In February 2019, the European Commission prohibited the proposed acquisition of Alstom by Siemens,1 reigniting the discussion on the need of including wider public interest considerations in merger control. That ongoing debate restarts whenever a high-profile transaction is prohibited, and the discussion’s main focus is whether in merger review the Commission should have the discretion to take into account other objectives than protecting competition and allow the creation of “European champions” that are better placed to face global competition.

A recurrent theme in the European media is that in today’s rapidly developing globalized economy, in a landscape of rising competition and international trade wars, the competitive position of Europe is under threat. 2 A prominent sub-theme is the looming entry of powerful Chinese giants into the European theatre, sponsored by government subsidies, support and coordination, all of which are lawful thanks to China’s outdated “developing economy” status under the WTO rules. The argument is that these and other factors favor Chinese companies over their European competitors. This then raises a burning question: should Europe stick to the old faiths of free trade and competition law orthodoxy or become more protectionist and pursue a more coordinated industrial policy? Such a policy would be supported by more and better state aid, revised public procurement rules insisting on reciprocal market access, effective trade defence instruments (TDIs), a thorough monitoring of foreign direct investment and – last but not least – a more lenient merger review system capable of closing an eye to competitive harm for the greater good of Europe’s industry and welfare. This particular aspect of industrial policy would imply that the merger rules may be bent to let industrial policy considerations override competition policy orthodoxy.

In recent years, the EU has already adopted a set of rules to cope with the changing global environment, ie by modernizing its TDIs which strengthens the protection of EU companies against harmful imports (2018) and adopting an EU FDI screening allowing the exchange of information between the Commission and EU member states and raise concerns related to specific investments (2019). 3 In a colourful paper titled EU Industrial Policy After Siemens-Alstom – finding a new balance between openness and protection released in March 2019, the Commission’s European Political Strategy Centre rolls out the different dimensions of such an industrial policy: (i) making the WTO fit for purpose; (ii) growing the EU’s arsenal of TDIs; (iii) protect critical technologies and assets through an increased monitoring of foreign direct investment; and (iv) leveraging power to have more reciprocal market access.

The report rightly states that “industrial leadership starts at home.” And given the institutional framework, the member states are in the driving seat to achieve these goals. This means (i) re-boosting the Single Market; (ii) funding innovation and important projects of common European interest; (iii) developing standards for a brand Europe; (iv) and building partnerships including through more “economic diplomacy.” The report does not list merger control as a means to make European companies fit for the global stage. In one of the sub-chapters, it does call for a “rethinking of ‘European champions,” but the example referred to is the teaming up of Ericsson, Telia and another international car manufacturer for 5G testing, not a concentration within the meaning of merger control. This deliberate silence clearly suggests that opening up merger control to industrial policy considerations is not on the Commission’s table, at least not today. Which is not surprising.

Although several EU countries have shown some sympathy to the idea of modifying the merger control regime in one way or the other, it should be recalled that it has taken the antitrust community in the US and the EU many decades since the adoption of the Sherman Antitrust Act in 1890 to develop our current rationalistic competition law framework, which forces regulators in merger reviews to clearly identify a harm to competition, and that restrictive measures (ie, veto, conditions) can only be imposed where and to the extent that this is necessary to prevent the harm from occurring (principle of proportionality). The current orthodoxy aims at guaranteeing the optimal allocation of resources through the competitive play of market forces, at generating consumer welfare and efficiencies. This being said, according to established EU case law, the competition rules laid down in the European Treaty aim to “protect not only the interests of competitors or of consumers, but also the structure of the market and, in so doing, competition as such” – whatever “competition as such” may be. 4 

To the extent that the EU beefs up its industrial policy along the frontlines sketched out above and that EU competition rules continue to safeguard the interests of both competing suppliers, their input providers, buyers and final consumers, thereby incentivizing European companies to reach their full potential and leveling the play field on the European and global market places, there should arguably not be any need to discard orthodoxy and dabble with protectionism. But let us take a closer look at the proposed modifications of merger control discussed over the last months.

I.European champions


As previously stated, the recent decision of the Commission to block the proposed Siemens-Alstom merger has fuelled EU competition policy critics to voice their concerns. Critics were in support of the merger as it would allow for the creation of an EU champion and level out the playing field against foreign companies enjoying subsidies (eg, Chinese companies). Given the significant interest in the decision and the heated debate, the Commission rushed to publish a provisional non-confidential “summary” of the decision on 5 September – a “summary” of 400 pages. The published sections include those of relevance for the debate, notably those on the potential entry of Chinese competitors. 5

The Commission based its negative decision on the ground that the proposed transaction would have harmed competition in markets for railway signalling systems and very high-speed trains. During the lengthy investigation, there was much political pressure on the Commission to allow the transaction – a pressure that was resisted, as the outcome shows. However, the decision as such is not political – rather, it refuses to be, claiming that the negative outcome of the review is entirely based on the Commission’s use of wholly orthodox legal and economic tools.

The parties had argued that Chinese train manufacturers, such as CRRC and Huyndai Rotem, should be considered potential competitors, because they satisfy the technological standard required to bid in European tenders if they want to. The time window for potential entry should be 5 to 10 years given the dynamics of the market, surmountable barriers to entry and the fact that tenders are infrequent.

The Commission objected that it had sufficiently considered potential entry in its analysis of the global competitive landscape. It found that Chinese suppliers were not yet present in the EEA markets for very high-speed trains and have not yet tried to participate in any tenders. Moreover, the Commission believes that it will take a long time before Chinese suppliers can become credible suppliers for European infrastructure managers. Regarding very high-speed trains, the Commission indicated that it will be highly unlikely that new Chinese entry will represent a competitive constraint on the merging parties in the foreseeable future. 6 However, the time frame when assessing competitive constraints should be done on a holistic basis (ie, how long would it take for Chinese competitors to enter the market?). In relation to the timeframe taken for the analysis, it should be noted that the Commission would prefer not to have a long period of unconstrained competition and forward-looking assessments are complicated in fast-changing markets without a sufficient volume of information. The Commission also pointed out (quite maliciously) that Alstom had already forecast Chinese entry at the time of Alstom/Areva, 7 ie, almost a decade ago.


Not surprisingly given the strong support of Germany and France to the merger, less than two weeks after the prohibition of Siemens/Alstom, the German and French Ministers of Economy published a short manifesto outlining 3 pillars and 14 working points envisaging an EU industrial policy fit for the 21st century. 8 The manifesto’s key section is the second pillar, the call for an adaptation of the regulatory framework, and notably the competition rules. The manifesto bluntly alleges that the current rules are outdated as they disadvantage European companies in the global playing field, where competitors are heavily subsidized. The merger rules, says the manifesto, prevent European companies from growing and competing.

This translates into two proposals:

  • Merger control should “take greater account of competition at the global level, potential future competition and the timeframe when it comes to looking ahead to the development of competition to give the European Commission more flexibility when assessing relevant markets. This would enable a more dynamic and long-term approach to competition, at the global scale.”
  • There could be “a right of appeal of the Council which could ultimately override Commission decisions could be appropriate in well-defined cases, subject to strict conditions.”

The manifesto further suggests to take more account of third-country subsidies in merger reviews, and it welcomes the recent developments in European state-aid rules enabling EU member states to finance major research and innovation projects including the first industrial deployment in Europe.9 While a subsequent initiative, the Polish-Franco-German manifesto of June 2019 toned the proposed veto right down to a Council involvement, it still opens the door to a broader political influence.

Shortly after the manifesto, the European Council called upon the Commission on May 27, 2019 to present “a long-term vision for the EU’s industrial future, with concrete measures” by the end of 2019,10 with a demand that action at the EU level should be taken in order to prevent a fragmented and thus ineffective approach to the economic challenges that lie ahead.

