On Wednesday 6 February, the European Commission rejected the proposed acquisition of Alstom, a French company producing railway equipment, by Siemens, a German company operating in the same sector, arguing that this deal, as proposed by the two companies, would have a negative impact on competition in the markets for railway signalling systems and very high-speed trains.
"Our investigation showed that the merger would significantly reduce competition in several signalling markets and for very high-speed trains. The merged company would have become, by far, the largest player in Europe and in some signalling markets there would be no competition left”. It was these words in particular that Margrethe Vestager, the Commissioner responsible for competition policy, used at a press conference to justify the Commission's decision to veto the proposed merger of the two companies operating in the rail sector.
This decision is not really a surprise, in view of the recent rumours forecasting rejection of the merger (see EUROPE 12187). The decision follows the opening of an in-depth investigation last July by the Commission, which was concerned about the effects of a merger of this kind on competition in the European Union (see EUROPE 12063).
The Commission states in its analysis that the deal would have brought together the two largest suppliers of railway and metro signalling systems and rolling stock in Europe. It also received several comments from industry stakeholders during its investigation, including fears expressed by stakeholders that they would be squeezed out of the market or that innovation would shrink in the future.
With regard to signalling, the Commission believes that the merged entity would have become "undisputed market leader in several mainline signalling markets", especially for automatic systems for ETCS trains (the European Train Control System standard) in the European Economic Area (EEA) and for standalone interlocking systems in several Member States. The company would also have been the market leader in the EEA for the latest signalling systems for urban railway lines.
With regard to very high-speed rolling stock (more than 300 km/hour), the Commission considers that the merged company would have had “very high” market shares in the EEA and the rest of the world, with the exception of South Korea, Japan and China, where the markets are closed.
Therefore, in the opinion of the Commission, "the competitive pressure from remaining competitors would not have been sufficient to ensure effective competition" in these different types of markets. It also dismissed the argument concerning the entry of foreign companies into the EEA, arguing that Chinese companies did not pose a competitive threat either in signalling or in very high-speed trains. This analysis is not shared by everyone, especially by the French government.
The Commission's concerns were also not allayed by the remedies proposed by the two companies, which took the form of asset sales or transfers. The Commission is of the opinion that these remedies would not have allowed other companies to compete effectively with the potential joint entity. "We found that the proposed remedies were simply not enough to address our competition concerns", said Ms Vestager.
The European Commission has therefore decided to prohibit this deal from taking place.
Reactions. Reactions were not long in coming, as this merger project was extremely newsworthy and politically sensitive. Berlin and Paris have been very active in recent weeks promoting this deal.
"Rejection of the Alstom-Siemens merger will serve China's economic and industrial interests", said Bruno Le Maire, the French Finance Minister, even before the decision was taken. He added that, together with his German counterpart, Peter Altmaier, he would propose "overhauling the European Union's competition rules". In particular, the French government would like States to have a right of scrutiny over competition decisions.
Mr Altmaier was correct in stating that "the EU's prohibition of this merger demonstrates the urgent need for a European industrial strategy". "We need strong European champions", he added.
"Today's announcement by the European Commission on Siemens and Alstom is a mistake", said Manfred Weber (EPP, Germany), the EPP’s frontrunner for the presidency of the next European Commission.
Outside the political sphere, the companies concerned have obviously reacted to this decision. “Alstom regrets that the remedies offered, including recent improvements, have been considered insufficient by the Commission. The remedies were extensive in scope and addressed all the concerns raised by the Commission in respect of signalling and very high-speed trains ", said a spokesperson on behalf of the French company.
In the opinion of its German counterpart, reported by AFP, this decision shows lack of "a level-playing field" in the EU. (Original version in French by Lucas Tripoteau)