CELEX: 32014M7052
Language: en
Date: 2014-01-30 00:00:00
Title: Commission Decision of 30/01/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7052 - LLOYDS DEVELOPMENT CAPITAL / POSTNL / TNT POST UK) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                        Brussels, 30/01/2014
                                        C(2014) 571 final

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|To the notifying parties:                                              |

Dear Sir/Madam,

Subject:    Case No COMP/M.7052 – Lloyds Development Capital/ PostNL/ TNT Post UK
         Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

    1) On 16.12.2013, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by
       which Lloyds Development Capital (Holdings) Limited ("LDC") and PostNL NV ("PostNL") acquire joint control over TNT NN1 Limited ("TNT Post
       UK") by way of purchase of shares (LDC and PostNL are designated hereinafter as the 'notifying parties' or 'the Parties').1

       THE PARTIES

    2) LDC is a private equity fund active in a broad range of sectors in the United  Kingdom,  the  Netherlands  and  China,  although  LDC  has
       particular experience in construction and property, financial services, healthcare industrials, IT and software, leisure and media, retail
       and consumer, and support services. LDC is a wholly-owned subsidiary of Lloyds Banking Group plc ("Lloyds Banking Group").

    3) PostNL provides mail, parcels and support services, both physical and digital, in its home market of the Netherlands, as well  as  in  the
       United Kingdom, Germany, Italy, Luxembourg and Belgium. PostNL has a controlling interest in G3 Worldwide Mail (UK) Ltd ("Spring"). Spring
       is active throughout the world as a provider of cross-border mail services to corporate customers.

    4) TNT Post UK supplies postal services in the United Kingdom, focusing principally on mail delivery  services  for  business  customers.  As
       stated above, TNT Post UK is solely controlled by PostNL prior to the contemplated transaction.

       THE OPERATION AND CONCENTRATION

    5) Prior to the proposed transaction, TNT  Post  UK  is  solely  owned  and  controlled  by  PostNL.  Post-transaction,  PostNL  will  retain
       approximately […]% of the issued capital, LDC will own approximately […]%, while  members  of  TNT  Post  UK's  management  will  own  the
       remaining […]% of the shareholding.

    6) According to a Shareholder's Agreement entered into between the Parties, each of LDC and PostNL will have  the  ability  to  veto  matters
       including the business plan, the budget and the appointment, removal or replacement of the chairman, CEO, CFO and other senior members  of
       management of TNT Post UK. The proposed transaction therefore results in the acquisition of joint control by LDC and PostNL over TNT  Post
       UK and constitutes a concentration under Article 3(1)(b) of the Merger Regulation. It is hereafter referred to as the Transaction.

       EU DIMENSION

    7) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million (EUR […] million for  LDC,  EUR  4
       317 million for PostNL and EUR […] million for TNT Post UK). All of them have an EU-wide turnover in excess of EUR 250  million  (EUR  […]
       million for LDC, EUR […] million for PostNL and EUR […] million for TNT Post UK). Lastly, PostNL does not achieve more than two-thirds  of
       its aggregate EU-wide turnover within one and the same Member State. The notified operation therefore has an EU dimension.[2]

       COMPETITIVE ASSESSMENT

1 Market definition

    8) TNT Post UK operates in the UK postal services sector. This sector underwent a period of liberalisation since  2003,  before  which  Royal
       Mail enjoyed a legal monopoly. Private operators in the UK can now compete in two ways, namely (i) the upstream  competition  relating  to
       the collection and the sorting of customer's mail then being handed over to Royal Mail for the onward delivery to the final addressee, and
       (ii) the end-to-end competition relating to the collection, the sorting and the delivery of customer's mail.

    9) TNT Post UK's core business is to offer mail delivery services in the United Kingdom. To a lesser extent, TNT Post UK provides third party
       logistics (3PL) in the United Kingdom.[3] TNT Post UK mainly collects and sorts addressed mail  from  business  customers  which  it  then
       either delivers itself in the London area or hands over to Royal Mail for final delivery in the UK or to its  sister  company  Spring  for
       delivery outside the UK. Spring operates a depot in Southall (Middlesex, UK) from/to which it provides both inbound  and  outbound  cross-
       border mail services. Spring offers its outbound services to postal companies but also to large companies. For  its  inbound  cross-border
       mail entering the UK, Spring uses the services of Royal Mail or, to a minor extent, TNT Post UK for final delivery to the addressee.

