Background

In 2013, the European Commission (“the Commission”) prohibited the proposed acquisition of TNT by United Parcel Service (“UPS”) on the basis that the merger could lead to a significant impediment of effective competition for intra- EEA express small package delivery services and result in increased prices. UPS offered a package  of remedies, including divestment of TNT’s subsidiaries in the 15 Member States where the Commission identified competition concerns.

The Commission considered that the proposed remedies were insufficient because they did not include an “up-front buyer” commitment. In addition, only a divestment to a pre-existing “integrator” (i.e., a delivery company that controlled international integrated air and ground small package delivery networks) would provide a sufficient competitive constraint following the transaction. The Commission issued a decision blocking the transaction, which UPS appealed to the General Court.

Judgment under Appeal

The appeal focused on the fact that the Commission—after sending UPS the Statement of Objections, but two months before adopting its final decision—made non-negligible amendments to the econometric model it used to identify competition concerns. The General Court annulled the Commission decision, finding that the Commission had breached UPS’s rights of defense by not giving it the opportunity to submit observations on the final, amended version of the econometric model on which the Commission’s prohibition decision relied.[1] The Commission appealed to the Court of Justice.

Judgment of the Court of Justice

On January 16, 2019, the Court of Justice upheld the General Court’s judgment.[2] In particular, it confirmed that the principle of observance of the rights of defense requires the Commission to base its decisions only on objections which the parties have been able to comment on. The Court of Justice moreover agreed that the Commission should have disclosed the final version of its econometric model to the parties before adopting its final decision. It also upheld the General Court’s finding that it was sufficient for UPS to show that there was “even a slight chance that it would have been better able to defend itself” had this procedural irregularity not occurred.[3]  UPS was not required to show that the decision would have been different.

Implications

This judgment strengthens the rights of defense of parties involved in merger proceedings before the Commission. It confirms that before a merger decision is adopted, the parties must have been given the opportunity to “make known effectively their views on the accuracy and relevance of all the factors that the Commission intends to base its decision on”.[4] In particular, if the Commission intends to base its objections to a proposed transaction on an econometric model—which the Court of Justice observed was an “appropriate” tool for analyzing the prospective effects of a merger—it must notify the parties of any non-negligible modifications to the model and allow them to submit comments before adopting a final decision. It remains to be seen if, as a result of this judgment, the Commission will rely less on econometric models going forward. It also remains to be seen how this judgment will impact UPS’s ongoing damages litigation case before the General Court, where UPS Aviation Holdings DAC and ASL Airlines Ltd (“ASL”) are respectively claiming €1.74 billion and €263.6 million in damages from the Commission for having prohibited the 2013 proposed acquisition of TNT Express.[5]


[1]      United Parcel Service v. Commission (Case T-194/13) EU:T:2017:144.

[2]      Commission v. United Parcel Service (Case C-265/17 P) EU:C:2019:23.

[3]      United Parcel Service v. Commission, (Case T-194/13) EU:T:2017:144, para. 210.

[4]      Commission v. United Parcel Service (Case C-265/17 P) EU:C:2019:23, para. 31.

[5]      EU Competition Law Newsletter, November 2018, p. 7.