FedEx, UPS Claim DHL Deal Violates Federal Law

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FedEx and United Parcel Service have begun separate assaults on the proposed $1.05 billion deal that would strengthen Deutsche Post's presence in the U.S. package delivery business.

DHL Worldwide Express, a unit of Deutsche Post World Net, announced March 25 that it would buy the ground delivery business of Airborne Inc. Upon conclusion of the acquisition, Airborne's air operation would become an independent public company called ABX Air Inc. The deal, which is subject to shareholder and regulatory approval, is to close this summer.

FedEx and UPS filed separate proposals with the U.S. Department of Transportation following the announcement charging that the deal may violate U.S. limits on foreign control of domestic airlines. In general, they contend that Deutsche Post, the German post office, is using its monopoly profits from German mail delivery to subsidize its global expansion.

The two companies also charge that DHL Worldwide effectively would control Airborne's air operations despite plans to spin it off into a publicly traded company. U.S. law restricts foreign ownership of U.S. airlines to no more than 25 percent.

They said the deal resembles ties between U.S. cargo carrier DHL Airways and DHL Worldwide. Though DHL Worldwide owns 25 percent of DHL Airways, FedEx and UPS have argued for two years to U.S. regulators that DHL Worldwide effectively controls DHL Airways.

DHL Worldwide Express and Airborne argue that the merger would improve service for customers by creating a stronger competitor to UPS and FedEx.

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