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EU Court annuls Commission block of UPS buy of TNT

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EU Court annuls Commission block of UPS buy of TNT

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(LUXEMBOURG) - The European Court of Justice confirmed Wednesday that a 2013 Commission decision to prohibit the acquisition of TNT Express by UPS must be annulled due to procedural irregularity.

In 2013, the Commission prohibited the acquisition by UPS of TNT Express on the grounds that in 15 Member States that operation would have led to a significant impediment to effective competition on the market for the international express delivery of small parcels within the European Economic Area (EEA). The decisive factor on which that prohibition was based was an econometric analysis that led the Commission to conclude that there was a risk prices would increase on the majority of the markets concerned.

A UPS action was successful in 2017, when the General Court annulled the Commission's decision on the ground that UPS's rights of the defence had been infringed. The General Court found that the price concentration econometric model ultimately used by the Commission differed considerably from that disclosed to UPS during the administrative procedure, without the Commission giving UPS the opportunity to submit observations on the amendments made.

The Commission appealed before the EU's top Court to have the judgment set aside. In today's judgment, the Court points out that observance of the rights of the defence before the adoption of a decision relating to merger control requires the notifying parties to be put in a position in which they can make known effectively their views on the accuracy and relevance of all the factors on which the Commission intends to base its decision.

So where the Commission intends to base its decision on econometric models, the notifying parties must be able to submit their observations in that regard. Econometric models are, by their nature and purpose, quantitative tools appropriate for the purpose of carrying out the prospective analysis that the Commission undertakes in merger control proceedings. The methodological basis underpinning those models must be as objective as possible in order not to prejudge the outcome of that analysis one way or another. Accordingly, those factors contribute to the impartiality and quality of the Commission's decisions, which, ultimately, is the basis of the trust that the public and businesses place in the legitimacy of the EU's merger control procedure.

The disclosure of such models and methodological choices underlying their development is all the more necessary as it contributes to ensuring that the procedure is fair, in accordance with the principle of good administration enshrined in Article 41 of the Charter of Fundamental Rights of the European Union.

According to the Court, the Commission is required to reconcile the need for speed that characterises the general scheme of the regulation on the control of concentrations with observance of the rights of the defence. Such observance does not allow the Commission, after disclosure of the statement of objections, to modify the substance of an econometric model on which it intends to base its objections, without that modification being brought to the attention of the undertakings concerned and allowing them to submit their comments in that regard.

Consequently, the Court of Justice considers that the General Court did not err in law when it concluded that the Commission could not claim that it was not required to disclose the final econometric analysis model to the applicant before adopting the decision at issue.

In addition, the Court upholds the General Court's finding that failure to disclose an econometric model to the parties to a merger can lead to the Commission's decision being annulled, provided that it has been established that that irregularity has denied them the chance, even if that chance is slight, better to defend themselves. It need not be proven that, but for that procedural irregularity, the decision would have been different in content.

Given the importance of econometric models for the prospective analysis of the effects of a merger, raising thus the standard of proof to be met in order to cancel a decision due to an infringement of the rights of the defence resulting from failure to disclose the methodological choices which are inherent to those models would run counter to the objective of encouraging the Commission to show transparency in the development of such models and undermine the effectiveness of subsequent judicial review of its decisions.

The Court concludes that the General Court was entitled to find, without erring in law, that UPS's rights of the defence were infringed, with the result that the decision should be annulled, provided that it has been sufficiently demonstrated by UPS that, but for that procedural irregularity, it would have had the opportunity better to defend itself. Accordingly, the Court of Justice rejects the Commission's appeal.

Judgment in Case C-265/17 P Commission v United Parcel Service


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