Scott Miller

As we discussed “income inequality,” there was some further discussion about the current US posture on mergers and antitrust enforcement. In that light, I thought the following Financial Times blurb might be of interest.

As the article points out, in a global, trade-enabled economy, national (or EU) antitrust enforcement activity can put “local” businesses at a disadvantage relative to unfettered (or differently fettered) foreign competitors.

Merger Meddling

By Rochelle Toplensky and Alex Barker

January 15, 2019

There is arguably no area where the European Commission has more raw power than in competition policy. It is a hugely important enforcement role that Brussels is supposed to discharge with quasi-judicial solemnity. So when old conventions are tossed aside and politics takes centre stage, it is worth paying attention.

The (often humdrum) weekly meeting of the college of European commissioners today promises to be an extraordinary occasion on the competition front. On the agenda in the gathering in Strasbourg is a debate on creating European industrial champions with the clout to take on state-backed Chinese rivals. The big surprise: extending the discussion to include a looming decision on the Siemens-Alstom railway merger, which would otherwise be heading for a veto.

By law, the college has the final say on competition decisions. But, in most cases, to describe it as a rubber stamp would be generous. Merger decisions are usually first taken by the competition commissioner Margrethe Vestager. The Dane and her predecessors of course consult colleagues behind the scenes in sensitive cases, but by the time the matter reaches college level the hard work is done. The result is a formality.

Rarely, if ever, has a formal merger recommendation been overturned. Even mild objections noted in the minutes of college meetings are a rarity (Michel Barnier is responsible for a good many of them). When handing over the post, the late Karel Van Miert joked to his successor Mario Monti: “now you will have to get used to being thought of as Europe’s most powerful man.”

So why is the college being consulted before Vestager takes her decision – and while negotiations with the companies are still open? The first reason is China. France and Germany see the Siemens-Alstom tie-up as an opportunity to create a European “Railbus” able to go toe-to-toe with China’s CRRC, the world’s biggest trainmaker.

CRRC wants to aggressively expand in Europe. The trouble is Vestager doesn’t think the Chinese are coming any time soon. CRRC faces high barriers – related to safety, technical compatibility and market knowledge – to enter what rival Canadian trainmaker Bombardier called the most complex railway market in the world.

The second reason is politics. Alstom and Siemens are Franco-German heavyweights. Their corporate marriage is blessed at the highest levels in Paris and Berlin. Jean-Claude Juncker, the commission president, clearly sees it as deserving of a political discussion.  

When a decision is taken in coming weeks the expected outcome – a veto – may well not change. The German and French companies together would have a near monopoly in signalling and high-speed trains in parts of Europe. Approving the merger without further concessions would likely face court challenges. Even Germany’s competition authority wants to see it blocked.

But a veto could give ammunition to critics seeking to overhaul the EU’s competition regime. France has long-standing complaints (Nicolas Sarkozy, the former French president, once grudgingly said: “When competition is useful, I am for it.”) Now China’s power is rapidly changing the outlook of other member states, not least historically pro-competition Germany.

The college discussion may at least shield the commission from the charge that it blindly applied rules without reflecting on strategic or political priorities.