EU Court Scolds Commission for Merger Interference

(Via UPS.com)

(CN) – EU regulators breached protocol, the union’s top court ruled Wednesday, in using an undisclosed econometric analysis to block the merger of UPS and TNT Express.

The package-delivery companies announced their plans to merge some six years ago, but faced swift interference in January 2013 by the European Commission. 

Though the commission determined that the sale of TNT to UPS would hurt competition in 15 countries, including the Czech Republic, Poland and Sweden, UPS had that decision annulled in 2017.

In its legal challenge before the European General Court, UPS showed that the commission based its decision on an econometric model that differed significantly from the model given to the companies during the administrative procedure.

The Luxembourg-based First Chamber of the European Court of Justice upheld that determination Tuesday.

“Given the importance of econometric models for the prospective analysis of the effects of a merger, raising the standard of proof required to cancel a decision due to an infringement of the rights of the defense resulting, as in the present case, from failure to disclose the methodological choices, especially as regards statistical techniques, which are inherent to those models, as is advocated, in essence, by the commission, would run counter to the objective of encouraging it to show transparency in the development of econometric models used in merger control procedures and undermine the effectiveness of subsequent judicial review of its decisions,” the opinion states.

The commission failed to sway the court that any error regarding the model was immaterial since other factors supported the finding of a significant impediment to effective competition in Denmark and the Netherlands.

“Contrary to what is claimed by the commission, the General Court was not entitled to reject as ineffective the plea alleging infringement of the rights of defense relied on by UPS at first instance due to the fact that, with regard to the Danish and Netherlands markets, the commission found that there was a significant impediment to effective competition, irrespective of any consideration of the econometric model,” the opinion states.

A spokeswoman for the commission voiced appreciation for the court’s input.

“The commission has fully taken on board the guidance given by the GC and now confirmed by the ECJ,” a representative for the press office said in an email. “The commission fully recognizes the importance of rights of defense in competition proceedings and strives to give the parties ample and sufficient opportunities to comment and respond to the economic and econometric analysis that the commission relies upon in merger cases.”

UPS meanwhile applauded today’s ruling, noting that the Atlanta, Georgia-based company has operated in Europe for over 40 years.

“UPS is pleased that the European Court of Justice has agreed that UPS was not given a fair hearing,” spokesman Gregg Svingen said in an email. “The judgment in UPS’s favor makes a number of points preserving a competitive environment in Europe by clarifying the procedure and relevant criteria for merger approval.”

In 2016, about a year before the General Court ruled against the commission in this case, the commission signed off on the merger of TNT Express and FedEx.

A representative for Memphis-based FedEx has not returned a request for comment sent through its website Wednesday morning.

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