Merger control and why we need a new perspective

Morgan Guérin

Head of the Europe programme, Institut Montaigne

You could be forgiven for thinking the European Union shot itself in the foot last February when the European Commission overruled the plan for Alstom and Siemens to merge their rail activities into a major European champion that could rival the large American and Chinese players in this sector. Fortunately, those red lights are few and far between. But a more important question is how many businesses have shelved their plans to merge to avoid embarking on lengthy, costly and subjective procedures.

The telecoms sector is a striking example. China is home to over a billion people and has three telephone operators. France, which is home to 70 million people, has four operators. What future will the European Union and its 30 or so operators face in this fiercely competitive environment?

Still, the European Commission isn’t to blame. The merger control rules it applies are enshrined in European law and mostly stem from an economic assessment of the European market. But it isn’t really possible to completely separate economic matters from geopolitical issues in today’s world. Can we still claim to be a global power when no European businesses are as large as the world’s leading players?

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European competition law vigorously defends consumers’ interests and we would not want that to change. But the fact that it has only taken a few years for large Chinese industrial organisations to pick up substantial parts of the European market suggests we might have to reconsider our approach. What we need now is a global industrial strategy. Merger control will be one of the main pillars underpinning that strategy. Its overarching goal, however, should be to build leaders in each economic sector and segment in the European Union. And leaders, in practical terms, means businesses that rank among the top 10 worldwide in terms of revenue or market capitalisation.

The enduring perception that “consumer interests” and “industrial policy” are somehow at odds is deadlocking Europe. Large businesses have become the key players on the geopolitical competition landscape. If Europe wants to move back up the rankings once again and keep its place at the table, it has to take another look at its policy on competition.