For months, the tone of competition commissioner, Mrs Margrethe Vestager, has been distinctly dismissive, softening any expectations that the EC might give its blessing to the combination. Growing consternation among politicians in Paris and Berlin added to the sense that this deal was going nowhere.

All the evidence suggests this wasn’t exactly an agonising decision for the Commission, which since July 2018 has trawled through more than 800,000 documents and heard numerous objections from customers, competitors, trade unions, industry bodies and competition authorities.

In October 2018 the two suppliers put forward their remedies to the EC’s concerns, outlined in the so-called Statement of Objections. These primarily concerned the markets for main line signalling and very high-speed trains.

The proposals involved divesting a “complex mix” of assets in the signalling sector and the sale of Alstom’s Pendolino product line or a license for the production and sale of Siemens’ new Velaro Novo high-speed train. Ultimately, this was insufficient to satisfy the Commission, which said the package put forward was inadequate to prevent higher prices and less choice for customers. The disposal of Pendolino in particular would do little to stimulate competition in the high-speed market given that this is a 250km/h train in a sector where much of the demand is for rolling stock with 300km/h capability.

Vestager played down the prospect of competition from China, noting that Chinese suppliers are not present in the signalling market in the European Economic Area. The Commission believes that Alstom and Siemens are “unlikely” to face competitive pressure from CRRC in the European high-speed rolling stock market any time soon - a reasonable assessment, although a future acquisition could help to anchor a Chinese supplier in the European market. Chinese firms are also investing heavily in research and development, which is driving improvements in their products and technology.

In its February 6 statement outlining the reasons for the merger’s rejection, the EC said that “remedies providing a structural divestiture are generally preferable to other types of remedies” because they directly ensure continued competition within markets that could be compromised by supplier consolidation.

Structural divestitures were a key feature of previous major mergers such as BASF’s acquisition of Solvay’s Nylon business, the acquisition of Gemalto by Thales, and GE’s purchase of Alstom’s power generation and transmission assets. Alstom and Siemens clearly understood this from the outset. The limited scope of their concessions indicates that the kind of divestiture suggested by the EC would have undermined the value of the merger to a degree that the two suppliers and their shareholders could not accept.

On February 5, EC president, Mr Jean Claude Junker, told delegates at a conference in Brussels that the Commission had only rejected 30 of the 6000 merger cases it has reviewed. “This is a message for those who are saying that the Commission is composed of blind, stupid, stubborn technocrats,” he said. “We believe in competition as long as it is fair for all. We’ll never play politics or play favourites when it comes to ensuring a level playing field.”

The job of the Commission is to preserve the interests of the single market and apply European competition law. In rejecting the Alstom-Siemens merger it has done precisely that. There were clear contradictions that threatened competition in certain sectors and national markets within the European Union. Conversely, it is not within the Commission’s remit to consider how a merger between two European firms might influence their ability to win more business in Asia or Australia or South America, where Chinese suppliers are gaining ground. What’s best for the single market isn’t necessarily best for European firms on the global stage.

Yet the mere existence of the single market has helped European manufacturers to flourish, breaking down barriers to market entry and nurturing the conditions for investment in new products and technologies. This in turn has provided a solid platform for success elsewhere in the world. Few would disagree that this is worth preserving.

However, with the rise of China, there is a growing feeling that European competition law needs to evolve. On February 19 German chancellor, Mrs Angela Merkel, told a digital conference in Brussels that she wants “a discussion about the industrial location of Europe” at this month’s EU summit. “The approach to competition ...leaves me in doubt whether we can create global players in this way,” she says. “But we have to find the European will to change that competition law.”

Merkel says Europe wants its companies to compete globally, but European competition law “is not sufficiently prepared for the global situation.”
The Alstom-Siemens deal may be finished, but a high-level debate over competition and the place of major European firms in global markets is just getting started.