   10) In its practice, the Commission has segmented the mail delivery services markets according to the distinctions between  (i)  standard  and
       express mail delivery services (ii) domestic and cross-border mail (iii) business mail and mail for private customers (iv)  addressed  and
       unaddressed mail and (v) inbound cross-border mail services and outbound cross-border mail services.[4] In  La  Poste/Swiss  Post/JV,  the
       Commission based its assessment on a market for standard outbound cross-border addressed mail services for business customers.[5]

   11) The Commission has found in the past that the markets for mail delivery services are national in scope.[6]

   12) The Parties follow this approach. The Transaction would maintain a horizontal overlap on a market for outbound cross-border addressed mail
       delivery services for business customers in the UK. In addition, according to the Parties, there is a vertical link brought about  by  the
       fact that TNT Post UK uses among others Spring’s services for final delivery of outbound standard addressed mail for  business  customers,
       and Spring, on the other hand, uses TNT Post UK for final delivery of  its  UK-inbound  standard  addressed  mail  services  for  business
       customers. On that basis, the Transaction maintains a vertical relationship between the following two markets:  the  market  for  standard
       addressed mail delivery services for business customers in the UK and the UK-market for standard in- and outbound  cross-border  addressed
       mail delivery services for business customers.

   13) For the purpose of this notification, it is however not necessary to reach a precise market definition since  the  Transaction  raises  no
       competition concern under any plausible market definition.

2 Competitive assessment

   14) The Transaction maintains one insignificant horizontal overlap in the market for outbound cross-border addressed  mail  delivery  services
       for business customers in the UK and two vertically affected markets out of the activities of  PostNL's  cross  border  services  via  its
       subsidiaries Spring and TNT Post UK.[7]

       HORIZONTAL OVERLAPS

   15) Both TNT Post UK and Spring provide outbound cross-border addressed mail delivery services for business customers in the UK. TNT Post UK’s
       market share is, according to the Parties, [0-5]%, while Spring accounts for less than [0-5]%. Market leaders are  Royal  Mail  ([30-40]%)
       and DHL ([20-30]%). In light of the very minor combined market share and the existence of strong  competitors,  the  proposed  transaction
       does not raise competition concerns.

       VERTICALLY AFFECTED MARKETS

       Outbound cross-border mail services

   16) According to the Parties, TNT Post UK has a market share of [20-30]% on the market for standard addressed mail delivery services in the UK
       and [20-30]% on the business segment thereof. Spring's estimated market share on a market for outbound cross-border delivery of  addressed
       mail from UK to other countries reaches [0-5]%. These markets are vertically related.

   17) However, these low to moderate market shares of Spring and TNT Post UK do not allow for foreclosure strategies, in particular in light  of
       the strong competition provided by Royal Mail as the market leader in the UK for standard addressed mail  delivery  services  to  business
       customers, and several strong competitors for outbound mail, such as Royal Mail, DHL and Air Business which all account for higher  market
       shares than Spring.

   18) In any event, this vertical relationship predates the Transaction and thereby the acquisition  of  joint  control  by  LDC  alongside  the
       current parent of TNT Post UK, PostNL does not change the market structure on any of these mail delivery markets.

       Inbound cross-border mail services

   19) Based on the Parties' best estimates, TNT Post UK's market share on the segment of inbound  cross-border  addressed  mail  is  around  [5-
       10]%.[8] Spring accounts for [30-40]% of the total volume of outbound addressed mail services coming into the UK. While market shares  per
       country of origin may vary, this volume is a good measure of Spring's market position  in  the  supply  chain  of  cross-border  mail  and
       corresponds to the sorted cross-border addressed mail into the UK which Spring then hands over to other postal companies,  such  as  Royal
       Mail or TNT Post UK. According to the Parties, […]% of this volume  is  collected  by  Spring  under  an  agency  agreement  (the  "Agency
       Agreement") with Royal Mail.  […] Moreover, the Parties claim that there  are  several  strong  competitors  as  many  major  cross-border
       services providers such as DHL, Asendia and bpost are all active in this area.

20) [Commission's assessment of the Agency Agreement]. [9]

21) [Commission's assessment of the Agency Agreement].

22) [Commission's assessment of the Agency Agreement].

   23) In any case, the question of whether Spring is to be considered an agent of Royal Mail or not can be left open, as even  with  a  [30-40]%
       share of the market, the Transaction would not cause serious doubts as to its compatibility with the internal market.

