European Union regulators recently approved FedEx’s acquisition of TNT after considering restrictions to ensure market competitiveness just a month earlier. Although this represents a major development in favor of the deal, if any customers or competitors are thinking of filing objections, they should be reminded that there would be no sound basis for any such move.  

The market at all levels remains competitive. At the global level, it will become more competitive, because the FedEx-TNT combination provides a more formidable competitor to DHL and UPS in the pan-European market. DPD, the rebranded express parcels company GeoPost, has a larger market share in Europe than TNT Express. In 2014, GeoPost/DPD generated 4.9 billion euros ($5.4 billion) from European countries, while TNT Express made 4.5 billion euros in Europe, although its annual revenue from global operations was 6.7 billion euros.

In addition to having a stronger network to challenge DHL and UPS in Europe for pan-European service, the FedEx-TNT combination will push DPD to fill any gaps in its European service and create opportunities for other smaller regional carriers to expand into new markets.

Another way to highlight the merits in this transaction is to benchmark the European parcel market with that of the U.S., which was more than $70 billion in 2014 and significantly larger than that of Europe.

The U.S. is dominated by two private carriers — UPS and FedEx — and the U.S. Postal Service. The three control about 97 percent of the market, with the remaining 3 percent handled by six regional parcel carriers. Still, the U.S. market is highly competitive, with parcel rates lower than those in Europe.

In 2003, DHL Express made a move similar to that of FedEx when it entered the U.S. domestic market with the acquisition of Airborne Express. DHL proceeded to invest heavily in rebranding Airborne as DHL and aggressively sought to capture a larger share of the domestic parcel market.

Similar to the current situation where FedEx has a presence in Europe, DHL had a presence in the U.S. As such, DHL’s acquisition of Airborne was going to eliminate one competitor from the domestic U.S. market. The result, however, was that the Airborne-DHL combination made the U.S. market even more competitive, because Airborne Express benefited from having access to DHL’s global network and its capital for a huge network expansion.

Errors in execution of the merger of the two domestic operations led to billions in losses for DHL, however, and an exit from the U.S. domestic market in 2008. Hopefully, FedEx will learn from DHL’s mistakes and provide a better experience for TNT customers in Europe and other parts of the world.

TNT customers can take comfort in knowing this is not FedEx’s first such major acquisition in the parcel industry. The company acquired Roadway Package System in 1998, rebranding it as FedEx Ground in 2000. Prior to the acquisition, RPS was growing at a single-digit rate. After acquisition and rebranding, FedEx Ground started growing at a high double-digit rate, becoming a more formidable competitor to UPS.

More importantly, the changes at FedEx Ground made its archrival UPS a better company through investments in technology and introduction of new services to enhance its competitive position against the combination of FedEx Ground and FedEx Express.

For shippers still feeling nervous about the FedEx-TNT deal, there is a lot of misinformation about the European parcel market. First, the combined FedEx-TNT Express will control less than 20 percent of the European parcel market, and the three global carriers (DHL, UPS and FedEx Express) will have less than 75 percent of the total market.

Furthermore, in Europe, each country is still a separate market, and there are many country-based parcel carriers. Examples include GLS, Colis Prive, APC Overnight and General Overnight. Expect some carriers to expand to take advantage of the new market opportunities.

In addition, there are many postal agencies (Royal Mail, PostNL, La Poste, Swiss Post and Correos), some of which have been privatized. These postal agencies already are seeking to penetrate the parcel market, and the FedEx-TNT deal will make them more aggressive in capturing a piece of the fastest-growing segment of the parcel business, driven by the rapid growth of online retail sales.

The growth of e-commerce is bringing new delivery models such as crowd sourcing, store-to-door delivery service providers, and other options such as Amazon Flex. In the U.K., retailers such as Argos also are building out their own delivery network.

Many European shippers aren’t aware that they pay much higher rates than their U.S. counterparts for the same parcel service. The FedEx-TNT deal should promote operational efficiencies leading to more competitive rates.

Satish Jindel is president of SJ Consulting Group, which has offices in Pennsylvania and India.