Friday, 11 January 2013

UPS move on TNT poses concern -

UPS’s attempted takeover of TNT Express poses serious competition problems that are “not easy” to resolve, the EU competition chief has said, while leaving open the door to an 11th-hour solution to save the deal from being blocked.

The US delivery group is trying to sell France’s DPD a swath of TNT assets that are sufficient in quality and scope to convince Brussels that competition in the express delivery market is maintained.


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The proposed remedies are still being reviewed by the European Commission. But Joaquín Almunia, the EU competition commissioner, made plain the difficulties of compensating for the takeover of one of Europe’s four integrators, which combine ground and air transport.

“The elimination of competitors such as TNT, that is an integrator, requires . . . an alternative integrator or someone who will play the same role from the competition point of view with equivalent competitive pressure,” Mr Almunia said in an interview with the Financial Times.

He added that finding such a remedy was “not easy”, particularly given DPD has no air transport of its own. However by noting that the creation of an “equivalent competitive pressure” – rather than a full-blown global integrator – could be sufficient, Mr Almunia appears to be keeping his counsel on a DPD option.

“What I have told UPS, what you have to present is an equivalent. Everybody who knows this market is convinced today DPD is not an equivalent,” he said. “It depends how this situation can be changed but it will not change just for saying I want to change. We need to receive assurances.”

“To be express delivery you cannot go with horses, you need also to have not only capacity in the point of delivery of the sender of the parcel but delivery close to the receiver,” he added, with reference to air capability.

The commission sees a potential sale to FedEx as a simpler option, because the US group has its own airline and a more developed network in Europe. But UPS has told the commission FedEx are unwilling to discuss buying the assets it is willing to sell.

Mr Almunia is shortly to pass judgment on the terms of the provisional deal with DPD. His decision remains in the balance and it is possible that the UPS-TNT deal will be blocked.

DPD is being asked to provide assurances to the commission on how it plans to use the TNT assets and on its long-term plans to challenge the likes of UPS and DHL in express delivery.

UPS has offered to sell TNT subsidiaries in at least 16 countries, as well as providing DPD with space on its aircraft at competitive rates for five years. Mr Almunia’s comments indicate potential commission concerns about whether this would leave gaps in the DPD network that would undermine its ability to compete.

An option under consideration is to “stop the clock” for a few weeks to give more time to UPS to agree terms with DPD, before the commission gives its official approval.

But some people involved in the talks say that the risk of the DPD transaction not being completed after approval make this option unlikely. The commission could instead withhold full regulatory approval – and stop UPS closing its deal – until a binding agreement is signed with a buyer.


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