European antitrust regulators proved again on Monday that they were more than willing to flex their considerable muscle.
U.P.S.‘s $6.9 billion bid for TNT Express is the latest merger blocked by the European Union, and certainly the most prominent since the proposed tie-up of NYSE Euronext and Deutsche Börse last year. In the case of U.P.S., European regulators argued that proposed asset sales, including airline operations, would not be enough to appease their concerns over the state of competitiveness in package delivery.
“We are extremely disappointed with the European Commission’s position,” the chief executive of U.P.S., D. Scott Davis, said in a statement. “We proposed significant and tangible remedies designed to address the European Commission’s concerns with the transaction.”
Other antitrust regulators have blocked mergers on antitrust grounds. For example, the Justice Department opposed AT&T‘s proposed $39 billion bid for T-Mobile USA.
But the European Commission, led by Joaquín Almunia, has displayed an aggressive approach that has rankled some deal makers.
Mr. Almunia has acknowledged those concerns, even as he has sought to rebut them. In a speech delivered in November, the commissioner argued that he was not trying to prevent European companies from growing. But he said he was trying to preserve a competitive market place.
“It is simply not true that the commission is putting the brakes on the legitimate efforts of Europe’s firms to scale up,” he said. “What we must avoid are attempts to shield Europe’s companies from competition, in particular during this harsh period for the economy. In this game, only a few of them will benefit, and the majority will lose.”
Among Mr. Almunia’s arguments was that the European Commission was less concerned about high levels of market share than what mergers might do to prices.
In the case of the NYSE Euronext merger, regulators demanded that the two exchange operators sell off significant parts of their businesses. Chief among the European Union’s concerns were the strong position that the two companies would have in the market for derivatives traded on exchanges, leading to a call for the sale of either NYSE Euronext’s Liffe platform or Deutsche Börse’s Eurex unit.
Both companies protested, arguing that the European Union’s view of the market was too limited and did not take into account the broader market for derivatives traded off exchanges. The market operators eventually decided to call off their deal, believing that there was little hope for reversing regulators’ opinion.
Other deals have passed review, but some have required significant changes. In approving Universal Music Group’s takeover of EMI Music last year, for example, European regulators required the sale of a third of EMI’s assets. The decision has led to the auction of music labels like Parlaphone, the home to groups like Coldplay and David Guetta.
DealBook: With U.P.S. Deal, European Antitrust Regulators Block Another Big Merger
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DealBook: With U.P.S. Deal, European Antitrust Regulators Block Another Big Merger
