Vestager warns against weakening merger rules
Commissioner responds to Franco-German calls for overhaul of EU competition regime
The EU’s competition commissioner Margrethe Vestager has warned national capitals to be “aware of the consequences” of watering down merger rules, saying such a move would amount to a “strategic choice” to change Europe’s economic model.
“We have a lot of state intervention in our economy but basically it is a very strategic choice to have fair competition — and you can see that it bites,” said Ms Vestager in an interview with the Financial Times in Brussels.
The Dane, who has built a reputation as a formidable competition enforcer by taking on Apple and Google, enraged the French and German governments this year by blocking a plan to merge the rail businesses of Siemens and Alstom. The deal was supposed to create a rail equivalent of Airbus to counter competition from China’s state-backed CRRC, the world’s biggest trainmaker.
French finance minister Bruno Le Maire called Ms Vestager’s decision to veto the deal a mistake. Together with his German counterpart Peter Altmaier, he has proposed a potentially radical overhaul of the EU’s strict competition rules including the option of giving politicians the power to override commission decisions and ensuring regulators systematically base decisions on global rather than European or national market share.
Ms Vestager, one of the star performers of the commission and deemed a potential future president, agreed the time was right to have “a more nuanced and more pragmatic approach” to competition policy. Data were becoming increasingly important to the global economy, she said. Meanwhile, with the rise of Chinese state-capitalism and US protectionism, it was “more and more obvious” that the openness of European markets was “an asymmetrical thing”.
However, she argued the current regime to foster fair competition “has served us well” by creating markets that made European companies more efficient, innovative and better able to compete globally.
“I think it is important to discuss that very fundamental choice because if we want to change it [in Europe] we should be very well aware of the consequences,” she added.
Europe’s competitors had adopted different economic models, she added. The Chinese “have made a different strategic choice” for a market led by state-owned monopolies while in the US they have chosen to have “more concentrated markets”.
Ms Vestager defended her decision to block the Siemens-Alstom deal, saying had she allowed the merger go through, it would have cut competition and increased prices for very high speed trains, thereby pushing customers to look for a cheaper supplier — “de facto inviting” foreign competitors like CRRC into the market.
Critics see the blocked railway merger as proof that the EU rules need to change in order to compete with state-backed rivals such as CRRC. However, Ms Vestager said the deal could have been cleared if the companies had done more to reduce their dominance in markets for very high-speed trains and mainline-railway signalling systems.
To level the playing field with Chinese and other state-backed rivals, Ms Vestager said Europe needs to make better use of its trade instruments, the bloc’s public procurement rules and new EU procedures for screening foreign direct investment. EU governments also needed to accelerate stalled talks over procurement measures “that will allow us to ask for reciprocity [in rivals’ markets]”.
The commission urged EU capitals need to make better use of the programme to allow state aid for projects of common European interest. Established five years ago, the programme was first used in December to approve €1.75bn in government funding from France, Germany, Italy and the UK for a research and innovation project on sensors, chips and other so-called micro-electronics at the heart of household and industrial devices linked the internet.
Countries including France, Germany and Poland are considering funding a scheme to build next generation batteries for electric vehicles. Ms Vestager said the development of 5G networks “could be another candidate”.
One important reason for revising competition policy is that new antitrust tools are needed to deal with data, which is becoming increasingly important as more businesses and sectors digitalise.
“The creation of data and the pooling of data have been so much faster than expected — because now the internet of things is a thing,” Ms Vestager said.
An advisory panel she appointed to report on new antitrust tools to manage data will report in the coming weeks.
“This is all very, very inspiring because it is renewed interest in this field between competition law enforcement, regulation — coming from the fact that we are all digitalising — and the facts of life in the global marketplace,” she added.