Siemens-Alstom merger: Will the EC succumb to Franco-German pressures for the sake of May’s EU Elections?

A TGV train in France (Pixabay, 2019)

It was yesterday when executives of Siemens and Alstom met with EU Commissioner Margrethe Vestager in one of their last attempts to convince her to give the green light for their merge. The European Commission (EC) is now left to decide till February 18 whether or not to approve the merger of the rail operations of Siemens and Alstom. In the meantime, both companies agreed to sell a set of assets in an attempt to promote as much as possible the promising acquisition.

However, the EC is profoundly investigating the case and is having numerous concerns as it is believed that this merger will reduce the competition in the supply of several types of trains and signalling systems creating a Franco-German rail monopolistic champion in the EU arena.

Background

The EC was only notified about the decision of Siemens AG to acquire Alstom SA on the 8th of June 2018 despite the two companies had demonstrated their will back in September 2017. Since then, the EU’s executive body has opened an in-depth investigation to assess this merger under the EU Merger Regulation. The EC has until February 18 to inform both companies about its decision.

Both firms have a wide portfolio of high speed trains and safety control systems on mainline and urban rail networks. Together these companies will create a giant EU rail operator which can bring tremendous changes to the market and a monopolistic environment that favours them only and not the European consumers.

EC stance

The EC and especially the Competition chief Margrethe Vestager has logical doubts regarding this acquisition as there is chance that it will lower competition and increase prices. More specifically, Commissioner Margrethe Vestager has mentioned on the case:

“Trains and the signalling equipment that guide them are essential for transport in Europe. The Commission will investigate whether the proposed acquisition of Alstom by Siemens would deprive European rail operators of a choice of suppliers and innovative products, and lead to higher prices, which could ultimately harm the millions of Europeans who use rail transportation every day for work or leisure.”

Siemens-Alstom last merger’s attempts

Last month, competition officials from the UK, Holland, Spain and Belgium sent a letter to Commissioner Vestager where they said that Siemens and Alstom have not made enough compromises as they are required to and by extension this merger should not proceed.

However, both companies are pushing forward the sale of train equipment assets as a last resort to persuade the EC that this acquisition must be materialized. According to Bloomberg though, Alstom supports that no more assets will be sold in order to assure the approval of the EC on the issue.

Franco-German alliance

Both France and Germany support the acquisition of Alstom by Siemens. The will of the two governments to consolidate their power in Europe and their economies ahead of the upcoming EU elections next May is more than apparent. The two companies are merging in order to be able to create an huge EU train maker conglomerate that will be able to compete with the Chinese rival CRRC (China Railway Rolling Stock Corporation) and Canada’s Bombardier Transportation.

French Economy Minister Bruno Le Maire mentioned last Sunday that a decision against this acquisition would affect the European bloc’s industry. In detail, Mr. Le Maire said in a Europe 1 radio interview:

“If the European Commission was to make an unfavorable decision regarding this merger, it would be for the wrong reasons. It would not only be an economic error but also a political mistake because it would weaken the whole European industry faced with China”.

Will the EC succumb to the political pressures or remain unaffected and refuse to the creation of a giant train maker which could change the current status quo? So far, Margrethe Vestager has shown her credibility by enforcing the EU laws strictly even, against US tech giant companies and despite EU’s long love, fear and admiration for the US. Nevertheless, an action such as the one to sell train assets has been welcomed by the EU officials.

Will the train run over the EU consumers?

All in all, it is quite certain that it would be a tough competition decision for the European Commission which has only about a month to consider all aspects and conditions ahead of the imminent European elections. Will the EC decide as a political stakeholder or regulator?

What matters the most at the end of the day is not to please the shareholders of two of the biggest companies in Europe so that politicians can clap their hands at the EU elections night, but above anything else to protect the rights of the EU consumers who would be always left to be a helpless pray to any giant monopoly in the Old Continent.

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