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10th Apr 2020

Vestager says 'no' to Siemens-Alstom mega-merger

  • Margrethe Vestager said that China's state-owned company is not a competitor inside Europe (Photo: European Commission)

EU regulators on Wednesday (6 February) rejected plans by Germany's Siemens and France's Alstom to create a European railway company, citing concern over rising prices and costs for taxpayers.

Siemens and Alstom wanted to combine their rail operations, a move backed by the French and German governments, which wanted to create global European industrial champions.

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The landmark EU decision prompted Germany and France to call for the overhaul of Europe's competition rules as they argue could hamper European companies' chances to compete globally, epsecially against China's state-owned rail company.

EU competition commissioner Margrethe Vestager told journalists Wednesday the planned merger posed "serious competition problems", and would have led to "higher prices, less choice, less innovation", and neither of the companies offered solutions to resolve competition issues.

The commission had concerns over how the merger would affect competition in signalling systems, which are responsible for safe travel, and very high-speed trains, which are operating at the speed of 300 km per hour or more.

EU regulators were worried that the merger could push up prices of signalling equipment that would be ultimately be paid by taxpayers, as national and local governments usually finance railway infrastructure. In the sector, Siemens and Alstom are the two largest players.

The Danish commissioner said regulators also looked at competition from China, as one of the key arguments made in favour of the merger was to take on Chinese competition globally.

Vestager said, however, that no Chinese supplier ever participated in a signalling tender or delivered a single very high-speed train outside of China, and there is no prospect for China to enter that market any time soon.

After the commission's announcement, Germany's economy minister Peter Altmaier said that Berlin and Paris were working on proposals to change EU competition rules.

"I've agreed with my French colleague Bruno Le Maire that we will prepare a joint Franco-German initiative that is aimed at getting an up-to-date adjustment of European competition law," he said.

"The current EU rules are obsolete," French finance minister Bruno Le Maire said on Wednesday.

Verger told journalists, on the possible push from Germany and France on new rules, that she had not seen any proposals yet.

"I don't think this case is a proof that we need to change competition rules," she added, saying protecting European companies globally should be addressed via different tools than competition, such as trade defence mechanisms and procurement rules.

"The interest in this merger has been very, very high from France and Germany, but there are still 26 other member states who have an interest in this market," Vestager said, adding: "We see there is a lot of interest from others to make sure prices don't go up that makes it difficult for national authorities modernise their railway system and have competitive tenders."

Vestager decision prioritised protecting competition in the European railway industry, while the two companies themselves, along with Germany and France, argue that competition should be interpreted globally.

Following the decision, Alstom said the veto was a clear setback for the industry in Europe.

Siemens' chief executive Joe Kaeser said Europe urgently needed to reform its industrial policy to help its companies compete, according to Reuters.

Siemens produces the ICE trains for the German Deutsche Bahn and builds units of the Eurostar, which runs in the Channel Tunnel. Alstom makes France's signature bullet train, the TGV.

The commissioner, usually lauded for tough decisions against US giant firms, said that the commission had approved over 3,000 mergers in the past 10 years and blocked only nine, including this one.

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