Thursday, February 21, 2019

Rail Freight Interests Welcome European Commission Decision to Disallow Merger

Antitrust Ruling Forbids Marriage of Siemens and Alstom
Shipping News Feature
EUROPE – Whilst freight interests have welcomed the decision of the European Commission earlier this month to disallow the 2017 proposal to merge the rail assets of Germany's Siemens with France's Alstom, there will doubtless be others considerably more disenchanted with the Competition Authority's antitrust ruling.

After that initial announcement over a year ago the authorities made it plain that the deal would be closely examined, leading to the pair making some concessions, including agreeing to the selling off of both their high speed train manufacturing and some signalling technology concerns. This however, as expected by many observers, obviously did not sway the Commission.

When the initial investigation was proposed, politicians from the two countries concerned raised the possibility that refusing the deal would open the door for Chinese interests to sweep into the European market, a consideration flatly rejected by EU Competition Commissioner Margrethe Vestager who indicated from the start that she viewed this as unlikely, whilst permitting the merger introduced the possibility of restricting trade.

Had it proceeded the amalgamated binational group would have seen revenues of around €15 billion, twice the size of Canadian train maker Bombardier, but only around half that of the state owned Chinese group CRRC, by far the world’s largest producer of rolling stock.

The decision has been greeted by the European Rail Freight Association (ERFA) which publicly thanked the Commission for its perseverance in the enforcement of competition rules, saying the next step is to ask for ‘a real market access reciprocity’. Carole Coune, Acting Secretary General of ERFA was enthusiastic in her support of the Commission, saying:

”We applaud the decision of Mrs Vestager to reject the Siemens-Alstom merger in her role of guardian of the Treaty and its competition rules. Such a merger would have increased costs for European industry at a time when railway undertakings are redoubling their efforts to achieve excellence. But our European industry must be protected by a real reciprocity of the market access conditions.

”We need a Commission which goes ahead with the enforcement of the rules that benefit customers, making rail travel cheaper, safer, qualitative, more accessible and less susceptible to tax subsidy. In [order to] achieve climate change goals, it’s crucial that this policy remains a priority.”

ERFA says it supports the idea of having a strong European railway manufacturing sector but in order to protect its industry against unfair competition, the Commission needs to work on market access. It insists this continued action is essential for rail to continue its path towards more and more qualitative services at increasingly competitive prices with other modes of transport. Only this policy, it says, will support more modal shift and lead to the goal of climate challenge.

To illustrate its point ERFA says that previous freight and passenger market success stories have demonstrated that the European competition model is benefitting customers. These include new services like the ‘rolling road’ concept and the rail freight corridors. It says rail volumes have grown in countries such as the Netherlands, UK, Sweden and Germany where there is a market share of alternative operators.

The introduction of innovations such as quieter wagons and communications systems for customers and efficiencies are making the shift to rail more user friendly, and changes driven by a competitive market mean that rail products are now more affordable. ERFA says this progress is in no small part due to the constant attention of the Commission in respect of competition regulations.

For its part Alstom said the decision was a clear set-back for Industry in Europe. Alstom, together with Siemens, is convinced that the transaction would have created substantial value for the global mobility sector, the European railway industry, customers, travellers and commuters, without harming European competition. It would also have allowed the creation of a European player having the ability to cope with the growing competition from non-EU companies.

Siemens meanwhile says it is assessing its options in view of the setback. Siemens Chief Executive Joe Kaeser made a statement saying:

“We take note of a decision that has brought an end to a European landmark transaction. While not unexpected, it proves that Europe urgently needs structural reform in the way it shapes its industrial future in a globally connected world.”