RReturn to sender: Court annuls ministerial unblocking of postal merger

Article
NL Law
EU Law

The Rotterdam District Court has annulled the Dutch Minister’s very first clearance of a blocked merger (between postal operators PostNL and Sandd), on grounds of public interest.

The court found that the Minister had insufficiently substantiated the public interest grounds concerned. According to the court, the Minister had also been too hasty in making the decision, which had prevented third parties from giving their views on the underlying clearance conditions.

Calls to intervene in merger control cases for non-competition related reasons have become louder and louder. This ruling, however, underlines that high procedural and substantive standards need to be met when answering to these calls.

ACM blocks postal merger

On 5 September 2019, the Dutch Authority for Consumers and Markets (ACM) blocked postal operator PostNL's acquisition of its only national competitor, Sandd, on the basis that this would create "a monopolist on the postal delivery market". According to the ACM, the efficiencies gained from establishing a single postal network following the proposed PostNL/Sandd merger would fail to offset the anticipated price increases for consumer and business mail. In addition, the PostNL/Sandd merger was unnecessary for PostNL's continued fulfilment of its statutory universal service obligation, as PostNL's postal activities would remain profitable in both the short and long term. Moreover, the ACM pointed to potential negative effects on competition in adjacent markets (such as parcel delivery) due to the loss of an additional postal delivery network. However, the ACM considered there was no need for a definite conclusion on actual effects, given the already-established significant anticompetitive problems in postal markets.

Minister unblocks blocked postal merger

On 27 September 2019, the Dutch Minister of Economic Affairs and Climate Policy unblocked the ACM's prohibition decision on grounds of public interest; this was the Minister’s first time overruling the ACM (see also our October 2019 Newsletter). According to the Minister, the continuity and affordability of the postal services, and the protection of postal employees, outweighed the competition issues raised. The Minister's approval for the merger was granted under strict conditions regarding price increases and network access.

District Court overrules Minister’s unblocking

On 11 June 2020, the District Court of Rotterdam annulled the Minister’s unblocking of the postal merger. According to the court, the Minister had neglected to consider all the competition concerns identified by the ACM, particularly those raised in regard of adjacent markets. Furthermore, the Minister should have demonstrated, for each overriding public interest claimed, how and why the approval decision would contribute to attaining them, underpinned by relevant facts, reports and analyses. The Minister had, for instance, insufficiently refuted the ACM’s (external expert based) finding that the merger’s prohibition would not affect the continuity of postal services, by merely relying on PostNL’s own findings. The court also found the five-day consultation period for the network access condition too short for interested third parties to submit their views. The court therefore annulled the Minister’s approval decision, thereby removing the legal basis for the PostNL/Sandd merger.

And now?

Even though the court acknowledged the far-reaching implications of its annulment, and the difficulty of potentially unscrambling the PostNL/Sandd eggs, it considered that it had no other option given the lack of substantiated reasoning and absent third party views. The Minister has indicated that he intends to appeal the court’s ruling. Whatever the outcome, the ruling demonstrates a high standard for intervention in merger cases for non-competition related reasons, having due regard of procedural and substantive safeguards.

This article was published in the Competition Newsletter of July 2020. Other articles in this newsletter: