Becket McGrath, antitrust and competition partner at international law firm Cooley, comments on the Alstom-Siemens decision and France’s proposals for national powers to overturn EC merger decisions.
On 6 February 2019, the European Commission delivered its long-anticipated ruling on the proposed merger of Siemens and Alstom by prohibiting the transaction. While this was a notable event for competition lawyers – after all, there has been a prohibition decision in only 30 of the over 7,000 deals that have been reviewed by the Commission since the start of the current regime – it was not particularly surprising. According to the Commission, the deal would have combined the two leading European providers of certain types of rail signalling and high speeds trains, creating a dominant position in the latter case. Although the parties claimed that the merger was necessary to counter the emerging threat from Chinese competition, Commission officials have noted that Chinese competitors have not tendered for a single European signalling contract or sold a single high speed train in Europe.
This is being written while travelling on a Eurostar train manufactured by Siemens, which is gradually replacing the previous model manufactured in Alstom. Eurostar’s procurement of the Siemens train was hard-fought, and led to much clutching of pearls in the French government over the company’s preference for a German train over a French one, but there is little doubt that it was a text book example of competition producing a good outcome for a major customer and ultimately consumers.
What was perhaps surprising was the fact that the parties thought they get the deal through, as well as the open political lobbying of the Commission during its review and the reaction of politicians to the outcome. On 12 February, the French economy minster responded by proposing a three-point “reform” of the EU competition rules to prevent the prohibition of future deals that seek to create “European industrial champions”. The main aspect of the proposed reform would be to give European governments the ability to override such decisions in the interests of European industrial strategy.
Such a move would be profoundly damaging to the integrity of the European merger control system, which is based on careful factual and economic assessment of each deal’s likely impact on competition. The risk of political intervention would be likely taint the regime well beyond the small number of prohibition cases.
While there is space for different interpretations of the evidence, the rules of the game are clear. Exceptionally, an anticompetitive deal may be cleared (or, more commonly, a competitively benign deal blocked) on specified public interest grounds, for example media plurality or national security. Extending this regime by reference to a nebulous, and overtly political, test of whether a deal created a European industrial champions, even where the adverse impact on competition and hence consumers was clear, would be a mistake.