When Siemens AG and Alstom SA unveiled their rail merger in 2017, the former arch-rivals hailed the deal as a historic union, forming the basis of a European champion with the heft to take on an expansionist Chinese competitor.

The plan may well go down in history, but not for the reasons the companies had hoped. Rather, the European Commission’s likely rejection of the merger on antitrust grounds is generating a political backlash in Paris and Berlin against Europe’s independent competition regulator.

French Finance Minister Bruno Le Maire has called for an overhaul of policy to make it easier for the region’s companies to grow and take on aggressive Chinese rivals. German Chancellor Angela Merkel has also talked of loosening EU rules. Le Maire raised his rhetoric last week when Competition Commissioner Margrethe Vestager got the backing of member-country regulators to block the deal. A formal decision may come by this week.

“Alstom and Siemens are the symbols of French and German industry”, said Marc Iveldi, a professor at the Toulouse School of Economics, who studies competition issues.

Two sides

At the heart of the controversy is a fundamental disagreement over the role of Brussels in European business. On one side of the issue are powerful European officials like Vestager who view themselves as umpires calling balls and strikes with a view of protecting consumers. On the other are politicians who fear that the rigid EU attitudes are hobbling Europe’s top corporate players from forming ever-larger combinations.

At first glance, approval for the deal looked difficult because of the companies’ market power in Europe. Backers urged regulators to look beyond the region and consider the global rise of China’s CRRC Corp, a product of a government-mandated tie-up between two major rolling-stock manufacturers. The Chinese company, now active on many continents, has annual sales of more than double the €15 billion ($17.1 billion) that Siemens and Alstom would have, if they combined.

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