Amidst allegations of breach of European Commission’s fir competition laws, the Commission has initiated an in-depth investigation to assess whether the proposed acquisition of TNT Express by FedEx Corporation is in line with the EU Merger Regulations.
Both TNT Express and FedEx Corporation are major players in the global small package delivery sector.
The merger of the two majors would create a stronger entity, which the Commission is fearful, would humble competition from UPS and DHL. The only two companies in the sector that can provide nay any amount of competition to the strength acquired by the TNT Express acquisition by FedEx Corporation are UPS and DHL.
“The Commission has concerns that on a number of European markets for international express and regular (so-called ‘deferred') small package deliveries, the merged entity would face insufficient competitive constraints from the only two remaining players (UPS and DHL). This could lead to higher prices for business customers and consumers,” said the Commission in a press release on Friday.
To confirm their initial fears of the competition cessation in the sector, the Commission has a time period of 90 working days till the 8 of December 2015.
However the outcome of the investigation would not be prejudged by the opening of an in-depth investigation against the proposed acquisition.
"Many businesses, and in particular e-commerce, rely heavily on affordable and reliable small package delivery services, and many consumers depend on these services to ensure rapid and safe delivery of goods they have bought. The Commission must therefore make sure that FedEx's takeover of TNT would not impede effective competition and would not lead to higher prices for consumers", said Margrethe Vestager, in charge of competition policy.
The four companies, FedEx, TNT, DHL and UPS are the only four so-called 'integrators' currently operating in Europe.
The companies have a significant control over air and road delivery network throughout Europe and beyond and are thus called ‘integrators’, the press release said. These companies have the capacity to offer broad portfolios for small package delivery services. DHL is owned by Deutsche Post and UPS is a US-based company.
The Commission is concerned about the consequences to corporate and the general consumers in terms of reduced product option and pricing after the proposed acquisition. The Commission that since DHL and UPS are the only two companies that can provide any realistic competition to the post acquisition entity, the competitive constraint on the merged entity would be significantly reduced.
This significant competitive constraint provided by DHL and UPS on the new entity would be applicable to for most international express services that have a destination within or outside the EEA.
The Commission is apprehensive that the merger could lead to a concentrated market in several Member States for international express delivery services to a destination within or outside the EEA.
The basis for the initiation of the investigation stems from the Commissions initial market investigation that indicated that the merged entity would have very high market shares for services to some destinations leading to potential competition concerns.
The two merging companies had notified the Commission on 26th June this year and the Commission would now investigate the proposed merger in-depth to determine whether these initial concerns are confirmed or not.
The transaction was notified to the Commission on 26 June 2015.
The Commission’s initial investigation has shown that small package delivery services can be divided into several segments, depending notably on whether the destination is in the European Economic Area (EEA) or beyond and on whether the timing of the delivery is express or 'deferred'.
(Source:www.streetinsider.com)
Both TNT Express and FedEx Corporation are major players in the global small package delivery sector.
The merger of the two majors would create a stronger entity, which the Commission is fearful, would humble competition from UPS and DHL. The only two companies in the sector that can provide nay any amount of competition to the strength acquired by the TNT Express acquisition by FedEx Corporation are UPS and DHL.
“The Commission has concerns that on a number of European markets for international express and regular (so-called ‘deferred') small package deliveries, the merged entity would face insufficient competitive constraints from the only two remaining players (UPS and DHL). This could lead to higher prices for business customers and consumers,” said the Commission in a press release on Friday.
To confirm their initial fears of the competition cessation in the sector, the Commission has a time period of 90 working days till the 8 of December 2015.
However the outcome of the investigation would not be prejudged by the opening of an in-depth investigation against the proposed acquisition.
"Many businesses, and in particular e-commerce, rely heavily on affordable and reliable small package delivery services, and many consumers depend on these services to ensure rapid and safe delivery of goods they have bought. The Commission must therefore make sure that FedEx's takeover of TNT would not impede effective competition and would not lead to higher prices for consumers", said Margrethe Vestager, in charge of competition policy.
The four companies, FedEx, TNT, DHL and UPS are the only four so-called 'integrators' currently operating in Europe.
The companies have a significant control over air and road delivery network throughout Europe and beyond and are thus called ‘integrators’, the press release said. These companies have the capacity to offer broad portfolios for small package delivery services. DHL is owned by Deutsche Post and UPS is a US-based company.
The Commission is concerned about the consequences to corporate and the general consumers in terms of reduced product option and pricing after the proposed acquisition. The Commission that since DHL and UPS are the only two companies that can provide any realistic competition to the post acquisition entity, the competitive constraint on the merged entity would be significantly reduced.
This significant competitive constraint provided by DHL and UPS on the new entity would be applicable to for most international express services that have a destination within or outside the EEA.
The Commission is apprehensive that the merger could lead to a concentrated market in several Member States for international express delivery services to a destination within or outside the EEA.
The basis for the initiation of the investigation stems from the Commissions initial market investigation that indicated that the merged entity would have very high market shares for services to some destinations leading to potential competition concerns.
The two merging companies had notified the Commission on 26th June this year and the Commission would now investigate the proposed merger in-depth to determine whether these initial concerns are confirmed or not.
The transaction was notified to the Commission on 26 June 2015.
The Commission’s initial investigation has shown that small package delivery services can be divided into several segments, depending notably on whether the destination is in the European Economic Area (EEA) or beyond and on whether the timing of the delivery is express or 'deferred'.
(Source:www.streetinsider.com)