II. Advancement or pitfall?


While the Commission’s Directorate-General for Competition insists on the importance of having an impartial review according to orthodox competition law standards and free of political pressure, several merger control regimes in Europe and around the world openly allow for public interest considerations to be taken into account, be it in the initial process or at the appeal level. The following countries among others indicated to including public interest considerations in their assessment:

i. Germany

Under the German merger rules, public interest considerations can be taken into account (arguably even allowing mergers that can cause competitive harm) in exceptional circumstances. Indeed, if the Bundeskartellamt (BKartA) prohibits a merger, the parties can appeal to the German Federal Ministry for Economic Affairs and Energy for a “ministerial authorization.” The German Minister for Economic Affairs and Energy is allowed to approve an anti-competitive merger on non-competition grounds, in exceptional cases, provided this is in the “overriding public interest,” the macroeconomic benefits outweigh the restriction of competition and the authorization does not put a threat to the German system of market economy. Introduced in 1973 at time of Keynesian interventionism, the exception was applied for less than 25 times and granted not more than 9 times. The exercise of that exceptional authority, which requires to overcome significant self-constraint due to the ordo-liberal competition culture prevailing in Germany, is usually accompanied by a lot of drama and systematically criticised by numerous representatives of the German antitrust community. Such public interest grounds have included, among others: 

  • Securing technological progress (Thyssens/Hüller)
  • Securing energy supply (VEBA/Gelsenberg) and
  • Supporting international competitiveness (MAN/Sulzer). 

ii. Portugal

Although the substantive assessment of mergers carried out by the Portuguese Competition Authority (PCA) is based on competition law considerations, public interest may have an impact on the outcome of the decision. In particular that could manifest through the opinion of the Regulatory Authority for Media and the potential extraordinary appeal to the Portuguese government.

Therefore parties concerned are able to submit an extraordinary appeal against a prohibition decision of the PCA, however the decision by the Council of Ministers must be grounded on fundamental strategic interests of the national economy, outweighing the impact of competition that will likely be distorted stemming from the merger.

iii. South Africa

South African legal framework allows for competition and public interest considerations. In particular, the South African Competition Authority can, in accordance to section 12A(3) of the Competition Act, consider the following public interestrelated factors:

  • Particular industrial sector or region
  • Employment
  • The ability of small businesses, or firms controlled or owned by historically disadvantaged persons, to become competitive and
  • The ability of national industries to compete in international markets.

Admittedly, there are a few examples of respectable jurisdictions that do allow merger review to take into account other than purely competition considerations. It is therefore not heresy to think that industrial policy considerations can have some weight in merger reviews.


Although EU competition policy critics might argue to the contrary, EU competition enforcement does not as such prevent the creation of EU champions while focusing on sustaining robust competition in EU markets. A well-established competition law enforcement keeps markets fair and competitive and creates conditions for better, more efficient and innovative industries to emerge. 11 Previous Competition Commissioner Joaquín Almunia stated that “competition policy is not about preventing the rise of vibrant and competitive European champions – far from it. On the contrary, enforcement of competition rules – including merger control – is a vital tool for public authorities to create the best possible conditions for firms to do business and to help the economy grow.” 12

Looking at the broader picture, the Commission has since its inception cleared the vast majority of the more than 7,400 notified merger transactions. Some of them allowed for the creation of EU champions (eg, Peugeot/Opel,13 AB InBev/ SABMiller14). The Commission has currently only blocked 30 mergers. Even when adding clearances with conditions and some withdrawals to avoid a negative decision, the statistics do not indicate an inflexible regime.

