France and Germany seek veto on commission competition decisions

When the European Commission announced recently it would block the merger of rail giants Alstom and Siemens, it was acting out of concern the link-up would lead to higher prices for signalling systems and high-speed trains in Europe.

Both companies already dominate their respective French and German markets and the merger, it was argued, would merely squeeze out competitors in the European rail industry.

Competition regulation in defence of European consumers is among the most important powers of the commission and among the most fiercely contested by businesses and member states stymied by it. And at the moment the commission's competition directorate is run by a particularly fearless champion of its role, Danish commissioner Margrethe Vestager.

Now France, and, perhaps less enthusiastically, Germany, upset at the commission decision, are calling for a radical reappraisal of the EU's competition policy, one that would in effect prioritise the interests of giant companies – "industrial champions" – on the global stage over those of EU consumers.

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In the Alstom-Siemens case, at issue is the ability of the merged company to compete internationally with China's powerful CRRC, the world's biggest rail conglomerate in terms of sales with an annual revenue of about €30 billion. It has had relatively little success, however, outside China.

Chancellor Angela Merkel complained that the EU's stance on competition "leaves me in doubt about whether we can really produce global players this way".

‘European champion’

“We will not succeed without a European champion that’s capable of investing, innovating and keeping value-add at home. We should change European competition rules to defend our interests,” France’s finance minister, Bruno Le Maire, said. Only five European firms are in the world’s 40 biggest companies, a joint statement arguing for a new European industrial strategy noted.

The new Franco-German pro posal would give member states the right to override the commission’s antitrust decisions in “well-defined cases”. A political veto for ministers.

But critics warn that that could be a recipe for the gradual defanging of competition policy in the interest of large member states and giant corporations. Politicians can be subject to intense lobbying by large firms and industry organisations more interested in limiting competition than promoting it.

The independence of the commission’s expert service, they argue, is the best guarantor of consumer protection – a view that chimes strongly with Ireland’s longstanding defence of the commission’s role as the defender of the rights of small states.

The argument that the EU’s competition authority is too intrusive would appear to belie the reality that the commission clears the vast majority of mergers without requiring companies to take remedial steps to address competition concerns. In 2018 it approved 370 mergers unconditionally, and a further 23 with conditions (or “commitments”) attached. It blocked only two mergers in 2017, none in 2018, and fewer than 30 since the EU merger regulation was adopted in 1990.

Industrial strategy

Not that the Franco-German proposal will fly – it would require a proposal from the commission and some support from other member states, of which diplomats suggest there is precious little. It will certainly not be supported by Ireland.

More broadly, however, the initiative has to be seen in the context of a wider debate about giving the European Union an industrial strategy. Among the issues being debated by the 18-member-state Friends of Industry grouping is the identification and support of “strategic value chains” – bringing Europe-wide assistance to every stage in the production of items such as car batteries from mining to car sales.

Among other proposals being promoted are ideas about reframing the EU’s state aid and competition rules to allow funds to be directed to areas where innovation needs a helping hand or where “market failures” occur. A step in the direction of the more ambitious French interventionist vision.