German watchdog deals new blow to Alstom-Siemens rail tie-up
Concessions offered not enough to allay ‘serious doubts’, says competition authority
Germany’s competition watchdog has raised “serious doubts” over the railway merger between Siemens and Alstom, in another blow to a Franco-German deal seen as a watershed for EU industrial policy on China.
The intervention by the independent Bundeskartellamt, in a letter seen by the Financial Times, adds to a chorus of national competition authorities opposing a merger that has full political backing from the French and German governments.
Billed as a deal to create a European champion with the muscle to take on China’s CRRC, the world’s biggest trainmaker, the proposed Siemens-Alstom tie-up is now on the brink of being vetoed by Brussels for creating a virtual monopoly in some European markets.
In December, the Bundeskartellamt advised the European Commission that concessions offered by Siemens-Alstom were “neither suitable nor sufficient” to allay competition concerns in the signalling and high-speed train markets.
The Bundeskartellamt last week confirmed its objections still stood in spite of revisions made by the companies, according to sources familiar with the advisory submission.
The commission, the EU’s top competition authority, must decide on the case by February 18.
The decision is one of the most important since Brussels was given oversight of all big merger approvals in the 1990s, setting a political precedent that could reshape the EU’s approach to contentious mergers in strategic sectors for years to come.
Officials reviewing the deal have so far advocated it be blocked. Margrethe Vestager, the EU’s competition commissioner, is unconvinced of any Chinese threat in the railway market for the foreseeable future and has warned Siemens-Alstom executives that more sell-offs will be needed if the deal is to be approved.
But in a break with a three-decade old convention, the commission’s top decision-making body will on Tuesday discuss the Siemens-Alstom merger before Mrs Vestager makes a formal recommendation on whether to approve the deal.
An increasingly divided college of commissioners will address the merits of the merger in a broader debate on how to create industrial “champions” that can withstand pressure from state-backed Chinese rivals. It offers a clear opportunity for advocates of the Siemens-Alstom deal to make their case.
Bruno Le Maire, the French finance minister, has warned Brussels that applying “obsolete” competition rules to block the merger would be a “political mistake” leaving Europe weaker in the face of China. Paris has made clear that it would see a veto as an opportunity to overhaul the competition regime in the EU.
National competition authorities from Spain, the Netherlands, Belgium and the UK have all raised similar objections to those of the Bundeskartellamt in advice offered to the commission. In December, Siemens and Alstom offered to sell off some of their older high-speed trains and signalling technology to secure EU approval for their merger, but the move failed to impress rivals or the commission.
The Bundeskartellamt submission echoes many commission concerns about the deal. The German authority dismisses the offer to sell off Alstom’s Pendolino business in Europe because it is not a technology that would allow rivals to compete in the market for “very high speed” trains.
The alternative — the offer to license Siemens’ Valero system for a time-limited period — is described by the Bundeskartellamt as “far too short” a licence to make a lasting difference. The conditions also exclude big upcoming high-speed tenders in the UK and Turkey.
Finally, it raises concerns over the sell-offs proposed by Siemens-Alstom to address concerns over signalling. The package included parts of two separate signalling business: Siemens’ on-board signalling systems and Alstom’s trackside equipment. The Bundeskartellamt doubted this “mix and match” approach would leave a viable competitive rival.