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The European court has annulled the watchdog’s 2013 decision to block the proposed mail merger between UPS and TNT, the first such defeat in over a decade.

American UPS agreed to buy Dutch delivery group TNT Express for €5bn in 2012. After an in-depth probe, then-Competition Commissioner Joaquín Almunia blocked the merger in January 2013, citing concerns the deal would have ‘drastically reduced choice’ and likely increase prices for small-parcel delivery in the EU.

But the General Court of the EU has now found that the European Commission “infringed UPS’ rights of defence” by basing its final decision on an econometric analysis that had changed from the one discussed with UPS during the process.

“This is a significant defeat for the Commission,” said Nicholas Levy, an antitrust lawyer at Cleary Gottlieb, “not only because the Court has determined that the Commission wrongly annulled a transaction – the first such decision for over a decade – in circumstances where the transaction in question can no longer take place, but also because the error identified by the Court concerns the Commission’s handling of evidence and its respect for the merging parties’ rights of defense, exposing shortcomings that the great package of reforms passed in 2003 following a trilogy of similar judgments by the EU Courts were designed to address.”

Mr Almunia said at the time of the decision in January 2013: “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.”

TNT was subsequently bought by FedEx for €4.4bn in a deal unconditionally approved in January 2016 by current commissioner Margrethe Vestager. She stated at the time that the tie-up did not raise concerns “because FedEx and TNT are not particularly close competitors and because the merged entity will continue to face sufficient competition from its rivals in all markets concerned”.

Ms Vestager had also noted that they “replicated the same assessment as was undertaken in the UPS/TNT case “ to ensure “full consistency with its previous practice”.

UPS welcomed Tuesday’s decision and said: “The most significant [point] of this decision is its impact in helping to preserve a competitive environment in Europe by clarifying the procedure and relevant criteria for merger approval.”

Commenting on the decision, the European Commission said:

The Court has based its annulment on a procedural ground, namely that the Commission did not communicate to UPS the final version of the econometric model used in the contested decision, infringing the rights of defence of UPS.

Today’s judgment focuses on the specific circumstances of the conduct of the administrative procedure in the UPS/TNT Express case of 2013.

The Commission fully recognises the importance of giving parties the full rights of defence. The Commission strives to give parties ample and sufficient opportunities to comment and respond to the economic and econometric analysis that the Commission relies upon in merger cases, notably in its in-depth investigations.

The Commission will carefully analyse the judgment.

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