   24) First, the low market share on the downstream market segment of inbound cross-border mail where TNT Post UK is active does not enable  TNT
       Post UK to engage in a customer foreclosure strategy. Second, it is also unlikely that the Parties could successfully engage in  an  input
       foreclosure strategy in light of Spring’s moderate market shares on the upstream market and the existence of strong  competitors  such  as
       DHL or others. Moreover, […]% of Spring's volume is handed over to Royal Mail and it is unlikely that that would significantly change post
       transaction. […]. While there is no technological or legal barrier to Spring redirecting all  or  part  of  this  volume  currently  going
       directly to Royal Mail to another provider, doing so would […]. Moreover, in almost every area of the UK (except those few  in  which  TNT
       Post UK's pilot end-to-end programme is currently in operation) Royal Mail is the only provider capable of final mile delivery.  TNT  Post
       UK will not be able to match Royal Mail’s footprint […] in the foreseeable future. Therefore, even if Spring were to redirect all  of  its
       mail to TNT Post UK, Royal Mail would still benefit from delivering almost all of those volumes, albeit under the terms  of  the  upstream
       access agreement between TNT Post UK and Royal Mail rather than via the Agency Agreement. In light of the above, the Commission  considers
       that the Parties have little ability and no incentive to enter in an input foreclosure strategy.

   25) In any event, this vertical relationship between TNT Post UK and Spring predates the Transaction and therefore the  acquisition  of  joint
       control by LDC over TNT Post UK does not change the market structure on any of these mail delivery markets.

   26) The Commission therefore considers that none of these vertical relationships is likely to raise competition concerns.

       CONCLUSION

   27) For the above reasons, the European Commission has decided not to oppose the notified operation and to  declare  it  compatible  with  the
       internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation.

                                        For the Commission
                                        (signed)
                                        Joaquín ALMUNIA
                                        Vice-President

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[1]   OJ L 24, 29.1.2004, p. 1 ('the Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the  European  Union
      ('TFEU') has introduced certain changes, such as the replacement of 'Community' by 'Union' and 'common market' by  'internal  market'.  The
      terminology of the TFEU will be used throughout this decision.

[2]   Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the  Commission  Consolidated  Jurisdictional  Notice  (OJ
       C95, 16.04.2008, p1).

[3]         For sake of completeness, one company within the Lloyds Banking Group portfolio (namely […] purchases 3PL services from TNT Post  UK.
       […] is a purchaser and multi-channel retailer of replay DCs, DVDs and games. The Parties explain that 3PL  services  are  not  a  critical
       input for […] and that they account for very limited share of the purchaser's costs and do not  enable  any  product  differentiation.  In
       addition, 3PL stands for a […] portion of TNT Post UK's activity, representing less than […]% of its total turnover.  In any case, 3PL  is
       not an important input to […] and hence the actual seller/purchaser relationship between the parties is not to be regarded as  a  vertical
       relationship and needs no further assessment in the present case (see footnote 6 of Annex II or  the  Commission  Implementing  Regulation
       (EU) No 1269/2013 of 5 December 2013 amending Regulation (EC) No 802/2004 implementing Council Regulation (EC) No 139/2004 on the  control
       of concentrations between undertakings).

 [4]  See decisions of the European Commission n°COMP/M.6503 – La Poste/Swiss Post/JV, recital 18 to 26, M.5152 –  Posten  AB/Post  Danmark  AS,
       recital 14 and subsequent, COMP/M.3971 – Deutsche Post/Exel, recital 23 and 24.

 [5]  See decision of the European Commission n°COMP/M.6503 – La Poste/Swiss Post/JV, recital 26.

 [6]  See decisions of the European Commission n°COMP/M.6503 – La Poste/Swiss Post/JV, recital 27 and 28, M.5152 – Posten  AB/Post  Danmark  AS,
       recital 20 to 24, COMP/M.3971 – Deutsche Post/Exel, recital 33

 [7]  For sake of completeness, several companies within the Lloyds Banking Group portfolio purchase mail services in the United Kingdom. As the
       Parties explain, this input cannot be considered as critical to any of them, insofar as it does  not  relate  to  their  core  activities,
       pertains to limited costs and does not enable any product differentiation. In addition, an increasing portion of mail can  be  substituted
       by internet services. Therefore, this potential seller/purchaser relationship is not regarded as a vertical relationship in nature for the
       purpose of this case.

[8]   As the Parties explain, TNT Post UK is, with the exception of its very limited delivery network, only active  in  the  intermediate  phases
      between receiving cross-border mail which has been brought into the UK, and its final delivery. Spring brings cross-border  mail  into  the
      UK, but does not deliver it. It is Royal Mail that brings cross-border mail into the UK or receives it from other national postal operators
      or customers, and delivers it.

[9]   […].

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 In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC)  No  139/2004
 concerning non-disclosure of business secrets and other confidential information.  The  omissions  are  shown  thus  […].  Where  possible  the
 information omitted has been replaced by ranges of figures or a general description.

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE