Affected market: Courier activities
Please note that square brackets indicate figures or text which have been deleted at the request of the parties for reasons of commercial confidentiality.
Fedex Corporation (Fedex) provides transportation; e-commerce and business services through owned and independently operated companies under the Fedex brand. In the UK, it offers international document, parcel and freight delivery services focusing on the express delivery market.
ANC Holdings Limited and its associated companies (ANC) provides a range of distribution and logistic services throughout a network of locally based depots across the UK, many of them are franchises. These include domestic and international express delivery services. Its UK turnover in the year ended 31 March 2006 was some £156 million.
Fedex acquired the entire issued share capital of ANC on 15 December 2006. The statutory deadline therefore expires on 14 April 2007. The administrative deadline is 18 May 2007.
As a result of this transaction Fedex and ANC have ceased to be distinct. The UK turnover of ANC exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. The OFT therefore believes that a relevant merger situation has been created.
FRAME OF REFERENCE
The OFT [see note 1] and the European Commission [see note 2] have previously assessed the markets for domestic and international delivery services under three parameters: time (standard or express services), destination (domestic and international services) and weight (documents, parcel and freight services).
Standard service provides delivery within two to three days. Express services tend to be time-sensitive and delivery takes place overnight or within 1-2 days depending on the destination. Parcels and documents are considered distinct from freight on the basis of weight. Parcel (and document) delivery typically concerns packages up to 31.5 kg. Fedex considered that the weight differentiation point between parcels and freight was 68 kg; however, this discrepancy has no impact on the outcome of this case given the parties' limited share of supply.
In the previous BET UK/Target Express decision, absent any competition concerns on the narrowest possible delineation, the OFT did not need to conclude on the frame of reference but found that: 1) there was a lack of demand- and supply- side substitutability between standard and express delivery services; 2) parcel services were considered not to include freight delivery services; and, 3) there was a lack of demand- and supply-side substitutability between domestic and international services.
Fedex has defined the markets where the parties are active on the above basis and the OFT has not seen any evidence or received any representations from third parties suggesting it should divert from the frame of reference used in the BET UK/Target Express decision.
On the basis of customer perception, price differences, and the national organisation of pick-up, delivery and marketing, in its BET UK/Target Express decision, the OFT (in line with the Commission’s past decisional practice [see note 3] has deemed both domestic and international express delivery services for parcel, documents and freight respectively as national in scope. Some decisions [see note 4] have, nonetheless, suggested that there may be a current trend towards a European or global market due to the emergence of some global customer accounts.
While the balance of the evidence in this case points towards a UK-wide frame of reference, this transaction does not raise any competition concerns on this national basis. It has therefore not been necessary to conclude on the geographic scope.
Conclusion on frame of reference
While it has not been necessary to reach a conclusion on the product or geographic frame of reference in this case, as no competition concerns arise even taking into account the narrowest possible frame of reference, the OFT has taken a cautious approach and considered this case on the basis of the provision of: 1) international standard parcel (and document) delivery services in the UK; 2) international express parcel (and document) delivery services in the UK; and, 3) international express freight delivery services in the UK.
Pre-merger, Fedex and ANC's activities were mainly complementary. Fedex had no significant domestic services while ANC's business was focused on its domestic delivery services with relatively minor operations in the international segments. Third parties agreed that they were not close competitors. Nearly all third parties were unconcerned as there are several alternative providers of similar or larger size they can easily switch to at no or minimal cost.
In international standard parcel and document delivery services and in international express freight delivery services, the merged entity has a combined share of supply of about [0-5] per cent with negligible increments. In international express parcel and document delivery the merged entity has around [5-15] per cent share of supply (with an increment of less than [0-5] per cent). In light of these shares and absent any horizontal third party concerns, the OFT does not consider that this transaction raises the realistic prospect of a significant lessening of competition on a horizontal level.
Fedex and also (to a negligible extent) ANC provided international express freight airport to airport services. One third party expressed concerns that the merger would reduce competition in the air express and air freight markets in the London Heathrow area particularly. It was suggested that Fedex could foreclose the provision of wholesale air express and air freight services to smaller courier companies or raise their costs. Given ANC’s negligible presence in these segments (less than [0-5%), the OFT does not believe that this merger is, in itself, capable of giving rise to vertical concerns that raise the realistic prospect of a significant lessening of competition.
THIRD PARTY VIEWS
All third parties (except one) who responded were unconcerned about this transaction. The one concern has been addressed above.
The parties overlapped in the provision of international standard and express parcel and document delivery services and international express freight delivery services in the UK respectively. ANC has less than [0-5] per cent share of supply in each of these three segments. ANC focuses on domestic services whereas Fedex focuses on international services. Several third parties commented on the complementary nature of the merging parties’ services.
In each segment, the merger does not raise the realistic prospect of a significant lessening of competition with increment to share of supply of less than [0-5] per cent. The highest estimated combined share of supply is around [5-15] per cent in international express parcel and document delivery services (including a negligible post-merger increment).
A wide range of viable alternative suppliers with similar or marginally lower shares of supply will continue to exist post-merger and the parties have submitted evidence demonstrating that the parties are not considered to be each other’s closest competitors. Third parties who have commented on this merger have confirmed this statement. In addition, third party respondents did not consider switching to be difficult and all (except one) were unconcerned.
Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.
This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.
- Completed acquisition by BET UK Limited of Target Express Holdings Limited, OFT decision of 7 March 2007 (BET UK/Target Express decision).
- For example COMP/M.3155 – Deutsche Post/Securicor, COMP/M.2908 – Deutsche Post/DHL, COMP/M.1405 – TNT Post Group/Jet Services, COMP/M.1347 – Deutsche Post/Securicor.
- For example IV/M.843 PTT Post/TNT/GD Worldwide.