Has anyone seen this Euro-flick before?

In an action reminiscent of the steps it took on its way two years ago to deny UPS Inc.'s proposed US$4.8 billion offer for Dutch delivery firm TNT Express, the European Commission (EC), the European Union's antitrust arm, said today it has opened an in-depth investigation into FedEx Corp.'s proposed US$2.8 billion all-cash acquisition of TNT Express.

The EC said today it has proceeded to a "Phase II" analysis of the FedEx-TNT Express deal, a move that usually doesn't happen unless there are questions raised about whether the merger would stifle competition. Most mergers that come before the EC are routinely cleared during Phase I of the review process. Once the EC is notified of a transaction, it generally has 25 working days to clear the deal or move on to Phase II, which takes the form of an in-depth probe. The agency was notified on June 26; the transaction was first announced in early April.

The EC said it had concerns the merger would face "insufficient competitive constraints" from the two remaining parcel carriers serving Europe: DHL Express, which is owned by German mail and logistics giant Deutsche Post AG, and UPS Inc. The combination of a reduced number of carriers and the purported behavior of DHL and UPS would lead to a "concentrated market in several member states for international express delivery services" to a destination within or outside the European Economic Area (EEA), the EC said. It did not identify which states would be most affected by the merger. The EEA is composed of 31 countries, including all 28 EU members.

The EC also raised concerns about the competitive impact the combination would have on international deferred, or nonexpress, services outside the EEA.

In a statement, Memphis-based FedEx said it "will continue to work together with TNT Express to meet the European Commission's need for additional due diligence and [is] confident that the combination of both companies will increase competition and create benefits for customers." FedEx said it still hopes to complete the deal during the first half of next year.

Industry watchers believed that European regulators would clear the FedEx-TNT Express acquisition because FedEx, at 4 or 5 percent of the market, has the smallest share among the four majors, according to Shipware LLC, a consultancy. The deal would make FedEx the second-largest player in Europe, with a 17-percent share, behind DHL's 19-percent share leadership position, Shipware said. By contrast, a UPS-TNT deal would have given UPS about 30 percent of the Euro parcel market, a level regulators were uncomfortable with.

The FedEx-TNT Express transaction won praise from analysts for melding complimentary strengths. FedEx operates a sizeable European air fleet, and TNT Express would give FedEx access to an expansive ground network and strengthen Fedex's currently weak road-transport positions in the U.K. and France, said Rob Martinez, Shipware's president and CEO. TNT Express, in turn, would shutter its expensive air system and then route air shipments through the FedEx network. TNT Express would also be able to expand its global footprint outside of Europe, especially in the U.S., where it is invisible.

Jerry Hempstead, a former top U.S. sales executive at the old Airborne Express and DHL Express and today the head of a consultancy that bears his name, said he wouldn't be surprised if DHL was lobbying to torpedo the deal in much the same way it used its influence in Europe to scotch the UPS-TNT Express deal. DHL not only would want to maintain its top-dog position on the continent, but it harbors long-running resentment toward UPS and FedEx for trying to block its 2003 acquisition of Airborne.

"Never underestimate the tentacles of DHL to strangle this deal, and either make it painful for a long time or … actually kill it," Hempstead said. He added that DHL could be sufficiently well-connected in Brussels and other European capitals to persuade the EC to kill the deal.

The EC has until Dec. 8 to finish its probe and to determine if the competitive concerns are legitimate. It said the opening of the investigation does not predetermine its outcome.

Should the case follow along the lines of the UPS-TNT Express saga, it would set up a pitched battle between the European monolith and FedEx Founder and Chairman Frederick W. Smith, arguably the world's most influential transport executive, and a master political player. If that isn't worth the cost of a movie ticket, it is surely worth the US$8 price of the popcorn.