A European Commission decision of 6 February 2019 caused a big political stir. The European Commission based its prohibition of Siemens’ proposed takeover of Alstom’s rolling stock sector on the EU Merger Regulation. The ban provoked a political outcry. The Commission was accused of having failed to take sufficient account of the global competitiveness of European enterprises and of thus having prevented the ‘Airbus of trains’. In doing so, the Commission had prevented the global competitiveness of European enterprises, it was claimed. Politicians voiced the wish for a possibility to politically overturn Commission decisions, i.e. an instrument analogous to the ‘Ministererlaubnis’ available for that purpose in Germany.

Knocked out by the SIEC test

Featuring sales of some EUR 30 billion, state-owned China Railway Rolling Stock Corporation (CRRC), which resulted from the merger of the state-owned Chinese companies CSR und CNR, is the world’s largest supplier of rail equipment. The rolling stock sectors of Alstom and Siemens account for less than half of such sales. So, given such seemingly overpowering competition, how could it happen that creating a European champion was prohibited? The reason is the compulsory standard for the appraisal of mergers which must be applied by the Commission. The Merger Regulation provides for the SIEC test to be used for the appraisal. Whereas a dominance-based test is still being applied in Austria, checking whether a significant impediment to effective competition (SIEC) exists has come to be the standard procedure on the European level. Therefore, the relevant question is whether the concentration prevents effective competition in the common market, particularly but not exclusively by the creation or strengthening of a dominant position in the market. The concentration is reviewed as to market shares, financial power, barriers to entry, supply and demand trends and other criteria as well as to effects on potential or actual competition.

Judging from the publications of the Commission, we can say that this appraisal was performed in great detail – although, of course, we could not inspect the details of the examination. As soon as the full-text decision is available, we will provide further details.

The Commission was of the opinion that the proposed transaction failed to pass the required market test (SIEC) in particular in the area of signalling systems and high-speed trains. With regard to very high-speed trains, the Commission’s analysis even covered a global market. According to the Commission, it had also carefully considered the competitive landscape in the rest of the world and it saw no relevant potential competition for the undertakings concerned in the two segments at issue, i.e. signalling solutions and very high-speed trains.

Now, immediately after current press releases disclosed that railway operator Westbahn is buying train sets from CRRC, voices are being raised calling European merger control a disaster. As an enforcement authority, the Commission has no political leeway in applying the applicable legislation, including, above all, the SIEC test. Whether this outcome is politically desirable can – and must – be a subject of political discussion. The Commission is the wrong party to blame, though. It enforces legislation.