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UPS/TNT deal asks questions of EU competition structures
26/Nov/2012 by Thomas Cullen
Over the past week, the European Union has been convulsed in one of its periodic bouts of organisational apoplexy. The meetings to settle the next seven years budget are typical of its internal processes.
Conducted at a glacial velocity and in the most inefficient manner possible, they are characterised by cynical self-interest, disguised with a veil of idealism.
However, it is not just at the strategic level that the EU is a failing organisation. Its ability to act as a regulator also suffers from problems. The so called 'single market' is one of the organisation's few achievements, however the ability of the regulatory structures to manage competition do not always inspire confidence.
The purchase of TNT Express by UPS is a good example. Originally a deal which was to be concluded in the third quarter of 2012, it is now delayed until well into next year as the European Commission will not finish its investigation into the effects on competition caused by the takeover any earlier than January.
Yet, despite the length of the enquiry, it is still unclear what the objections- if any - to the deal are.
The content of the 'statement of objections' that the competition authorities of the European Commission have handed to UPS has not been made public. So why is it acceptable that the key staff in the Commission give interviews about the case to journalists, reported in such a manner that they are incomprehensible and only add to the uncertainty? Similarly the commissioner in charge of competition, Joaquin Almunia, gives speeches that apparently outline the principles on which the decision will be made, yet with references so vague and so short that it is impossible for anyone outside Brussels to know what they mean.
In this process, the lack of transparency has been one of the key failings. Either the process is confidential or it is not. It would be better if the Commission could publicly explain its perspectives on the potential takeover, however if it cannot do this it should stop making semi-public comments. It should also seek to make the process as rapid as possible in order improve confidence amongst customers and investors.
The express parcels market is complex and difficult to understand and it is unclear if the Commission fully understands it. The habit of emitting garbled messages does not increase faith in the regulatory process.
Of course, the purpose of any market regulation mechanism is to ensure effective competition and thus the best service to the customer. However, that regulation should also ensure that the workings of the market are as transparent as possible. If the processes of the regulator are not understood properly, it injects uncertainty into the market and acts as a brake upon investment.