Acquisition by Deutsche Post of Joint Control of Securicor’s Distribution Business

Deutsche Post AG will acquire joint control of the distribution business of Securicor plc. As a consequence of the transaction, the business concerned, which includes Securicor Group Limited and a number of the subsidiaries of Securicor, will become a joint venture between Deutsche Post and Securicor.

Securicor offers a range of services including express document and parcel delivery, within the UK and Ireland and, to a lesser extent, from the UK and Ireland. Deutsche Post acquired a minority interest in DHL International Ltd in June 1998 and has sole control of the Swiss group Danzas as well as the French company Ducros Services Rapides. The sector affected by the operation comprises express parcel and document delivery, standard expedited parcel delivery, express freight delivery and logistics. All of these services are mainly of a business-to-business nature, and have both a national and an international dimension. The Commission considered that its previous approach is still valid, the relevant geographical markets are national, for all the different services in the sector, including both national and international services. However it was not necessary for it to reach a definite conclusion. Even though traditionally national companies are expanding their European activities through acquisitions of alliances/partnerships, leading to an increase in the number of pan-European operators, the array of service providers still differs across the various Member States, and the presence and importance of national providers is still an important factor to be taken into account. Moreover, despite the trend towards global accounts for pan-European customers and tendering procedures for the award of their contracts, it seems that the practice of contract negotiation between customers and suppliers at a national level is still in place to a significant degree. Pan-European customers only constitute part of the demand.

On the international express delivery market, the joint venture’s activities will only represent a minor increase if added to those of DHL. DHL is the market leader at EEA level with 44% of the market and also in most EEA countries including the UK, Ireland, Germany, Belgium, and the Netherlands. The joint venture’s shares in the same markets, by contrast, never exceed 3%. This relatively minor increase will not substantially change the competitive situation in these markets where other strong competitors have important shares.

On international freight, the joint venture, Danzas (Deutsche Posts’s subsidiary) and DHL’s combined market share at EEA level will not exceed 15%. The only significant overlap at national level will be in the UK where the combined entities (Danzas, DHL and the joint venture) will have a market share of around 25%. 20% of this is the share that will be added by the joint venture.

Deutsche Post indicated that the present operation will enable it to extend its European parcels network (“Europack”) to the UK and Ireland, at the same time giving the joint venture improved access to the continental European markets. The Commission therefore considered the consequences arising from the combination of the activities of the joint venture in express parcel delivery with Deutsche Post’s existing delivery in the parcel business.

However, even if the activities of the joint venture are treated as being the “Europack” type, there are no indications that combining them with Deutsche Post’s parcel activities would lead to serious concerns regarding competition. Apart from the differences in quality, the services offered by the joint venture and by Deutsche Post are clearly complimentary from a geographical viewpoint, since they are carried out in the UK and Germany respectively. In addition, Ducros, which also offers similar services, operates at a lower scale and only in Spain and France. Despite the fact that both Securicor and Deutsche Post are important players in their home countries, the Commission found that they are both faced with substantial competition in the parcel business. This means that there is no serious risk that the combination will dominate the cross-border traffic for any specific services between the UK/Ireland and Germany.

The Commission stated that if an integrated European market was taken into account comprising domestic and international express delivery, freight and parcels in the business to business segment (i.e. the whole expedited transport industry), then the present operation would allow the Deutsche Post group (including Securicor, DHL, Danzas, Ducros) to achieve a market share of between 20% and 25%. Deutsche Post will thus consolidate its leading market position at European level. It will also have the opportunity to substantially increase its range of services as well as the geographical area it serves.

The Commission concluded that this strong market position does not amount to dominance of the market. Customers indicated that they consider the one-stop shop to be convenient, but that they might well keep several suppliers if the price differences justified it. Deutsche Post’s ability to offer a broad range of services in packages would not allow tie-in practices to the detriment of competitors. As to possible network effects triggered by an enlarged geographic coverage and customer base, they do not appear to pose any serious concerns at present. Other competitors are able to offer services on a comparable scale to Deutsche Post. In addition, a large share of services in this field is still directed to customers whose requirements in terms of geographic coverage is limited to local, national or regional levels.

The Commission concluded that the proposed operation was compatible with the common market and the EEA agreement.