Trustee has the necessary
powers, in particular powers to monitor and to impose
measures,
in order to ensure the respect of this obli-
gation and in particular to avoid any circumvention.
This will ensure that this exception will not enable TPG
to circumvent the non-compete obligation.

(159) As described above there is another exception relating
to the customers currently dealing with both TNT IM
Netherlands and TPO in the Netherlands. This exception
limits the turnover that TPO and the JV may continue
these customers […]*. The
to achieve with each of
this exception is therefore clearly delineated
scope of
and will preserve the status quo with regard to these
customers and is
therefore unlikely to threaten the
goodwill that will be divested.

d. TNT Name

(160) By having the right to refer to the Divestment Business
as the former business of TNT International Mail and
the inverse obligation on the parties not
to present
themselves as TNT, the transition between these services
being provided by TNT IM Netherlands and by the
the
eventual purchaser will be smoothed. Therefore,
purchaser should be able to establish itself as a credible
competitor in the Dutch market
for outbound cross-
border business mail.

4. MODALITIES OF THE SALE

a. Up-front buyer

(161) The up-front buyer combined with a short divestiture
deadline solution proposed by the parties will put the
the
risk of divestiture and with it
transaction entirely on the parties. In case they do not
find a purchaser
the various conditions
described above and the approval of the Commission
within the short time period, this conditional clearance
decision would no longer stand.

the clearance of

that meets

not wish to acquire the entire business, because they
are already in possession of the necessary personnel and
infrastructure. In assessing a request from the parties to
apply the speaking clause the Commission will have to
consider very carefully whether the sale will amount to
a divestiture of the business and whether such a busi-
ness would be viable. In this context the standing of the
potential purchaser in the market, in particular its access
to volumes, networks and knowledgeable personnel
in
the Netherlands, will be vital.

5. INTERIM PRESERVATION OF THE DIVESTED BUSINESS

(163) The parties have argued that a hold-separate as indicated
in the Notice on Remedies would not be necessary in
the present case because their other commitments,
namely that to preserve the full economic and competi-
tive value of the business and that to let the Trustee
monitor this commitment, suffice to ensure that there is
no need for a hold separate commitment.

(164) The rationale for hold-separate measures as outlined in
the Notice on Remedies is to protect the business to be
separated by ensuring that it has a qualified independent
management and that the risk of the transfer of confi-
dential business information to the business retained by
the parties is limited. The Commission considers that
these interests are, in the current transaction, protected
by the commitment not
to complete the transaction
until the Commissioner has approved a buyer and to
do so in a very short time period. This should ensure
that the risks that the hold-separate is designed to avoid
will be limited.

6. CONCLUSION

(165)

In the light of
the above, the Commission concludes
that the commitments given by the Parties are sufficient
to remove the competition concerns identified by the
the proposed
Commission during its investigation of
operation on condition that
the parties comply with
the following commitments which are subject to change
by the Commission pursuant
to paragraph 12 of
Annex II:

(a) the divestment and suspension commitment set out

in paragraphs 1 and 2 of Annex II;

(b) the commitment

divestment business
Annex II;

set out

to maintain the viability of

the
in paragraph 3 of

(c) the mechanism for

the transfer of

personnel
paragraph 5 of Annex II;

set out

in the first

the existing
two sentences of

b. Speaking clause

(162) The speaking clause described above is intended by the
parties to enable the Commission to approve a purchase
agreement which does not contain the sale of all the
the business described above. The parties
parts of
there are potential purchasers who do
that
consider

(d) the access to the network set out in paragraph 6 (i)

and (ii) of Annex II;

(e) the completion of the divestment procedure as set
out in paragraph 7, first subparagraph, first sentence
and second subparagraph, phrase reading ‘provided
that … agreed by the Commission’ of Annex II;

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Official Journal of the European Union

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(f) the purchase of the divested business by a purchaser
fulfilling the
in paragraph 7,
subparagraph 3, first two sentences of Annex II, and

set out

criteria

(g) the compliance with any measure imposed by the
trustee to make the parties comply with their
commitment as indicated in paragraph 10 (i) (b) of
Annex II.

(166) The above aspects of the commitment constitute con-
ditions, as only by fulfilling them (subject to any change
pursuant to paragraph 12 of Annex II), can the struc-
tural change on the relevant market be achieved.

(167) The remaining aspects of

to

(subject

the commitment constitute
obligations
to
any
paragraph 12 of Annex II) as they concern the im-
plementing steps which are necessary to achieve the
structural change that is sought. In particular, this relates
to:

pursuant

change

(a) the non-compete obligations of paragraph 4 of

Annex II;

(b) the commitments relating to the personnel other
of

sentences

first

two

of

those

than
paragraph 5 of Annex II;

the

(c) the technical, administrative and operational assis-
tance and the reference to the name of the previous
business as indicated in paragraph 6 (iii), (iv) and (v)
of Annex II;

(d) the divestment procedure described in paragraphs 7
and 8 of Annex II, with the exception of the part
referred to in paragraph 165 of the Decision;

(e) the provisions relating to the trustee (Chapter D)
in
of

exception

referred

part

to

with
the
paragraph 165.

VII. CONCLUSION

(168)

the above, and subject to compliance
In the light of
with the conditions and obligations laid out
in the
commitments set out in Annex II, the proposed oper-
ation does not create or strengthen a dominant position
as a result of which effective competition would be
significantly impeded in the EEA or in a substantial
part of
it. The operation is therefore to be declared
compatible with the common market and the func-
tioning of the EEA agreement, pursuant to Article 8(2)
of the Regulation (EEC) No 4064/89.

HAS ADOPTED THIS DECISION:

Article 1

The notified operation whereby the undertakings The Post
Office, United Kingdom, TNT Post Group NV, the Netherlands,

and Singapore Post Private Limited, Singapore, will acquire
within the meaning of Article 3(1)(b) of Regulation (EEC)
No 4064/89 joint control of two newly-created joint ventures
known as Delta and NewCo, is compatible with the common
market and the functioning of the EEA Agreement.

Article 2

Article 1 is subject to compliance with the following condi-
tions, which may be changed by the Commission pursuant to
paragraph 12 of Annex II:

(a) the divestment and suspension commitment set out

in

paragraphs 1 and 2 of Annex II;

(b) the commitment to maintain the viability of the divestment

business set out in paragraph 3 of Annex II;

(c) the mechanism for the transfer of the existing personnel
two sentences of paragraph 5 of

in the first

set out
Annex II;

(d) the access to the network set out in paragraph 6 (i) and (ii)

of Annex II;

(e) the completion of the divestment procedure as set out in
paragraph 7, first subparagraph, first sentence and second
subparagraph, phrase reading ‘provided that … agreed by
the Commission’ of Annex II;

(f) the purchase of

fulfilling
paragraph
subparagraph 3, first two sentences of Annex II, and

the divested business by a purchaser
7,

criteria

out

the

set

in

(g) the compliance with any measure imposed by the trustee
to make the parties comply with their commitment as
indicated in paragraph 10 (i) (b) of Annex II.

Article 3

Article 1 is further subject to compliance with the following
obligations, which may be
changed by the Commission
pursuant to paragraph 12 of Annex II:

(a) the non-compete obligations of paragraph 4 of Annex II;

(b) the commitments relating to the personnel other

than
two sentences of paragraph 5 of

those of
Annex II;

the first

(c) the technical, administrative and operational assistance and
the previous business as

the reference to the name of
indicated in paragraph 6 (iii), (iv) and (v) of Annex II;

(d) the divestment procedure described in paragraphs 7 and 8
of Annex II, with the exception of that part referred to in
Article 2 of this Decision;

(e) the provisions relating to the trustee (Chapter D) with the
this

that part referred to in Article 2 of

exception of
Decision.

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This Decision is addressed to:

The Post Office
148 Old Street
London EC1V 9HQ
United Kingdom

Article 4

TNT Post Group NV
41-63 Neptunusstraat
2132 JA Hoofddorp
The Netherlands

Done at Brussels, 13 March 2001.

Singapore Post Private Limited
31 Exeter Road
Singapore 239732

For the Commission

Mario MONTI

Member of the Commission

Explanatory graph may be consulted on the following Commission website:

http://europa.eu.int/comm/competition/index_en.html

ANNEX I

ANNEX II

The full original text of the conditions and obligations referred to in Articles 2 and 3 may be consulted on the
following Commission website:

http://europa.eu.int/comm/competition/index_en.html