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Alstom-Siemens Merger Prohibited: Championing the European Antitrust Mindset

Dr. Aurelien Portuese

8th February 2019

Et voilà! On the 6th of February 2019, Margrethe Vestager, the EU Competition Commissioner, announced that the German company Siemens was blocked from acquiring Alstom, the French company. Despite the Franco-German efforts and pressures to back this train merger1, the EU regulator countered the creation of a European "champion" - a word derived from the French industrial policy where the scale of firms is incentivized to conquer foreign markets. This prospective Franco-German marriage suffered antitrust flaws according to the European Commissioner, who considered that, despite the parties' proposed remedies2, "this merger would have resulted in higher prices for the signalling systems that keep passengers safe and of the next generations of very high-speed trains"3.

The two relevant product markets were thus considered, indisputably, to be the signalling systems market and the market for very high-speed trains. The relevant geographic market was considered, however quite problematically, to be the European continent only for the assessment of the consequences of the merger. According to the Commission, the markets for signalling systems and most particularly for very high-speed trains are not global markets. And here lies the bone of contention of this merger decision.

Siemens and Alstom were willing to merge in order to tackle increasing competition from the Chinese competitor CRRC Corp. and in order to seize an opportunity to better innovate in a sector that is increasingly digitalised and technology-intensive4. CRRC portrays some aggressive export projections, notably in Europe with its "One Belt One Road" project that intends to create a Silk Road Economic Belt up to Europe5. In 2017, CRRC Railway amassed $20.7 billion of revenue for sales of rail vehicles, whereas Siemens Mobility counted for $8.6 billion and Alstom for $8 billion, with the next competitor Bombardier collecting $7.6 billion of sales revenue. Thus, the merged company would have been a European champion but still less than the size of the market dominated by the Chinese player6.

On the other hand, the Commission considered both that Chinese suppliers are not going to be "credible suppliers" of signalling systems for "a very long time" and that it is "highly unlikely that new entry from China would represent a competitive constraint on the merging parties in a foreseeable future" for very high-speed trains. Therefore, this merger bringing together the two largest suppliers of signalling systems and very high-speed trains in Europe would have significantly impeded competition, prohibited under Article 2 of the Council Regulation 139/2004 of 20047 as interpreted by Guidelines on Horizontal Mergers8.

The most striking fact about this blocked Alstom-Siemens merger is not so much the Commission's merger analysis, which is much in line with previous practice9, but more the political reactions stemming from Paris and Berlin. Both capitals condemned the Commission's analysis as flawed and called for reforms of the EU competition rules. They jointly argued that the relevant geographic market should have been the global market rather than the European market, since the Chinese competitor already exerted competitive constraint, and is expected to do so increasingly in the years to come.

The Franco-German analysis lamenting the impossibility of creating such a European champion of the rail is in blatant opposition with their opinions on US tech companies, when they praise the European Commission for tackling the scale of US big tech. Whereas they maul the European Commission for identifying only Europe and not the entire world as the relevant geographic market in the Alstom-Siemens merger decision, whilst the train business is quite an inflexible industry, the same politicians embrace the European Commission for identifying only Europe as the relevant geographic market for tech companies such as Google, Facebook or Amazon - part of what is unquestionably a much more intangible industry.

Clearly, the political meddling of European politicians into antitrust affairs is both detrimental and duplicitous. The European antitrust mindset of some national politicians seems to be mostly characterized by industrial policies where firms' nationalities play a more important a role than they are willing to admit. Such antitrust populism certainly comes at the expense of the standing of the European antitrust analysis.


Dr Aurelien Portuese is a Senior Lecturer in Law at St Mary's Law School, St Mary's University London, and an Adjunct Professor in EU Competition Law at the Global Antitrust Institute, George Mason University.

1 See Alliance of Rail New Entrants (2019) Political Pressure on Competition Policy Risks Undermining the Single EU Rail Market. Press Release on the 28 January 2019.

2 And despite the Singaporean Competition Commission having cleared the merger, and the Australian Competition Authority currently investigating the merger. Indeed, see Competition & Consumer Commission Singapore (2018) CCCS Clears Merger of the Rail Mobility Business of Siemens AG with Alstom S.A. Press Release on the 24th of October 2018; and see Australian Competition & Consumer Commission (2019) Siemens AG and Alstom S.A. Propose to Combine Siemen's Mobility Business With Alstom. Case n°63820. Available at: https://www.accc.gov.au/public-registers/mergers-registers/public-informal-merger-reviews/siemens-ag-and-alstom-sa-propose-to-combine-siemens-mobility-business-with-alstom . The Australian Commission announced on the 7th of February 2019, in light of the European Commission's decision, to discontinue its investigations.

3 European Commission (2019) Mergers: Commission prohibits Siemens' proposed acquisition of Alstom. Press Release IP/19/881 on the 6th of February 2019.

4 See Alstom (2018) Annual Results Fiscal Year 2017/2018. Report on the 16th of May 2018, at p.34.

5 SCORE Consortium Partners (2018) Analysis of Competitiveness of European Transport Manufacturers from an Economic Perspective. Institute of Transport Economics. D2.3 Available at: http://transport-scoreboard.eu/site/assets/files/1223/status_quo_-_economic_aspects.pdf, pp.193-200.

6 Id. p.205

7 Council Regulation (EC) 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) [2004] OJ L24/1.

8 European Commission 2004/C 31/03 Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings [2004] OJ C31/5.

9 See Commission Notice (EC) 97/C of 9 December 1997 on the definition of relevant market for the purposes of Community competition law [1997] OJ C372/5 where, according to para.24, potential competition as a source of analysis of the competitive constraint "is not taken into account when defining markets, since the conditions under which potential competition will actually represent an effective competitive constraint depend on the analysis of specific factors and circumstances related to the conditions of entry". In other words, in defining the relevant geographic market, potential competition (here of the Chinese competitor CCCR Corp.) is excluded. On the contrary, the Competition & Consumer Commission of Singapore, in clearing the merger, considered that the merger would not substantially lessen competition because "there is competition form other globally active urban signalling and metro suppliers who could supply in Singapore" and because "barriers to entry/expansion for these suppliers are not significant in each of the relevant markets". See Competition & Consumer Commission Singapore (2018) CCCS Clears Merger of the Rail Mobility Business of Siemens AG with Alstom S.A.. Press Release on the 24th of October 2018 at para.8.