France and Germany’s ambition to create a global rail powerhouse to compete with China has run into unexpected difficulties.
Madrid’s investigation could hardly have come at a more sensitive time. EU regulators in Brussels are in the midst of an in-depth investigation into whether a tie-up between France’s Alstom and Germany’s Siemens could distort competition, and Spain’s probe will be very difficult to ignore.
For Paris and Berlin, the rail merger is a core strategic priority that would enable Europe to compete with China in leading international markets. European aspirations to establish a “Railbus” in the mold of Airbus would, however, have to be put on ice if competition authorities find, for instance, that the deal is likely to lead to collusion.
That is exactly the danger raised by the CNMC, Spain’s competition regulator.
The presence of the big four – Alstom, Siemens, Bombardier and Thales – is likely to trigger alarm in Brussels.
The agency said on Thursday that it has uncovered anti-competitive practices involving eight companies on both its conventional and high-speed networks. The alleged malpractice took place across a wide range of contracts, from signaling and safety to maintenance and traffic management.
The companies being scrutinized are: Siemens, Siemens Rail Automation, Alstom, Bombardier, Thales, Nokia, CAF and Cobra Instalaciones.
“The investigation of cartels constitutes one of the priorities of the CNMC,” the Spanish regulator said in a statement.
The presence of the big four — Alstom, Siemens, Bombardier and Thales — is likely to trigger alarm in Brussels. Lawyers said the approval of the Alstom-Siemens deal would be largely contingent on proving that Bombardier and Thales are able to provide sufficient competition in the market.
Spanish train manufacturer Talgo opposes the merger, saying it could undermine competition.
While the EU is meant to decide whether to green-light the deal by the beginning of next year, the CNMC said that its investigation could take as long as 18 months. Lawyers contend that the Commission will be able to extend the investigation by six to eight weeks at most, meaning that the deal will have to be cleared without confirming the existence of the alleged Spanish cartel.
The Commission sidestepped the question of whether the Spanish probe will derail the EU deal review, saying: “We cannot comment on our ongoing investigation, including on the possible impact on it, if any, of the Spanish case.”
The Commission’s analysis as to why the merger will not harm consumers will have to be bulletproof, as the Spanish competition authority has now increased public scrutiny on some key aspects of the deal.
Alstom said it would cooperate with the investigation and would not comment further on proceedings. An official said that the company has clear guidelines internally for avoiding anti-competitive behavior.
A Siemens official insisted the company meets its legal requirements in Spain, and that it would cooperate with the investigation. The company would not comment on whether the Spanish case would affect the planned merger.
The planned merger is also being buffeted far from Brussels. On Thursday, theAustralian Competition and Consumer Commission (ACCC) published a statement of issues where it explains that its “preliminary view is that the proposed merger may substantially lessen competition” in some markets.
Earlier on Thursday Alstom and Siemens said in a joint statement that an initial review from the ACCC that found the deal could curb competition in the rail market is “common in the case of business combinations of this size and nature.” They said the deal timeline would not change, and the ACCC’s preliminary findings would not pre-judge the case outcome.