UPS faces uphill fight over TNT Express Europe's top antitrust watchdog has issued strong and deep-rooted objections to UPS's proposed takeover of smaller Dutch rival TNT Express, leaving the US delivery group with an uphill challenge to save the deal from being blocked. People familiar with the European Commission's "statement of objections," which runs to hundreds of pages, say it concludes that the tie-up will undermine competition in express small parcel delivery in almost every European national market, which would likely raise prices and restrict choice for customers. IN Transport The charge-sheet rejects UPS's arguments that the combination of two of the world's four largest delivery companies would leave the European market highly competitive due to a plethora of smaller operators. Instead, the commission used a narrow market definition restricted to so-called "integrators," companies with their own aircraft which are thus highly competitive in express delivery. The commission is concerned that because US delivery company Federal Express has a weak presence in Europe, a merger would leave UPS competing only with Germany's DHL in many countries. The commission, however, accepted UPS's argument that the takeover would pose no competition problems for routes from Europe to outside destinations. A commission spokesman would not comment on the details of the statement of objections, which remain confidential. UPS will respond in writing to the commission in coming days and put its case at a formal hearing, within the next fortnight. A final judgment is expected in January. While the statement of objections does not prejudge the outcome, the commission rarely changes its core market definition once a statement of objections is issued. If they are unable to broaden the fundamental market definition, it could prove difficult for UPS or TNT Express to find remedies that would allow the deal to go through. As well as the difficulties of selling off part of a delivery network, UPS would need to demonstrate any buyer would be a strong enough "integrator" to counteract any reduction in competition in specific national markets. Both companies declined to respond to details of the statement of objections, but said they remained committed to the merger and expected it to be approved early next year. Their executives argue that whether or not they own their aircraft, smaller delivery companies routinely rent space on planes owned by others, including UPS itself. They point to midsize operators such as GLS as well as numerous freight forwarders and smaller local players. UPS also argues that an expected €450m-€500m in annual synergies from the merger would ultimately be passed on to customers. But the commission statement of objections rejects these arguments as insufficient to balance the anti-competitive effect of the deal. The commission is concerned that if the merger leads Europe to follow the model of the US, where the departure of DHL in 2008 left UPS and Federal Express as the only integrators, it could give the remaining players unhealthy pricing power. In addition to resolving the commission's objections, TNT Express must sell its airline before the settlement date of the acquisition because EU rules prohibit a non-European company such as UPS from owning a European-based airline. TNT Express says talks on selling the airline are at an advanced stage. TNT Express's management agreed to the €5.2bn offer from UPS in March after initially resisting the takeover. On Wednesday the Dutch financial markets authority granted UPS an extension to February 28 of its offer for TNT Express's shares.