Monday, June 02, 2003

When freight titans collide Normally, oligopolies coexist in a state of Cold War. They compete, but within limits. But when one company threatens to disrupt the balance in a big way, they react. That's what happened when package delivery services FedEx and UPS felt threatened by DHL Worldwide Express. For years, FedEx and UPS have been poaching on each other's territories. UPS has pushed its next day service, moving into FedEx's area of strength. FedEx, in turn, changed its rate structure from a single nationwide rate to a zone rate, to better compete with UPS for shorter-distance ground deliveries. But together these two have dominated the U.S. market. But along comes DHL Worldwide. It's no Johnny-come-lately. After all it has 38% of the world delivery market. (FedEx has 21% and UPS has 13%.) But it has been expanding rapidly in the U.S. market, and the two other companies are upset. Between them UPS and FedEx control 80% of domestic shipping. Number three currently is Airborne, and the big factor is that DHL in March announced it would acquire Airborne. That would give it a significant foothold, and that is what FedEx and UPS are desperately trying to block. FedEx and UPS are among the largest corporate contributors to political campaigns, according to the New York Times. They have managed to get the Department of Transportation to look at DHL's domestic air service, called DHL Airways. It is the rule that foreigners are prohibited from controlling U.S. domestic airlines. While DHL is nominally American-owned, the lawyers for FedEx and UPS argue that it is controlled through shell companies by DeutschePost, the German postal service that owns most of DHL whether that's true is now in dispute before an administrative judge. (DHL has since divested any German ownership of the airline.) A N.Y. Times article (6/1/2003) points out, "The battle is unusual partly because FedEx, which is located in Memphis, and UPS, which is located in Atlanta, are such strange bedfellows. The Coke and Pepsi of the cargo world, they are archrivals. But they are working toward a common goal: to shut down, or a least slow down, DHL Worldwide Express in the United States." Yet as noted in the Atlanta Business Journal, "Despite almost simultaneous petitions from UPS and FedEx, the companies are rivals and aren't working together to stop DHL's expansion, spokespersons for both companies claim. 'You have two very concerned American companies," UPS's Black said. "It doesn't mean we are cooperating with each other.'" 9:19:55 AM

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8:53:13 AM

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