(CN) - European regulators blocked UPS from acquiring TNT Express this week, citing competition concerns.
UPS notified the European Commission of its plans to purchase Dutch-owned TNT Express last year, leading the commission to investigate and report competition concerns in October.
The shipping giant has submitted proposed remedies for the last three months, but the commission's action Wednesday shows that it found the remedies lacking.
UPS had agreed to divest TNT subsidiaries in Spain, Portugal and 15 other European countries, the commission said.
It had also purportedly offered the new buyer a portion of its express deliveries and access to its air network for five years - provided the purchaser was not an "integrator." Regulators identified only four integrators in Europe: UPS, TNT, DHL and FedEx.
The commission noted, however, that a prospective buyer could not provide express delivery within the 17 EU nations without a suitable network or partners in those countries. This requirement alone severely limited the number of potentially suitable purchasers, it found.
Furthermore, any prospective buyer would have to invest in an air transport solution and upgrade its ground network to become a competitive threat to UPS - and regulators doubted the volume of express deliveries within the EU provide much of an incentive to do so.
In the end, the commission decided that a lack of competition would likely drive price increases, outweighing any savings UPS might have passed on to consumers by combining its network with the TNT Express system.
"Many businesses active in the EU single market need to send small packages to another European country with guaranteed delivery on the next day," Joaquin Almunia, who heads competition policy for the commission, said in a statement. "This requires access to affordable, reliable services that truly fit their needs," said. "These businesses would have been directly harmed by the takeover of TNT by UPS because it would have drastically reduced choice between providers and probably led to price increases. We worked hard with UPS on possible remedies until very late in the procedure, but what they offered was simply not enough to address the serious competition problems we identified."
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