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Big Rivals No Safeguard, EU Economist Says After UPS Defends Bid

United Parcel Service Inc.’s claim that buying TNT Express NV won’t harm competition because it will face a bigger rival may come up against some skepticism at the European Commission after its chief antitrust economist criticized such arguments from merging companies.

Kai-Uwe Kuehn, who advises the European Union regulator on complex economic issues, was speaking in London yesterday, after earlier attending UPS’s formal hearing with officials in Brussels, where the company defended its 5.16 billion-euro ($6.5 billion) purchase of TNT.

“Economically, it doesn’t make much sense” to argue a merger of smaller firms won’t have an effect because the “largest firm is still in the market to provide competitive restraint,” Kuehn said at the London event. “I have heard this several times, including this morning at a hearing.” He didn’t cite any companies by name.

UPS last month received a so-called statement of objections listing concerns about the deal. The EU said it would see a combined UPS and TNT facing Deutsche Post AG’s DHL, Europe’s largest package-delivery company, as its main rival, with weaker competition from FedEx Corp. and smaller firms, a person familiar with the private EU document said last week.

UPS and TNT responded that “competition in Europe continues to be significant, coming from multiple players who offer similar services,” according to an Oct. 19 statement.

Peggy Gardner, a spokeswoman for Atlanta-based UPS, declined to comment on the EU economist’s comments or yesterday’s hearing.

“We are not commenting on our confidential discussions,” said Ernst Moeksis, a spokesman for TNT in Hoofddorp, the Netherlands.

Even merging companies with moderate market shares can impair competition, EU Competition Commissioner Joaquin Almunia said in a speech earlier this month.

“We closely assess the likely impact of a merger on price and other parameters -- such as quality, choice and innovation,” Almunia said in the Nov. 2 speech.

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