Court Quashes Permit Decision of the Deputy Minister of Economic Affairs which allows PostNL’s Acquisition of Sandd
In a judgment dated 11 June 2020, the Rotterdam District Court annulled a decision from the Dutch Deputy Minister of Economic Affairs allowing the acquisition of Sandd by PostNL, which had been prohibited by the Dutch Authority for Consumers & Markets (ACM) in an earlier decision.
In its decision dated 5 September 2019, the ACM had prohibited – following a Phase II in-depth investigation – the acquisition of Sandd by PostNL, which would create a (near) monopolist in the Dutch postal market.
Sandd was, in practice, PostNL’s largest and only sizeable competitor in the Dutch market. The ACM had concerns about the position of the merged entity on the market for business mail. PostNL would become a (near) monopolist after the acquisition, as PostNL and Sandd were the only two national operators on this market. In its prohibition decision, the ACM decided not to grant a permit to allow the concentration, as its projections indicated that (without Sandd exercising competitive pressure) PostNL could increase its prices for business mail by 30 to 40 percent after the acquisition. In addition, the ACM expected that the acquisition would lead to higher prices for consumer mail. Since the parties maintained that the acquisition was necessary for maintaining a postal delivery system that is efficient and viable, the ACM also considered that any such benefits of the acquisition would fail to offset the consequences of the elimination of competition between PostNL and Sandd.
However, in September 2019, The Dutch Deputy Minister (staatssecretaris) of Economic Affairs and Climate granted – for the first time in history – a permit on the basis of reasons of general public interest. The Deputy Minister attached a number of conditions to the clearance. For example, the merged entity's pricing should be based on actual costs and access for third parties to the merged entity’s network should be guaranteed.
Two of such third parties dependent on PostNL’s (enlarged) network disagreed with this decision and appealed against it. In its judgment, the court found that the consultation period of four days that was given to third parties to present their views on the obligations to provide network access was too short.
Furthermore, the court found that the Deputy Minister insufficiently demonstrated that allowing the concentration would indeed be in the public interest. In particular, the court found that the Deputy Minister had insufficiently rebutted the ACM’s finding (supported by experts) that the universal postal service with which PostNL is entrusted could also be maintained in the absence of the acquisition with Sandd. In this respect, the court held against the Deputy Minister that her risk assessment was based entirely on the findings of PostNL itself and on an analysis by PwC that was commissioned by PostNL. In addition, the court considered that the Deputy Minister had not demonstrated that the obligation imposed on PostNL to maximise its profitability at 9% could sufficiently discipline the merged entity’s conduct, since PostNL had regularly achieved a lower profitability in the past at times when mail volumes were much larger. The 9% ceiling could therefore still create ample space for price increases. The court went on to conclude that the ACM had found in its decision that Sandd would likely have remained active in the postal market even without the acquisition by PostNL.
Finally, the court held that it was foreseeable that a large proportion of Sandd's employees would lose their job, which had also become reality. To that extent, the contested decision itself was said to have led to a sudden reduction in employment in the postal sector. The court found that the Deputy Minister had not substantiated why this reduction in employment would be preferable to a decrease in the rate of decline in mail volumes, even if that would have led to Sandd's bankruptcy. In the latter case, Sandd employees could be employed by other postal carriers.
The court concluded by pointing out that it was aware of the far-reaching consequences of the annulment of the contested decision and the uncertainty whether the concentration can actually be undone. However, the court ruled that PostNL's request to maintain the legal consequences of the Deputy Minister’s decision would unacceptably prejudice the possibility of appealing against ministerial decisions overturning a prohibition decision by the ACM. Furthermore, the court condidered it impossible to decide by itself whether to grant a permit and on the conditions to be attached to such a possible new permit. In this respect, the court observed that the Deputy Minister will first have to consult PostNL's access offer in an adequate manner, research will have to be carried out into the consequences of the concentration for the adjacent markets of unaddressed printing and parcel delivery.
The Deputy Minister has suggested that she will appeal the judgment. It is unclear whether in the meantime she will take a new decision on whether or not to grant a permit. The implications of the judgement for the consummation of the acquisition, which had already taken place, are therefore equally unclear. To be continued…