12 April 2017

UPS/TNT block annulled: need for speed does not trump right of defence

The General Court recently annulled the European Commission’s decision to block UPS’s intended acquisition of TNT Express. According to the General Court, the Commission infringed UPS’s rights of defence by making substantial changes to the econometric model used for its prohibition decision without first communicating this updated model to UPS. The General Court admitted that the need for speed in merger control proceedings should be taken into account when assessing alleged infringements of the rights of defence. However, in this case the General Court ruled that the Commission had had sufficient time to, at the very least, communicate the essential elements of the final model to UPS before adopting its decision. A useful clarification companies should be aware of when involved in merger proceedings.

In January 2013, the Commission blocked the proposed acquisition of TNT Express by UPS. The Commission used the results of an econometric model to find that the intended acquisition would have restricted competition in the express delivery of small packages in 15 member states. UPS brought an action before the General Court seeking the annulment of the Commission’s decision. UPS argued, among other points, that its rights of defence had been infringed because the econometric analysis used by the Commission in its prohibition decision was based on a different econometric model than what had been deliberated during the administrative procedure.

The General Court reiterated that the right to a fair hearing, which forms part of the rights of defence, requires that a company should have the opportunity, during the administrative procedure, to make known its views on the truth and relevance of the facts and circumstances alleged and on the documents used by the Commission to support its claim. In this particular case, the Commission had adopted the final version of the econometric model more than two months before the adoption of its prohibition decision. However, the Commission had not communicated this updated model to UPS even though the changes made to the model could not, in the General Court’s view, be regarded as negligible. By failing to inform UPS of these changes, the Commission infringed UPS’s rights of defence. UPS might have been better able to defend itself if it had been able to review the final version of the econometric model chosen by the Commission before the adoption of the prohibition decision. The General Court therefore annulled the Commission’s prohibition decision in its entirety.