DPSGY Deutsche Post AG (PK)

By Natalia Drozdiak 

BRUSSELS-- United Parcel Service Inc. is suing the European Union's antitrust watchdog for EUR1.74 billion ($2.15 billion) plus interest over the regulator's court-annulled veto of its merger with Dutch parcel-delivery company TNT Express NV, a move that could prove fruitful at a time when the bloc's top courts increasingly scrutinize the powerful competition cop's decisions.

In the past, the EU's two top courts have rarely annulled decisions by the European Commission, the bloc's antitrust regulator, prompting outcries among affected companies who say the checks and balances in the EU's system are too weak. But recent court decisions are increasingly putting the commission --which has built a fearsome reputation over the past two decades through a series of high-profile cases against America's biggest companies, including General Electric Co., Microsoft Corp. and Google Inc.--on the defensive.

In the UPS case, the European Commission formally blocked its planned $7 billion acquisition of TNT in January 2013 over competition concerns but the move was overturned by an EU court last year on the basis of procedural missteps by the regulator. The commission is appealing that judgment.

UPS is now seeking compensation from the commission for the 2013 decision, which the company says prevented it from "materializing the benefits associated with that proposed transaction," according to court documents published Monday.

"We feel strongly that the proposed acquisition would have constituted a good deal for logistics customers," said Gregg Svingen, a spokesman for UPS. "The compensation being sought corresponds to what we believe, through objective assessments verified by expert third parties, to be the value of the opportunity wrongly prohibited by the European Commission."

The commission will defend itself in court, an EU spokesman said.

Following the UPS court judgment, the EU's highest court in September backed Intel Corp.'s appeal of a EUR1.06 billion EU abuse of dominance fine in 2009, referring the case back to a lower court and dealing a blow to the European Commission.

The thorough audits by the two Luxembourg-based EU courts are welcomed by companies and lawyers who have complained about the EU antitrust watchdog's autonomy and its power to act as the prosecutor, judge and jury in competition cases. While companies can appeal decisions to the EU's top courts after they've been taken, judges there look for obvious legal errors rather than seeking to form a new opinion on cases and have rarely overturned decisions made in Brussels. U.S. enforcers, by contrast, need to prove their cases before a judge from the outset.

"There is a feeling among the companies and competition practitioners that the courts have been rather lenient to the commission and therefore, it's either better to settle or to forget about appealing... Why go to the court at the end of the day if you know the result?" said Assimakis Komninos, a Brussels-based partner at global law firm White & Case." There have been a couple of cases, which shows a bit [of] movement on the side of the court, but look at where we are coming from."

Only a handful of merger vetoes have been overturned by the top courts in the past, despite legal challenges being routine. In the rare situations where a top court has overturned a decision to block a deal, companies have typically gone on to seek compensation from the commission. For instance, in 2003 Schneider Electric SA sought compensation of nearly EUR1.7 billion after its acquisition of French electric-equipment maker Legrand was blocked but later overturned. In the end, the commission was ordered to pay EUR50,000 in damages to Schneider.

For UPS, the landscape has changed since the commission's 2013 decision, and any renewed attempt at a merger with TNT looks unlikely.

After UPS called off its merger in mid-January 2013 amid the commission's objections, logistics rival FedEx Corp. stepped in to acquire TNT in May 2016 for EUR4.4 billion, expanding its reach in Europe. meanwhile, has been grappling with problems at TNT. Last summer, the unit was hit with a cyberattack that crippled operations in the division for months and required hundreds of millions of dollars in spending to fix.

The EU blocked the UPS-TNT deal on concerns the overnight-parcel-delivery market would effectively become a duopoly between a combined UPS-TNT business and DHL, a unit of Deutsche Post AG. The regulator also worried that other parcel-delivery companies, including FedEx, could be shut out of the market.

Paul Ziobro contributed to this article.

Write to Natalia Drozdiak at natalia.drozdiak@wsj.com

(END) Dow Jones Newswires

February 26, 2018 10:16 ET (15:16 GMT)

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