Vestager should stand against Siemens-Alstom merger
Competition from China is no excuse for weakening antitrust rules
Margrethe Vestager, EU competition commissioner, may be approaching the end of her term this year but she is not coasting. Ms Vestager is close to issuing a ruling on one of the most controversial proposed mergers of her time — the tie-up between Siemens of Germany and Alstom of France to create a “Railbus” European champion.
Ms Vestager looks ready to block the merger next month despite pressure from France and Germany to let their companies bulk up to take on Chinese competition. The controversy raises a broader issue — whether the EU should dilute its strict antitrust approach so domestic giants can flourish in global markets.
She should not waver despite political pressure from Berlin and Paris. Europe may have had difficulty matching the dominance of US technology companies, or the size of Chinese state-supported enterprises, but there are better ways to address this than bending competition rules. That would weaken its credibility without solving the underlying challenge.
Europe unquestionably faces Chinese competitors playing by different rules, and backed by intrusive government policy. One of the prime examples is CRRC, the Chinese railway group formed by a merger in 2015, which has double the revenues of a merged Siemens-Alstom. It is part of China’s push to dominate the global market for railways and rolling stock.
It is tempting for the EU to respond in kind, by allowing strategic mergers and using state aid to give its companies an advantage. “If we want to be able to face competition with Chinese giants, we have to gather the European forces,” Bruno Le Maire, French economy minister, told the FT last year. Siemens-Alstom has become a symbol of Europe’s effort to strike back.
Angela Merkel, Germany’s chancellor, has shown support for the merger and the BDI group of German companies called in a paper on Chinese competition for “the market-driven formation of European champions.” It softened this vague rallying cry by insisting that, “Europe must not jeopardise its credibility in international governance” by diluting openness.
It is hard to see how Ms Vestager could square such demands. Despite the politics, competition authorities from five countries, including Germany, have objected to the Siemens-Alstom deal as reducing competition in high-speed rail. Waving the deal through despite such evidence would be a blatant case of national interests outweighing competition law.
Rather than bending the rules internally, Europe should do more to shield itself from unfair competition. That could include extending restrictions on state aid to cover foreign companies bidding for European procurement contracts. China has been allowed to drag its feet on reciprocal access to its market for too long and should face tougher treatment.
There may also be a case for the EU antitrust policy more often to focus on Europe as a whole rather than national markets, although that would not help Siemens-Alstom. But its opinion cannot vary according to the nationality of the companies involved, even if it happens elsewhere. Even the suspicion would turn competition cases into international trade disputes.
The EU’s best hope of creating champions is to study the example of the US rather than China. It must deepen economic integration, invest in technology and help companies to operate across borders. That would be a salutary lesson to the UK as well as China about the benefits of the single market. Abandoning antitrust leadership would be defensive and hypocritical.