UPS TNT

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The Court of Justice of the European Union (“CJEU”) has upheld the General Court’s ruling that annulled, due to violating the right of defense, the decision by the European Commission (“EC”) to block the merger of United Parcel Services, Inc. (“UPS”) and TNT Express (“TNT”). The ruling upheld that the EC cannot make a merger control decision based on an econometric model where the notifying party has not had the opportunity to comment.

In June 2012, UPS notified the EC of its intention to acquire TNT. Both companies operate in the international small parcel delivery market. The EC declared in January 2013 that the merger was incompatible with the internal market due to being a barrier to effective competition in 15 Member States.

UPS filed an appeal before the European General Court, which was upheld in March 2017 when the EC’s decision was annulled due to violating UPS’s right of defense.

In its ruling of January 16, 2019, the CJEU upheld the General Court’s ruling and dismissed the final stage appeal filed by the EC. The core issue lies in whether the EC had the obligation to make stakeholders aware and allow them to comment on the econometric model, which had been amended substantially after the statement of objections was made.

The EC argued that it was not obliged to provide access to the case file, and compared the amendments to internal, confidential documents. It also stressed that, due to its provisional nature, the EC is fully entitled to change the position it sets out in preliminary stages (Ruling of Bertelsmann and Sony Corporation of America / Impala, C-413/06 P, EU:C:2008:392, paragraphs 63-65, July 10, 2008). It added that Regulation 139/2004 required the EC to make a final decision as quickly as possible and that the right of defense must be offset by such right.

The court concluded that such an interpretation is contrary to observing the right of defense and article 18, paragraph 3 of Regulation 139/2004. First, it requires the EC to base its decisions solely on the objections for which the parties have made arguments. Second, due to the substantial nature of the amendments, the EC could not be allowed to argue that the document was internal. Lastly, in relation to the argued time pressures, the court found that the final version of the econometric model was approved two months before the final decision, and that the EC did not provide sufficient arguments to justify why UPS was not allowed a short window to make its comments.

The court made it abundantly clear that the important point was not the impact of the procedural irregularity on the content of the decision, but having ruled out even the possibility of the notifying company being able to better defend itself (Ruling Solvay / Commission, C-109/10 P, EU:C:2011:686, paragraph 57, October 25, 2011). Placing that impediment on the notifying party is particularly serious because of the substantial amendments, and the vital nature of the right of defense. Therefore, the company had to show only that such an anomaly deprived it of an opportunity (albeit small) to better defend itself. There is no possibility of demanding that proof be provided that the decision would have been different had the procedural error not occurred.

Authors: Irene Moreno-Tapia and Joaquim Candel

 

 

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Especialista en acuerdos de distribución y abusos de posición dominante, asesora regularmente a importantes multinacionales y fondos de inversión en materia de control de concentraciones, tanto a nivel español como comunitario, asumiendo su representación ante las instancias administrativas. Ha representado y asesorado con éxito a numerosos clientes ante las autoridades españolas en materia de defensa de la competencia, en los dos ámbitos administrativo y contencioso (acuerdos, abusos, concentraciones, ayudas públicas).

irene.moreno@cuatrecasas.com

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joaquim.candel@cuatrecasas.com

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