Siemens and Alstom still can't get 'European champions' argument past Vestager

Siemens and Alstom, as well as their political backers in France and Germany, appear not to have convinced Margrethe Vestager that they need to club together to fend off competition from outside the EU.

Speaking to German politicians and business leaders today, the EU competition chief sung a familiar tune about not sacrificing internal EU competition at the altar of “European champions”.

She has said similar things before. But that was before Siemens and Alstom had made their offer of concessions, and before she had heard competitors’ and customers’ reactions to their remedy offer.

Vestager didn’t mention the rail merger by name. But it must at least have been on her mind — it’s by far the biggest deal on her to-do list, and the deadline is less than six weeks away.

Moreover, her comments came just three days after French Economy Minister Bruno Le Maire called on her to approve the deal because of external competition. Blocking the merger would be a political and economic mistake because “it would weaken the whole European industry in the face of China,” he said.

The need for a “European champion” in the railway industry has been a cornerstone of the two companies’ efforts to get their merger approved since the beginning, and has been taken up by politicians in France and Germany who support the merger.

Europe’s rail sector is under pressure from China’s CRRC, they say, which as the world’s largest rail company threatens to outpunch its smaller European competitors. Siemens and Alstom have been making this argument at least since they filed the deal to the European Commission in June.

Opponents of the deal, including many national competition regulators, reject that argument. They say that CRRC hasn’t won any major European contracts and isn’t equipped to do so in the near future. And in opening its in-depth investigation of the planned merger, the commission itself has already said it was unconvinced by the China argument.

Since then, Siemens and Alstom have been trying to convince Vestager of the need to create a strong European rail company. The concessions they have offered to assuage the regulator’s competition concerns — selling off a high-speed train business and a package of signaling assets — don’t appear to do enough from the perspective of European competition.

As of today, Vestager certainly doesn’t appear convinced. “We can’t build those champions by undermining competition,” she said.

Her remarks indicate that she’s willing to block the companies’ “Railbus” ambitions if they can't convince her that competition won’t be harmed, regardless of the pressure on her from two industry titans and their respective governments.

And arguably, her speech today contained a retort to those who would accuse the commission of handicapping European business through its merger policy. “In nearly 30 years of the EU merger rules, we’ve approved more than 6,000 deals and blocked just 27,” she said.

It’s not certain that the Siemens-Alstom deal will become number 28. The commission hasn’t given any direct indication of which way it’s leaning, and the companies can still offer more concessions.

But to get their deal through, they’ll clearly need to make it palatable on competition grounds, not political ones.