UPS set to take EU’s European Commission to court over decision to block TNT acquisition

UPS said today it is following the legal process in seeking compensation from the European Union (EU) for the losses suffered as a result of its planned 2013 acquisition of TNT Express NV being unfairly prohibited by the EU.

UPS at one point was in heavy competition for the rights to acquire TNT Express NV, a provider of mail and courier services and the fourth largest global parcel operator, with its biggest rival FedEx, whom eventually won that fight, officially bringing TNT into the fold for $4.8 billion in May 2016.

Getting to that point, though, was replete with many chapters, though. In 2013, TNT was acquired by UPS for $6.8 billion, but the deal was squashed, following a formal decision from the European Commission, the executive body of the EU, which prohibited the acquisition. Many of the EC’s concerns over the deal were due to the competitive parcel landscape in Europe. And FedEx being a distant fourth in Europe in terms of market share made attempts to stop the sale difficult. TNT had been looking for a buyer of its express business since 2010, when it split out its mail division. And UPS subsequently had to hand over $267 million Euro (roughly $344 million in U.S. dollars), because of prohibition by the European Commission and the Offer Condition relating to the EU Competition Clearance not being fulfilled and UPS paying TNT the and withdrawing the offer.

But things took a turn in March 2017, when a general court ruled that the European Commission failed to give UPS the required opportunity to defend itself because the EC changed its economic analysis without disclosing it to the EC. And following the EC’s decision to block the UPS-TNT deal in 2013, UPS appealed that decision to the European General Court in Luxembourg.   

“We can confirm that UPS is following the legal process in seeking compensation for the losses suffered as a result of the acquisition being unfairly prohibited by the European Commission,” UPS said in a statement provided to LM. “We feel strongly that the proposed acquisition would have constituted a good deal for logistics customers as well as B2C consumers. UPS continues to remain bullish on Europe. Today, our European business makes up half of our international volume and revenue. UPS began operating in Europe 40 years ago and have never left since those early days in Germany. We remain focused on executing a disciplined business strategy, continuing progress on our European investment program and leveraging the significant growth opportunities we see in Europe and around the world.”

UPS added that it respects the course of the legal process but is unable to discuss any specifics relating to the claim at this time which is in the hands of the courts. It also noted that the compensation being sought corresponds to what it believes, through objective assessments verified by expert third parties, to be the value of the opportunity wrongly prohibited by the European Commission.

Jerry Hempstead, president of Hempstead Consulting, said that from the time of the original veto of the planned UPS-TNT deal that it was a given UPS was going to fight the EU’s decision.

“UPS won the appeal and had the decision overturned, but by then it was too late and FedEx (the much smaller player in Europe) was already in possession of TNT,” he said. “In my opinion UPS failed to appreciate how powerful a lobby DHL was going to be in influencing this decision. The last thing DHL wanted was a strong competitor in Europe. I believe UPS has already won the battle because shortly after TNT was acquired by FedEx, the TNT network was infected with a computer virus and crippled the operation. It never really recovered and all the TNT customers were forced to find relief at either UPS or DHL. That said, UPS will have a strong case against the EU but getting a foreign court to rule for an American firm is an uphill battle.”