Siemens-Alstom merger: Can Germany and France lobby to circumvent EC’s rejection, against EU consumers’ interests?

Press conference by Margrethe Vestager, Member of the EC
Date: 06/02/2019. Location: Brussels – EC/Berlaymont. © European Union , 2019 Source: EC – Audiovisual Service Photo: Lukasz Kobus

The European Commission (EC), after months of investigation and discussions, came to the independent conclusion to refuse the merger of the rail companies Siemens and Alstom despite the improvements provided by the two firms together with the continuous pressure by the French and German governments.

Nevertheless, France and Germany still believe that the EU has wrongly prohibited this gigantic merger and is considering of proposing new changes to the competition policies in order to avoid similar outcomes.

On the other hand, the EC decided with correct argumentation and away from EP election interests to protect the consumers’ rights against the enlargement of the EU companies which would create monopolies in the rail industry. Consequently, the argument that with this merger the EU would able to face the Chinese rival CRRC (China Railway Rolling Stock Corporation) and Canada’s Bombardier Transportation went to the trash bin. The Sting commends strongly any decision of the European Commission which is beyond any political interest and is solely made to protect the European Consumers.

EC puts a stop to the mother of all rail mergers

The European Commission decided last week that the proposed Siemens’ acquisition of Alstom should be prohibited under the EU Merger Regulation due to the fact that the actions taken by both firms were not enough as far as the EU competition rules are concerned. More specifically, European Commissioner Margrethe Vestager, in charge of competition policy, said: “Millions of passengers across Europe rely every day on modern and safe trains. Siemens and Alstom are both champions in the rail industry. Without sufficient remedies, this merger would have resulted in higher prices for the signalling systems that keep passengers safe and for the next generations of very high-speed trains. The Commission prohibited the merger because the companies were not willing to address our serious competition concerns.”

Siemens & Alstom fight back

Siemens CEO Joe Kaeser mentioned last Monday that this ruling was not up-to-dated implying that it needs to be changed. Mr Kaeser told:  “If it had been decided in the UAE I assure you it would have been different. We must not confuse antitrust laws with industrial policies, we need to respect that. But if the future of the world’s mobility is being determined with law that is 30 years old, that may have to be revisited — for the future, not for the past.”

Similarly, Alstom expressed its disappointment about the EC’s judgment. The French company supported that has done all the necessary improvements in order for the competition concerns to be covered related to Signalling and Very High Speed trains but still the European executive body declined to proceed with this acquisition.

Franco-German alliance

During the period of EC’s investigation, France together with Germany supported this acquisition which would have led to a huge EU train maker conglomerate capable to by at large monopolize the EU market with a strategy compete with its Chinese competitor CRRC.

But EC’s decision was felt by the German and French government as a hit below the belt, in view of the upcoming EU elections. The French finance minister asked for an alteration of the EU competition rules expressing his disapproval for the outcome. More in detail, Bruno Le Maire told CNBC at the World Government Summit in Dubai last Sunday: “Let’s have a look at reality — we are facing a huge challenge with the rise of the Chinese industry. What do we do — shall we divide the European forces, or try to merge the European forces from the industrial point of view?”

What is more, Bruno Le Maire mentioned two days ago that: “It is necessary to reform the EU competition policy. It’s urgent. It’s part of the proposals I will make with my German counterpart Olaf Scholz in the coming weeks”.

The pre-election Mergers

Naturally, Bombardier is the winner from this Franco-German merger halt.  The Canadian firm avoided having a company of twice its size as a rival in the train industry. Furthermore, it is not unlikely to fire up the merger talks between Alstom and Bombardier in order to reduce the costs and take a larger part from the pie.

Another possible merger in the EU is the one between Thyssenkrupp and Tata Steel which is being also investigated by the European Commission in order to make sure that competition rules are complied in the steel industry. The EC is expected to come up with a decision by April 29. However, Thyssenkrupp is much concerned after the Siemens-Alstom prohibition because it is on the course to create EU’s largest steelmaker after ArcelorMittal. Guido Kerkhoff, Chairman of the Executive Board & CEO of Thyssenkrupp, said yesterday that: “You cannot put the same label on it at all”.

Will competition rules change to the detriment of EU consumers?

All in all, it is true that this time the EC independently managed to handle the situation and deny the Siemens-Alstom merger but what if the competition policies change? Many companies and governments are most probably going to support such an action ahead of the EU elections as the interests at stake are just too high.

However, it remains to be seen whether the bloc’s watchdog will continue tackling similar threats independently and thus protecting the EU consumers’ rights by prohibiting price increases and making sure that they are well served by markets where a fair competition exists and monopolies are halted.