The incremental development of rationalistic antitrust standards on both sides of the Atlantic has taken almost a century – before that, competition regulators in the US would – depending on the prevailing policy – sometimes block mergers for the most ridiculous reasons. Even if the system is never perfect, we should also be careful to throw the baby out with the water. Relaxing EU competition rules by including public interest considerations in the Commission’s assessment carries significant risks, as it may open the door to many other considerations that we do not currently think about. Further, relaxing merger control rules may result in economic inefficiency on the EU market and political arbitrariness. Moreover, including public interest consideration in merger control may arguably give larger EU member states the tool to impose their will on smaller EU member states, fuel distrust in the Single Market and trigger more internal divisions within the EU itself. The Commission’s credibility and expertise could also be affected if it would have to directly consider member states’ public interest in the decision making process. Last but not least, some would argue that there are many other hurdles, including in the regulation of labor law and taxation at national level that may adversely affect the expansion of companies established in Europe.

III. Conclusion

It is good to have a clearly defined EU competition regime that mainly focuses on ensuring that market practices do no reduce consumer welfare by creating inefficiencies, rather than inviting a vague and undefinable array of industrial policy considerations to blur the process. To arrive at a regime that only sanctions conduct that is genuinely anticompetitive has been an undeniable achievement of US and EU competition law, and it took many decades to get there (counting from the adoption of the Sherman Act in 1890).

Industrial policy should concentrate on securing conditions for optimal industrial competitiveness, but outside merger reviews. “Public interest” can vary from one year to the next, so trying to intertwine competition policy with wider public interest may lead to unpredictable results. Competition policy should preserve competition, removing market-entry barriers and incentivize innovation. Any remaining market imperfections should be targeted by other industrial policies and specific sectorial regulations, which take into account other public interest considerations, such as public safety and consumer health.

At the same time, industrial policies should not interfere with the objective of the EU competition rules to optimize the allocation of efficiencies. Public interest policies constructed to choose a specific firm as the champion of the sector, instead of being the result of the competitive market process, are also argued as potentially ineffective because (i) the selection process may be arbitrary (especially when the process is not transparent) and (ii) it may lead to unexpected results (governments usually are not well suited to estimate the likely commercial success of a company). 16

At an independent panel discussion in Brussels organized by DLA Piper in June, panel members from different economic consultancies, the antitrust press and a leading national transport company converged in thinking that the EU merger review process does have the ability to deal with competition from foreign firms benefiting from domestic industrial policies allow them to distort competition. The consensus extended to being cautious with far-reaching proposals to remedy the current rules. Letting public interest be a factor in merger control decisions, if allowed at all, would need to be accompanied with transparent and well-aligned guidelines, in order to preserve legal certainty. Such rules may not be easy to create.

Looking at the proposals of the Franco-German Manifesto, the proposal to allow an appeal against a negative Commission decision that can be overcome by a political decision at Council level would probably qualify for “industrial policy,” as this decision would have to be based on other than competition grounds. It would of course also raise many practical questions, such as the grounds for appeal and the majority required to override a Commission decision. It would introduce an extraneous element in the (quite) cohesive body of EU competition law doctrine.

On the other hand, adjusting the parameters for taking into account potential competition in merger review to better reflect the realities of global markets, is in our view within the scope of competition policy orthodoxy, and does not amount to opening the doors to industrial policies of all sorts. We are convinced that the regulators at EU and national level could develop a modified standard in the context of future merger reviews. And it is standard practice to do so. The Commission itself, each time it modifies its guidelines, proceeds with such adjustments, and while some of these adjustments have been criticized by some, to the best of our knowledge no one has ever alleged that DG Comp ventured beyond the scope of its jurisdiction to introduce extraneous considerations into the realm of competition policy. According to the principle of proportionality, which is one of the fundamental principles of EU law, preference should be given to the least disruptive adjustment that is equally suitable to achieve a desired objective. In lay words: why use a sledgehammer to crack a nut? We therefore advocate more flexibility in applying and adapting the existing assessment guidelines, rather than opening up the door to wider public interest considerations.