EUROPEAN COMMISSION DG Competition CASE M.7630 - FEDEX / TNT EXPRESS (Only the English text is authentic) MERGER PROCEDURE REGULATION (EC) 139/2004 Article 8 (1) Regulation (EC) 139/2004 Date: 08/01/2016 This text is made available for information purposes only. A summary of this decision is published in all EU languages in the Official Journal of the European Union. Parts of this text have been edited to ensure that confidential information is not disclosed; those parts are enclosed in square brackets. EN EN EUROPEAN COMMISSION Brussels, 8.1.2016 C(2015) 9826 final Public Version COMMISSION DECISION of 8.1.2016 declaring a concentration to be compatible with the internal market and the functioning of the EEA Agreement (Case M.7630 FedEx/TNT Express) (Text with EEA relevance) EN 1 EN TABLE OF CONTENTS 1. Introduction ................................................................................................................ 13 2. The Concentration ...................................................................................................... 14 3. Union Dimension ....................................................................................................... 14 4. The Procedure ............................................................................................................ 14 5. Cargo transport and freight forwarding ...................................................................... 15 5.1. Cargo transport ........................................................................................................... 15 5.1.1. Market definition ........................................................................................................ 15 5.1.2. Competitive assessment ............................................................................................. 16 5.1.3. Conclusion.................................................................................................................. 16 5.2. Freight Forwarding..................................................................................................... 16 5.2.1. Market Definition ....................................................................................................... 16 5.2.2. Competitive assessment ............................................................................................. 17 5.2.3. Conclusion.................................................................................................................. 17 6. Small Package Delivery Services – Industry Overview ............................................ 17 6.1. Value Chain ................................................................................................................ 17 6.2. Competitive Landscape .............................................................................................. 19 6.2.1. Integrators .................................................................................................................. 19 6.2.2. Non-integrators .......................................................................................................... 19 6.2.2.1. Incumbent postal operators ........................................................................................ 20 6.2.2.2. National small package delivery companies and partner networks ........................... 20 6.2.2.3. Freight forwarders ...................................................................................................... 21 6.2.2.4. Others ......................................................................................................................... 21 6.2.2.5. Resellers ..................................................................................................................... 21 6.3. Small package delivery is a highly differentiated sector ........................................... 21 6.4. Network Industry and importance of economies of scale .......................................... 22 6.4.1. Effect of network density on pick-up and delivery costs ........................................... 22 6.5. Buyers ........................................................................................................................ 23 6.6. Bundling and multi-sourcing ...................................................................................... 23 6.7. Barriers to entry .......................................................................................................... 25 7. Small Package Delivery Services – Market Definition .............................................. 26 7.1. Relevant product markets ........................................................................................... 26 7.1.1. Small packages vs freight........................................................................................... 26 7.1.2. Domestic vs international ........................................................................................... 27 7.1.3. International intra-EEA small package delivery services .......................................... 28 7.1.4. Extra-EEA small package delivery services .............................................................. 30 EN 2 EN 7.1.4.1. Extra-EEA small package delivery services concern a variety of providers offering differentiated services ................................................................................................ 30 7.1.4.2. Express and deferred are sub segments of a wider extra-EEA market ...................... 31 7.1.4.2.1. FedEx's view ............................................................................................................ 31 7.1.4.2.2 Commission's assessment .......................................................................................... 35 7.1.4.2.3. Conclusion ................................................................................................................ 45 7.1.4.3. Segmentation of extra-EEA small package delivery services by major destination lane ............................................................................................................................. 45 7.1.4.3.1. FedEx's view ............................................................................................................ 45 7.1.4.3.2. Commission's assessment ......................................................................................... 46 7.1.4.3.3. Conclusion ................................................................................................................ 50 7.1.5. Conclusion on the relevant product markets .............................................................. 50 7.2. Relevant geographic markets ..................................................................................... 50 7.2.1. International intra-EEA express small package delivery services ............................. 51 7.2.1.1. FedEx's view .............................................................................................................. 51 7.2.1.2. Commission's assessment .......................................................................................... 51 7.2.1.3. Conclusion.................................................................................................................. 54 7.2.2. Extra-EEA small package delivery services .............................................................. 54 7.2.2.1. FedEx's view .............................................................................................................. 54 7.2.2.2. Commission's assessment .......................................................................................... 54 7.2.2.3. Conclusion.................................................................................................................. 56 8. Small Package Delivery Services – Market Reconstruction ...................................... 56 9. INTRA-EEA express delivery services markets ........................................................ 59 9.1. Principles and introduction ........................................................................................ 59 9.2. Competitive constraint exercised by non-integrators ................................................. 60 9.3. The Merged Entity's market position on international intra-EEA express delivery services markets would be moderate .......................................................................... 64 9.3.1. Market shares submitted by FedEx ............................................................................ 64 9.3.2. Results of the Commission's market reconstruction exercise .................................... 66 9.4. Amongst integrators, FedEx and TNT are no close competitors regarding international intra-EEA express delivery services ..................................................... 67 9.4.1. FedEx's views ............................................................................................................. 68 9.4.2. The Commission's assessment ................................................................................... 68 9.4.2.1. FedEx's business focus is on customers with significant extra-EEA delivery needs . 69 9.4.2.1.1FedEx derives the large majority of international intra-EEA express revenues from customers that also purchase extra-EEA services ...................................................... 69 9.4.2.1.2FedEx's focus on international intra-EEA customers that are heavy users of extra- EEA services is due to the low scale and density of its operations in the EEA. ........ 71 EN 3 EN 9.4.2.2. TNT's