Siemens-Alstom Fervor a Sign of the Times
Two massive rail corporations - Germany’s Siemens AG and French Alstom SA - attempted a merger of their two consumer rail sectors in the tail end of last year. If successful, it would have produced a giant to match Airbus, with annual revenue of $17 billion. The EU Commissioner on Competition, Margrethe Vestager, seeing dangers to consumer pricing and innovation, rejected the merger on February 6th, saying that “Without sufficient remedies, this merger would have resulted in higher prices for the signaling systems that keep passengers safe and for the next generations of very high-speed trains.” While this may seem common sense to those of the antitrust persuasion - and frankly, who isn’t afraid of the big bad monopoly? - there was a slight twist: the merger was pitched as an attempt to compete with an encroaching CRRC Corporation Ltd., China’s national rail corporation, a giant which would have still been nearly twice the size of the proposed Siemens-controlled merger.
What differentiated this spirited debate from past ones was the role of both the French and German governments, who vehemently opposed the EU Commission’s decision. France’s Finance Minister Bruno Le Maire called it a “political mistake,” and the competition laws “obsolete.” Germany’s Economy Minister Peter Altmeier echoed this, saying that the EU laws should be changed “to better take into account the demands of international competition.” The fact is that China is indeed an ever-present threat in the eyes of many Western authorities; both EU and US elections in very recent history have revolved around the dangerous specter of a China that does not play by the rules, that steals jobs and undermines domestic industry through currency deflation and state-sponsored monopolies. Yet the decision by the EU Commission on Competition was very much nuanced and specific to the consumer rolling stock industry. In a statement, Commissioner Vesteger stated that “No Chinese supplier has ever participated in a signaling tender in Europe or delivered a single very high speed train outside China. There is no prospect of Chinese entry in the European market in the foreseeable future.”
The primary purpose of any commission on competition and antitrust is consumer protection: from unfair prices, and from stifled innovation due to monopoly powers. The arguments of the EU Commissioner Margrethe Vestager followed their standard purview, focusing on consumer pricing and effects on innovation. The Siemens-Alstom merger would have allowed a clear monopoly in consumer rail in Europe. And while the companies and their parent countries disputed the decision to not include Japanese, South Korean, or Chinese rail markets in their deliberations, Vestager countered that those markets are effectively closed to foreign investment, and that there was no evidence of encroachment into the European market.
But maybe economic realities are not as high a priority as are political ones in today’s Europe. French President Emmanuel Macron has pushed for a “Europe that protects.” France’s Airbus, with a massive global control of the large aircraft market, has been held as a perfect example of corporations able to protect European markets from Asian encroachment.
Sources:
https://www.cnbc.com/2019/02/06/eu-blocks-plan-for-alstom-siemens-rail-merger.html
https://www.ft.com/content/ba654170-2eb5-11e9-ba00-0251022932c8
