The Role of the Efficiency Defence in EU Merger Control Proceedings Following UPS/TNT, FedEx/TNT and UPS v Commission

Abstract

The importance of efficiencies – synergies, cost savings – has long been recognised in the context of antitrust review of mergers, whether in the USA, Europe, or other jurisdictions. The use of efficiencies in defence of substantively-problematic mergers, as an antidote to the potential anticompetitive effects of a merger, has a much more chequered history. In Europe, outright denial of the pro-competitive effects of merger-related efficiencies has evolved through a phase of somewhat reluctant acceptance of the theoretical benefits of efficiencies, into what is currently a codified willingness to assess and accept efficiencies in defence of otherwise problematic mergers. On 7 March 2017 the General Court of the EU (‘Court’) issued its judgement1 on the matter of the appeal by United Parcel Service, Inc. (‘UPS’) against the Commission decision to prohibit its acquisition of TNT Express NV (‘TNT’) in January 2013.2 In that judgement, the Court annulled the Commission's prohibition decision, raising concerns about the lack of access afforded to the merging parties in UPS/TNT in respect of a finalised version of the econometric model used by the Commission as a basis for its blocking decision. Much of the economic evidence presented by the merging parties in that case had related to purported efficiencies that would be created by the merger, and the issue of whether those efficiencies would be sufficient to outweigh an expected negative effect on pricing as a result of the merger.