Published 15:27 February 6, 2019
Updated 15:27 February 6, 2019
The European Commission has blocked Siemens’ proposed acquisition of Alstom, a massive deal that had the backing of both the Frenc and German governments, saying the deal violated the EU’s Merger Regulation as it would have created a near monopoly in the European market.
According to Competition Commissioner, Margrethe Vestager, the merger would have harmed competition in markets for railway signalling systems and very high-speed trains, while at the same choking off fair competition which would lead to higher prices for passengers.
Vestager added that the Commission’s decision to nix the deal was made because “the companies were not willing to address our serious competition concerns”.
“If companies want to merge they can do so if they offer remedies just like Siemens and Alstom should have done,” said Vestager, who added, “We tested the remedy package in a market test and got very negative feedback.”
The Commission would not accept the offer that was put forward due to the special nature of this mostly tender-driven market.
“The best merger remedies are those that offer actually a structural divertissement, that solve the problem,” added Vestager, who said that the remedy that was provided by both companies later tested, had just a 4% turnover value of the merger, far below the 12% turnover value that was accepted for the merger of Monsanto and Bayer.
Vestager’s decision ran counter to the wishes of France and Germany as both have put significant political pressure on Brussels to green-light the merger. France’s Alstom and Germany’s Siemens had, along with the French and German governments, hoped to create a global competitor that would be capable of competing with the China Railway Corporation (CRRC), the state-run behemoth that currently does 90% of their business in China but who have their eyes set on a cracking into the European market.
The Commission’s investigation – and its ultimate decision – focused less on the necessity to compete with the Chinese and instead showed that the proposed transaction would have removed a very strong competitor from several mainline and urban signalling markets which would allow the merged entity to have become the undisputed market leader in several mainline signalling markets.
Also according to Vestager, the Commission took into consideration the fact that the merger would have “reduced competition significantly and harmed European customers”, She noted that apart from France and Germany, few in the EU were overly positive about the prospect of the merger. Competition authorities in the UK, the Netherlands, Belgium, and Spain expressed concerns that the new company would be in a dominating position
France slams Vestager’s merger ban
The Commission’s veto has infuriated the French government, where ministers, including Finance Minister Bruno Le Maire, called Vestager’s decision was “economic mistake,” adding that the decision “will serve the interests of China”.
“European competition rules need to be revised,” Le Maire said. “In the weeks to come, my German counterpart, Peter Altmaier, and I are going to make proposals aiming towards a much more ambitious industry policy. I hope we will consider that the pertinent market for analysing competition in the world market and not the European market.”
Altmaier echoed his French counterpart’s frustrated tone, saying the EU’s competition law has to put greater weight on the global, as opposed to national or European, market.