DOT rules in favor of DHL
Staff -- Logistics Management, 6/1/2001
The U.S. Department of Transportation last month rejected petitions brought by United Parcel Service (UPS) and Federal Express against DHL Worldwide Express. The petitions sought to revoke DHL's authority to operate as a foreign freight forwarder in the United States and requested an investigation of the citizenship of DHL Airways, DHL's U.S.-based airline subsidiary.
UPS and FedEx had argued that Deutsche Post, the partially privatized German postal service, would inevitably use profits from its mail monopoly to subsidize DHL's operations in the United States. The carriers also charged that Deutsche Post would likely engage in predatory pricing. In addition, they alleged that Deutsche Post's indirect stake in DHL Airways violated a U.S. law that limits foreign ownership of a U.S. airline to 25 percent and prohibits a foreign government monopoly from funding a private company that competes with U.S. businesses. Deutsche Post owns 51 percent of Brussels-based DHL International, which in turn owns 23 percent of DHL Airways.
In a statement announcing their rejection of the petitions, DOT officials said they found no evidence that DHL Worldwide Express was now competing or would compete unfairly with U.S. companies, but they promised that the department would take action if such evidence should arise in the future. The DOT also declined to initiate a formal investigation into DHL's citizenship but said it would continue to monitor the situation. "We have an affirmative responsibility to make sure that competition continues to protect the interests of American consumers," said DOT Secretary Norman Y. Mineta. "While we are denying these petitions, we will continue to ensure that competition in our aviation markets remains fair."
A statement issued by the Department of Transportation stated that there was no evidence that foreign freight forwarders had achieved any significant market share in the United States, "unlike UPS, which holds 53 percent of the domestic market, and FedEx, which has a 26-percent market share." DHL's share of the U.S. express market, the DOT said, is estimated at just 0.6 percent.
Nevertheless, DHL's victory could have far-reaching consequences, says one observer. Logistics industry analyst Edward M. Wolfe of Bear Stearns & Co. in New York believes that the way has been paved for a deal between DHL and troubled Airborne Express. Now that DHL Airways has been affirmed as a U.S. carrier, the door is open for an outright acquisition of Airborne, Wolfe suggested in a recent report. "DHL Airways is in need of a domestic express product to complement its export/import U.S. business, and ABF [Airborne Express] needs to improve its international operations. ... We believe there is real potential for DHL either through its U.S. entity DHL Airlines or its Brussels entity DHL International to take an equity stake in ABF."
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