--EU market definition still falls short of UPS, TNT lobbying positions - Source
--Statement sent to UPS and TNT sets out antitrust issues in at least 25 of 27 EU members
--Document stresses importance of competitive express parcel delivery sector for European economy
By Vanessa Mock
BRUSSELS--European Union regulators have warned that a planned deal to create Europe's largest package-delivery company raises competition problems in almost all 27 member states, according to a person familiar with the situation.
EU officials have broadened their definition of the market that is affected by the planned takeover of TNT Express NV (>> TNT EXPRESS) by United Parcel Service Inc. (>> United Parcel Service, Inc.), though didn't go nearly as far as what was pushed in the companies' recent lobbying. A key concern is the overnight delivery sector, where the two are among a handful of market leaders thanks to their wide networks.
The formal objections presented to the companies by the European Commission last month are likely to make it tougher for them to offer concessions that wouldn't undermine the commercial logic of the proposed 5.2 billion-euro deal revealed in April. Both companies have said they remain confident of closing the transaction early next year.
EU competition chief Joaquin Almunia warned last week that the proposed deal raises "serious competition concerns" and called for "substantial remedies," echoing his stance when reviewing last year's planned merger of NYSE Euronext (>> NYSE Euronext) and Deutsche Boerse AG (>> Deutsche Boerse AG), which collapsed because of antitrust issues.
The statement of objections sent to UPS and TNT by Mr. Almunia's team sets out antitrust issues in at least 25 of 27 European Union member states, according to the person who has reviewed the document.
"This would seem to suggest that UPS can no longer hope to clear the deal by offering country-by-country divestments, but instead would need to look at offering solutions for its entire network," the person said.
The formal document also reiterates the Commission's stance that UPS and TNT are two of just four so-called "market integrators"--alongside the DHL unit of Deutsche Post AG (>> Deutsche Post AG) and FedEx Corp. (>> FedEx Corporation)--that offer a one-stop shop for express parcel delivery thanks to their extensive road and air networks.
The Commission has also struck down the companies' argument that regulators should consider the dozens of firms providing door-to-door parcel delivery service in the EU as integrators providing a rival service.
The confidential document also stresses the importance of a competitive express parcel delivery sector for the European economy and highlights the high "barrier to entry," meaning that the market currently makes it hard for new entrants to compete against the four current integrators.
UPS said last week in a regulatory filing that it plans to respond to the Commission's concerns before the end of the year, and still aims to close the transaction in "early" 2013. The companies had previously hoped to finalize the deal by the end of 2012 before EU regulators opened a second-stage review of the plan.
The Commission has said it plans to make a final decision by early February.
Write to Vanesaa Mock at email@example.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires