European Commission Blocks the Siemens-Alstom Merger Deal Defying Pressure from Paris and Berlin

European Union’s competition regulator rejected a merger plan of two European rail giants Siemens and Alstom who wanted to create a European rail champion to take on Chinese government backed rail companies. The move by the competition regulator was announced amidst pressure from topmost levels of governments in France and Germany.

The EU decision is receiving backlash from French and German governments who have pushed for a review of EU’s competition policies to better meet 21st century challenges before EU. The European commission also blocked a buyout deal from Wieland-Werke AG, a German copper company to buy Europe’s largest copper smelter Aurubis. The commission argued that in both the cases the deals would have threatened healthy competition and raised prices for consumers. 

The decision does not seem to be taken lightly by the French and German governments who are likely to speed-up their efforts to loosen competition rules of the European Union. The governments might propose to bring competition policies of the union in line with a global worldview rather than just a consumer centric view of competition. They may also push for allowing greater say to EU ministers in such matters.

The announcement of the decision by EU were followed by statement from German Economy Minister Peter Altmair which said that Paris and Berlin are working on a proposal to change the competition policies of EU.  Chief Executive of Siemens Joe Kaeser said that Europe is in desperate need of reforming its industrial policy to help European companies to compete globally. He said that Europe’s view of competition has loopholes as protecting consumer interests locally does not necessarily mean hindering European companies to have a level playing field with other nations like United States, China and others.

EU Competition Commissioner Margrethe Vestager, who is among the proponents for EU’s stricter competition regime, disapproved the reform demand by stating that in the last 10 years the Commission approved 3000 mergers in the last 10 years while blocking only nine which include the Siemens-Alstom decision.

She told the press conference that the decision to prohibit mergers are very rare and that the Feb 6 decision to block two big mergers has happened for the first time. She added that other mergers did not pose any threat to competition as companies offered significant remedies in its place.

Siemens and Alstom, the two rail giants wanted to join hands by merging their rail operations to compete with China’s state-owned rail company CRRC Corp Ltd. The merger was backed by both German and French governments who are in favor of huge industrial champions; however the deal was criticized by the national competition agencies of Netherlands, Britain, Belgium, Spain and Germany.

Other rivals of the company welcomed the decision by EU commission stating that the merger would have compromised the competitiveness of the whole European rail market and would have raised prices for the EU consumers, tax payers and rail users.

Author: Nikhil Kaitwade

With over 8 years of experience in market research and consulting industry, Nikhil has worked on more than 250 research assignments pertaining to chemicals, materials and energy sector. He has worked directly with about 35 reputed companies as lead consultant for plant expansion, product positioning, capacity factor analysis, new market/segment exploration, export market opportunity evaluation and sourcing strategies.