News / ECJ rejects UPS $1.9bn compensation claim over failed TNT merger

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The Court of Justice of the European Union (ECJ) has rejected an appeal from UPS for $1.9bn in damages from the European Commission for blocking its 2013 merger of TNT Express.

The commission vetoed the €5.2bn takeover of the Dutch express delivery company on the grounds that it would have restricted competition in the parcels market.

It is unclear whether any further judicial avenues remain open to UPS and whether this judgment brings to an end a more-than-a-decade-long legal battle between the US logistics giant and the EU authorities.

The Luxembourg-based ECJ said that “by deciding not to go ahead with acquiring TNT as soon as the decision at issue was announced, UPS broke the causal link between the commission’s infringement and the alleged damage”, and that “the irregularity committed by the commission is not the determining cause of UPS’s alleged loss of profit, and therefore cannot justify a compensation payment”.

The appeal followed a decision in February 2022 by the General Court of the EU to dismiss the claim for damages. UPS then appealed to the ECJ, which issued its judgment at the end of last month.

The EC’s veto in 2013 of UPS’s planned deal with TNT Express was somewhat unexpected, given that the two companies had been preparing the merger for more than a year. They subsequently worked together to try and allay the EC objections, even offering to relinquish certain assets and giving competitors access to the air services network – but to no avail.

UPS then lodged an appeal to the general court against the veto, claiming unfair treatment by the commission, which had made last-minute changes to the price concentration econometric model it was using to analyse the proposed agreement.

This was upheld in 2017, but the judgment came too late for the merger as FedEx was given the go-ahead by the commission to buy TNT for €4.4bn in 2016.

UPS then instigated legal action for compensation against the EC for the “economic losses allegedly suffered due to the unlawfulness” of the 2013 takeover veto.

The company sought compensation for costs incurred in a legal wrangle over FedEx’s takeover of TNT, the payment to TNT of a contractual termination fee following the cancellation of the merger agreement, and loss of profit as a result of it being unable to implement that merger agreement.

In its statement, the ECJ noted: “First, the Court of Justice observes that, by disputing the circumstances in which the merger agreement concluded with TNT was terminated, UPS does not call into question the General Court’s legal reasoning, but rather the factual assessment made by that court. However, unless the facts have been distorted, which has not been demonstrated in the present case, the appeal procedure does not allow the facts as established by the General Court to be disputed.

“Second, the Court of Justice confirms that the payment of the termination fee stemmed from a contractual obligation which was included in the merger agreement. In so doing, the parties to the agreement together took on the risk that the proposed transaction would not obtain prior approval from the commission. However, the harmful consequences of contractual commitments freely consented to by the addressee of a commission decision cannot constitute the determining cause of the damage suffered because of illegalities vitiating that decision.

“Lastly, the Court of Justice finds that the General Court correctly established that there was no causal link in relation to the three separate types of damage alleged; therefore, UPS’ action for damages, which is required to demonstrate the existence of such a link, cannot in any way succeed.”