The debate that is developing around the decision of the European Antitrust of prohibit the merger between Alstom and Siemens reproposes a contrast between industrial policy and competition, which we thought was a legacy of the 70s of the last century.
Net of the considerations relating to the effects on consumers, the reasoning of the Commission, which prohibited the operation by collective vote, albeit on the proposal of the Competition Commissioner Vestager, is basically very simple. Alstom and Siemens are the two duopolists in the European high-speed train market, in which they operate by offering models in direct competition: there are no alternatives, as one can realize by visiting European railway stations. Also they are leader in non-European markets open to competition (excluding China, Japan and Korea). This competition has given rise to a very dynamic and innovative market.
The merger would give rise to a substantial monopoly in the high-speed rolling stock market. Furthermore, Siemens and Alstom are also among the major operators in the railway signaling sector. Their concentration would give rise to an undoubted leadership position. Leadership that would be further strengthened by the fact that in modern railway technology there is a close connection between signaling and train driving, and therefore a monopoly in the rolling stock market inevitably strengthens leadership in the signaling market.
All that it would prevent the entry of potential competitorswould reduce the ability of existing ones to compete and lead to the monopolization or quasi-monopolization of markets. This would inevitably also give rise to a substantial reduction in their dynamism: the concentration would certainly give rise to an increase in the margins of the companies but it would also reduce the drive towards efficiency and innovation. Faced with these assessments, anticipated to the companies many months ago, evidently the companies have not been able to propose changes that would reduce the risks that this would produce.
Nor did the Commission consider that the monopoly position resulting from the operation could have been "challenged" by any non-European, and in particular Chinese, competitors: it is true that Alstom and Siemens and the French and German governments have argued that the operation aimed to contain the competitive threat on the horizon from Chinese manufacturers and in particular the CRRC, who are developing a railway system in that country, with innovative technologies and enjoying substantial public aid: however, he assumed that the threat was too far away to justify the costs in potential loss of efficiency and innovative capacity.
Basically, the operation would end up weakening rather than increasing the competitive capacity of European companies. Significantly, these conclusions were explicitly shared by the competition authorities of six European countries including the French and German ones.
And here you register the conflict with the vision of industrial policy which is at the basis of the French and German governments: a vision according to which European industry must strengthen itself in order to compete with non-European companies which, thanks to globalisation, are coming to threaten them, when they are not already doing so. And this also through mergers that strengthen market positions and allow broader investment policies. In particular, in the railway case, they think that a "European champion" is needed to compete with manufacturers and especially with the Chinese ones, currently fully integrated in the management of the network, infrastructure and rolling stock, and which also enjoy public subsidies which make it an even more formidable competitor already now and above all in perspective. European companies need to strengthen themselves, and for this reason concentration would be essential.
In short, the Commission is accused of having limited its analysis to what happens to competition on the market, European or in any case open to international competition, without taking into account the overall context of global competition. To the point of suggesting a change in the criteria, based exclusively on competition, which have guided the control of European concentrations for thirty years.
In short, a reasoning not too different from the one that in the 70s pushed to wish for "national champions" that could compete with companies from other European countries within the context of the continental market undergoing integration. We know how it ended then: in the different context of a market that has globalized, but in which blocks with very different internal rules are also emerging, in particular as regards the antitrust legislation on state aid, as is the case of 'Europe and China, can it be considered that the assessments should be different? It is certainly a complicated problem, the weight of which cannot, however, be transferred to the use of a single instrument, the control of concentrations.
Eventually the central point is what the role of competition is in the market in stimulating the development of the industrial structure. The analyzes of the 80s, for example that of Michael Porter, came to the conclusion that competition played a fundamental role even in protected markets. Porter singled out among the success factors of the Japanese automobile industry, which was completely sheltered in the 70s, the fact that behind the tariff barriers the numerous Japanese automobile companies fiercely competed with each other, which had led them to achieve levels of efficiency and of innovation that had allowed them to establish themselves abroad also in the following decade in a globalized market context. The success factor therefore was competition and not protection.
More recent analyses, such as those of Professor Mazzuccato, which even suggest a significant role of the public sector in determining the success of industrial economies, especially in innovative sectors, do not question the significant role of competition between firms in determining how effectively public stimuli are then actually exploited.
The control of concentrations, in Europe as in the USA and in the whole of the most advanced economic systems, is based on perception that there is a close relationship between market competition and industry competitiveness: it is doubtful that the debate that is arising from the Commission's decision on Alstom-Siemens will give us the elements to change our minds.
°° The author was the Secretary General of the Italian Antitrust in its first phase of activity
