On February 23, 2022, the General Court dismissed UPS’ €1.7 billion claim for damages allegedly suffered due to the Commission’s prohibition of the proposed €5.2 billion merger between UPS and TNT Express (“TNT”). Although the General Court had previously annulled the Commission prohibition decision due to procedural deficiencies, it rejected UPS’ follow-on damages claim because UPS failed to demonstrate that it would have secured approval for the TNT transaction absent the procedural breach.[1]

The judgment reiterates that the path to damages is paved with insurmountable challenges. The only conceivable scenario appears to be that of manifestly erroneous substantive reasoning, which seems highly unlikely as the Commission’s merger control process normally follows prescribed merger guidelines, its preliminary substantive concerns are evaluated (and often rubber-stamped) by market test respondents, and the General Court affords it a wide margin of discretion.

Background

In January 2013, the Commission blocked a merger between UPS and TNT, which would have reduced the number of significant players in international express small package delivery services in 15 EU Member States from three to two.[2] UPS challenged the prohibition before the General Court, which annulled the Commission decision in March 2017. The General Court found that the Commission had infringed UPS’ rights of defense because it did not share the final version of the econometric model it had relied on.[3] During the General Court appeal process, the Commission approved the acquisition of TNT by FedEx, UPS’ leading competitor.[4]

In December 2017, UPS sued the Commission for economic damages stemming from the annulled prohibition decision.[5] Previous damages claims brought by Schneider Electric[6] and MyTravel Group (previously Airtours)[7] against the Commission’s merger control decisions date back to early 2000s, and were unsuccessful.

The General Court judgment

On February 23, 2022, the General Court dismissed UPS’ claim, essentially because UPS failed to demonstrate that it would have secured approval for the TNT transaction absent the procedural breach.[8] The General Court acknowledged the right to seek damages for procedural infringements of EU administrative institutions, though recalled three cumulative conditions established in the seminal judgment in Francovich: (i) a sufficiently serious breach of the individuals’ rights; (ii) a demonstration of actual damage suffered; and (iii) there must be a direct causal link between the infringement and the damage suffered.

  • Establishing a sufficiently serious breach of rights requires showing that the Commission manifestly and gravely disregarded the limits of its The General Court found that the Commission’s failure to communicate the evidence it relied on did meet this threshold.[9]
  • UPS put forth three damages claims worth €1.7 billion: (i) lost profit; (ii) the payment of a contractual termination fee to TNT; and (iii) regulatory costs related to the subsequent TNT/FedEx
  • However, the General Court dismissed the causality between the Commission’s failure to communicate evidence to UPS during the TNT merger control process and UPS’ alleged damages. UPS’ claim could only conceivably be upheld in a counterfactual where the Commission’s respect for UPS’ procedural rights would have yielded a different outcome – a merger approval. This has not been demonstrated, absent major errors in the Commission’s substantive reasoning. In addition, UPS’ regulatory and contractual costs reflected its “free choice” and did not directly stem from the Commission prohibition [10]

Implications

It remains to be seen whether UPS will appeal to the Court of Justice. But the present judgment will, in any case, likely have a chilling effect on any plausible damages actions for the foreseeable future.

Editors: Conor Opdebeeck-Wilson and Thorsten Schiffer

[1] United Parcel Service v. Commission (“UPS v Commission”) (Case T-834/17), EU:T:2022:84.

[2] UPS/TNT Express (Case COMP/M.6570), Commission decision of January 30, 2013.

[3] United Parcel Service. v. Commission (Case T-194/13), EU:T:2017:144. On August 17, 2020, the General Court ordered the Commission to pay €270,250 in recoverable costs to UPS (United Parcel Service v. Commission (Case T-194/13 DEP) EU:T:2020:371), as previously reported in our July/August 2020 EU Competition Law Newsletter. On January 16, 2019, the Court of Justice upheld the General Court’s judgment (Commission v. United Parcel Service (Case C-265/17 P), EU:C:2019:23).

[4] FedEx/TNT Express (Case COMP/M.7630), Commission decision of January 8, 2016.

[5] This was followed by similar actions brought by Irish airline companies ASL Aviation Holdings DAC and ASL Airlines Ltd (“ASL”) which, prior to the adoption of the Commission decision, had concluded commercial agreements with TNT that were to be implemented following the contemplated clearance of the UPS/ TNT transaction.

[6] Schneider/Legrand (Case COMP/M.2283), Commission decision of October 10, 2001 and Schneider Electric v. Commission (Case T-351/03), EU:T:2007:212, and

Commission v. Schneider Electric (Case C-440/07 P), EU:C:2010:324 (Schneider was awarded €50,000).

[7] Airtours/First Choice (Case COMP/IV/M.1524), Commission decision of September 22, 1999 and MyTravel v. Commission (Case T-212/03), EU:T:2008:315.

[8] The same day, the General Court also dismissed ASL’s damages claim on the grounds that: (i) ASL could not rely on the breach of UPS’ rights of defense; (ii) the Commission had not infringed ASL’s fundamental rights and, in particular, its right to sound administration; and (iii) ASL’s plea alleging the existence of a serious and manifest error committed by the Commission was inadmissible, given that ASL confined itself to referring to UPS’ application.

[9] The General Court rejected UPS’ claim that the Commission’s inadequate reasoning constituted a sufficiently serious breach. Similarly, even though the Commission made errors in the substantive assessment of the notified concentration, these were not sufficient to constitute a serious breach of EU law.

[10] The General Court further noted that UPS terminated the proposed TNT transaction as soon as the Commission’s prohibition decision was announced, which broke any direct causal link.