Antitrust Law Daily Procedural irregularity requires annulment of EC decision prohibiting UPS acquisition of TNT Express
Wednesday, January 16, 2019

Procedural irregularity requires annulment of EC decision prohibiting UPS acquisition of TNT Express

By Jeffrey May, J.D.

The Court of Justice of the European Union has rejected an effort by the European Commission (EC) to overturn a General Court’s decision annulling the EC’s prohibition of United Parcel Service, Inc.’s acquisition of competing delivery company TNT Express N.V. Today, the European Court of Justice (ECJ) announced that the EC’s January 2013 decision was properly annulled because UPS’s rights of defense were infringed in the matter.

In January 2013, the EC formally announced its prohibition of the transaction. According to the EC, the combination of the delivery companies would have restricted competition in 15 EC Member States. Offers by UPS to divest TNT's subsidiaries in these 15 countries and allow the buyer to access its intra-European air network for five years proved inadequate to address the identified competition concerns, the EC said. Prior to the EC's announcement, UPS dropped its plans to acquire TNT Express; however, UPS brought an action against that prohibition before the General Court.

The General Court in March 2017 annulled the EC’s decision because UPS was denied a fair hearing. The General Court said that "the right to a fair hearing requires that the undertaking concerned must have been afforded the opportunity, during the administrative procedure, to make known its views on the truth and relevance of the facts and circumstances alleged, and on the documents used by the Commission to support its claims." An econometric model used by the EC differed from that disclosed to UPS during the administrative procedure, and UPS was not given the opportunity to submit observations on the amendments made. It was determined that, by failing to communicate the final econometric analysis model to UPS before adopting the contested decision, the EC infringed UPS’ rights of defense. The ECJ has now upheld that determination.

According to the ECJ statement, after disclosure of the statement of objections, the EC is not permitted "to modify the substance of an econometric model on which it intends to base its objections, without that modification being brought to the attention of the undertakings concerned and allowing them to submit their comments in that regard." It was also pointed out that UPS did not have to prove that, but for the procedural irregularity, the decision would have been different in content. It was sufficient that the parties were denied "the chance, even if that chance is slight, better to defend themselves."

Companies: United Parcel Service, Inc.; TNT Express N.V

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