FedEx-TNT merger may be facing difficulties

European regulators may seek concessions from FedEx such as asset sales as part of its deal to acquire TNT Express, according to multiple media reports.    Press reports on Friday indicate that European regulators may seek concessions from FedEx Corp. as part of its plan to acquire TNT Express.
   The Wall Street Journal reported that the deal has “run into unexpected hurdles” and that regulators are considering “demanding concessions, such as asset sales.”
   A plan by United Parcel Service to buy TNT failed in 2013.
   Bloomberg reported today UPS “wants the EU to frustrate FedEx Corp’s bid” and that UPS is “lobbying hard” against the company’s $4.8 billion takeover, also citing unnamed sources.
   It’s no secret the deal is being scrutinized closely.
   On July 31, the European Commission has opened an in-depth investigation to assess whether the proposed acquisition of TNT Express by FedEx is in line with the EU Merger Regulation.
   The EC noted at the time, “Both companies are major global players in the small package delivery sector. The Commission has concerns that on a number of European markets for international express and regular (so-called ‘deferred’) small package deliveries, the merged entity would face insufficient competitive constraints from the only two remaining players (UPS and DHL). This could lead to higher prices for business customers and consumers.”
   The EC said on July 31 that it had “90 working days, until 7 December 2015, to investigate the proposed acquisition and to determine whether these initial concerns are founded,” adding that the “opening of an in-depth investigation does not prejudge the outcome of the investigation.”
   “Many businesses, and in particular e-commerce, rely heavily on affordable and reliable small package delivery services, and many consumers depend on these services to ensure rapid and safe delivery of goods they have bought,” noted EC Commissioner in charge of competition policy Margrethe Vestager. “The Commission must therefore make sure that FedEx’s takeover of TNT would not impede effective competition and would not lead to higher prices for consumers.”
   FedEx, TNT, UPS and Deutsche Post’s DHL are the only four integrators that control comprehensive air and road delivery networks throughout Europe, and are capable of offering a broad portfolio of small package delivery services.
   The EC said its initial investigation has shown that small package delivery services can be divided into several segments, depending notably on whether the destination is in the European Economic Area (EEA) or beyond and on whether the timing of the delivery is express or “deferred.”
   The Commission said its “preliminary investigation indicates that the other ‘integrators’ would be the only significant competitive constraint on the merged entity for most international express services, with a destination within or outside the EEA. As the proposed transaction would reduce the number of ‘integrators’ competing in the EEA from four to three, the competitive constraint on the merged entity would be significantly reduced, leading to a concentrated market in several Member States for international express delivery services to a destination within or outside the EEA.”
   FedEx and TNT also provide international deferred services outside the EEA. The Commission’s initial market investigation showed that the merged entity would have very high market shares for services to some destinations leading to potential competition concerns.
   The Commission said it “will now investigate the proposed merger in-depth to determine whether these initial concerns are confirmed or not.”