Almunia Gets Tough as EU Prepares to Block UPS’s TNT BidStukje op
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Joaquin Almunia, the European Union’s antitrust chief, is starting to look like a tough guy as he prepares to block a third merger in his tenure, fine Microsoft Corp. (MSFT) and extract concessions from Google Inc. (GOOG)
United Parcel Service Inc. (UPS) decided to scrap the biggest deal in its history after concluding it couldn’t do more to convince the 64-year-old to approve the 5.16 billion-euro ($6.9 billion) bid for TNT Express NV. (TNTE) Last year, he crushed another trans-Atlantic deal -- Deutsche Boerse AG (DB1) and NYSE Euronext’s (NYX) plan to create the world’s biggest exchange.
Enlarge image EU Competition Commissioner Joaquin Almunia
Three years into his term, Joaquin Almunia, has already axed as many deals as his Dutch predecessor, Neelie Kroes. Photographer: Georges Gobet/AFP/GettyImages
“Deutsche Boerse and UPS to me send a signal that the European Commission is getting tougher on mergers,” said Alasdair Balfour, a London-based lawyer at Fried Frank Harris Shriver & Jacobson LLP. “Almunia’s commission is willing to dig in its heels and stand its ground. And it’s not just a question of negotiating the extent of the remedies, they’re willing to say here’s what you have to do and if you don’t, we’ll block it.”
Three years into his term, Almunia, has already axed as many deals as Dutch predecessor, Neelie Kroes. He’s blocked the plans of Aegean Airlines SA (AEGN) to merge with unprofitable Olympic Air SA in Greece and is now vetting a resurrected bid by Ryanair Holdings Plc (RYA) to buy Irish rival Aer Lingus (AERL) Group Plc. Almunia rejects being labeled as tough, pointing to the hundreds of deals he’s approved.
“I’ve already blocked two in three years and this is to be very tough?” Almunia told reporters in Bruges, Belgium, yesterday. “How many have I cleared? A lot! Hundreds!”
Google Settlement
Almunia points to statistics that minimize the EU’s record of blocking mergers. Regulators have blocked only 22 deals out of 4,600 reviews, he said last month.
The Spanish socialist, who lost a bid to be his country’s prime minister in 2000, has said he’s resisted calls to soften EU merger scrutiny and would ensure that companies’ efforts to consolidate don’t trample on consumers.
Competition-abuse cases also fall under Almunia’s remit and he may seek more from Google than his American counterparts in similar probes into whether the world’s biggest search engine company discriminates against rivals.
He told Google last month to submit concessions to eliminate concerns over its search results that could allow the EU to settle the case without fines. U.S. regulators ended their probe earlier this month, saying there was insufficient evidence that Google’s actions harmed consumers.
‘Huge Step’
Almunia, who is from Bilbao, Spain, has also warned Microsoft that he will decide on fines as soon as this month over its failure to comply with a settlement to give users a choice of Web browsers.
“It’s a huge step for the commission to prohibit deals and I don’t think that’s really what they’re in the business to do,” said David Anderson, a lawyer at Berwin Leighton Paisner LLP in Brussels.
Some lawyers say Almunia may have been trying to extract more concessions from UPS to ensure a competitive parcel delivery industry in the 27-nation EU.
“I’m sure that they would much rather have been able to fashion a remedy which would have allowed the deal to go through but still maintain competition in the markets,” said Anderson. The Brussels-based commission “is very rigorous,” said Anderson. UPS and TNT made a “strong case too but couldn’t be reconciled.”
‘Chilling Effect’
While he is on track to block more deals than Kroes, he is still behind other predecessors such as Karel Van Miert, who blocked nine in the 1990s, and Mario Monti, who pulled the plug on eight deals during his stint from 1999 to 2004.
The recent vetoes are “a reflection of the deals we are seeing today” where there’s a tough trading environment, too much capacity and a need for consolidation, said Matthew Hall, a lawyer at McGuire Woods LLP in Brussels.
“The takeaway is in these difficult merger cases -- when you’re looking at a tricky deal and you’re having to predict where the European Commission comes out on it, what remedies are going to have to be given -- then as a result of these two prohibitions you’re likely to be more cautious,” said Balfour.
“It may have a chilling effect on M&A activity or on the prices that are paid for companies in consolidated sectors.”