Has the EC’s UPS/TNT decision ignored potential for “non-integrators”?

The European Commission last week revealed the nature of its concerns during review of the aborted UPS/TNT merger. The review  focused on “integrators”- parcel firms which operate incorporated international air and road transport networks - and the names La Poste and DPD cropped up...

During the process, the EC claimed  non-integrators with cross- border operations, such as Royal Mail and its European division GLS; or DPD and its parent La Poste, would not challenge UPS enough as they have a “heavy reliance on road rather than air transport”. Royal Mail claims to have 5,500 vans in the UK, along with 17,100 GLS vehicles on the Continent, a total that is not too far off TNT’s fleet of 30,000 vehicles worldwide.

In 2012, TNT Airways, TNT’s air express division, had a total of 37 planes, just 7% of UPS’s total worldwide air fleet of 531. If additional planes were a concern, would the minimal percentage UPS would have gained through the TNT takeover made much of a difference to its competitiveness?

In response to the EC’s concerns, UPS offered to sell some of TNT’s business along with five year access to its inter-European air network. However, rival integrators DHL and FedEx did not take up the offer and in response, the EC carried out a market test of offers from non-integrator buyers.

DPD parent La Poste was one of the non-integrator firms that expressed an interest in UPS’s offer to solve the problems the regulator was concerned, but the EC also scuppered this deal, concluding that La Poste was not a suitable buyer.

If the La Poste deal had been approved, would this have created another air and ground express network in the European market to compete against UPS? If Royal Mail and GLS, with their large combined fleet, had offered to buy some of TNT’s business, would this have created another big integrator in the European market? Could it be that if the EC had not thwarted the La Poste’s potential offer, more competition may have been created in the European express parcels market, therefore eradicating the regulator’s concerns.