Siemens-Alstom veto prompts debate, but won't lead to competition-rules overhaul

Siemens and Alstom’s frustrated plan to merge their railway businesses shows the steely independence of the European Commission’s competition regulators, who blocked the deal in the face of intense political pressure from France and Germany.

Finance ministers Bruno Le Maire and Peter Altmaier have said the prohibition will leave the European railway industry unable to compete with Chinese competition which, they say, is just around the corner.

EU antitrust chief Margrethe Vestager countered that she was just applying competition law to the European market as it stands, as is her mandate. Creating “European champions” to counter a threat that may never materialize is not her business, she says.

With so many prominent EU figures opposing her decision, which is portrayed as following the rules to the letter, the question arises: Do the rules themselves need to change?

Vestager doesn’t think so. "I don't think this case is proof we need to change the competition rules," she told reporters today.

France's Le Maire disagrees. “The EU competition rules must be changed,” he said last month. “European competition law was defined in the 20th century and stops us from confronting the challenges of the 21st century.”

Manfred Weber, a German EU lawmaker tipped to be the next commission president, has also said the rules need to change.

With France and Germany unhappy with things as they stand, the question of reforming the competition rules is likely to be on the incoming commission’s agenda, regardless of who takes over from Jean-Claude Juncker later this year.

The one exception might be Vestager herself, who has long been rumored to covet the top job. But if she does indeed want it — she’s never confirmed her ambitions — the Siemens-Alstom decision hasn’t helped her chances. Liberal leaders in France, who would have been among her most important backers, seem unlikely to do so now.

Empty threats

Vestager’s career aside, though, the political consequences of the veto decision might be smaller than it first appears.

The chances of the Franco-German grumblings translating into actual legislation seem remote. A formal rewrite of the merger regulations would need unanimity, and it's hard to see smaller EU countries signing up.

"The interest in this merger has been very high in France and Germany, but there are still 26 other member states that have an interest in these markets," Vestager said in her press conference today, before suggesting that members of that latter group had deep concerns over the deal.

Even the 17 ministers corralled by Paris and Berlin in December to sign a declaration on the future of European industry seemed equivocal on tipping the competition scales in favor of the largest companies.

While they promised to identify "possible evolutions" to competition rules, the reference to do so to help "European players of international scale to emerge" was relegated to an annex.

Speaking in Davos last month, even Altmaier admitted that his enthusiasm for European champions ebbed when it concerned companies headquartered outside Germany.

The commission's line that Europe's existing trade-defense rules are better suited to tackle unfair Chinese competition will ring true with many. The EU executive is also right to note that many European giants have been allowed to merge at the global level, provided they resolved concerns in Europe.

European elections

As for France, only time will tell whether the momentum behind reforming the rules will outlast the European elections.

By that time, Vestager might have even served Paris and Berlin a few timely examples of how the competition rules can work to their liking.

Any day now, she is expected to announce a third sanction against Google for restricting competition in online advertising.

And a recent decision ordering the UK government to collect hundreds of millions of pounds’ worth of tax breaks from multinationals could also help ease bruised feelings in Paris and Berlin.

In EU competition, you win some and you lose some. In the end, that’s a situation that most if not all EU governments can live with.