BSE Research Professor and former European Commission Chief Competition Economist Massimo Motta has co-written the following open letter, "Europe needs more, not less, competition," that has been signed by more than 40 European industrial economists:

We have been looking with preoccupation at the political pressure on the European Commission in the context of the merger between Siemens and Alstom, and even more at the political reactions to the prohibition decision. In particular, the announcement of possible initiatives by the French and German governments to relax European competition policy so as to favour mergers among large European companies is extremely worrying. Competition policy should be independent from political interference based on perceived European industrial goals, and respond to efficiency considerations and the protection of the competitive process.

The argument that it is sufficient for two firms to merge and increase in size to become more competitive in the international markets is fallacious. Siemens and Alstom are already leading firms in the international markets, and as such already benefit from important economies of scale and scope. We have not found in the public domain any explanation of why their union should give rise to significant efficiency gains (and the European Commission states in its press release that the companies have not substantiated any such efficiency claims).

Absent efficiencies from the merger, the elimination of competition between Siemens and Alstom may well increase profits, but it would make the merged firm less competitive in international markets and harm its customers, such as train operators and rail infrastructure managers, which will likely have to pay higher prices and enjoy less innovation and quality, and ultimately final consumers. Unsurprisingly, customers have strongly opposed the transaction (had Siemens become more competitive after controlling Alstom, actual and prospective buyers would have been the first to welcome the merger).

Competition law provisions do not prevent the formation of national or European champions, as long as a merger brings about sufficiently strong synergies and complementarities between the merging parties. Indeed, the European Commission prohibits mergers only in rare occasions, when the predicted anti-competitive effects for buyers and consumers are significant and no compensating efficiency gains are likely.

If anything, the mounting empirical evidence on increased market power and concentration call for stronger competition enforcement, responding only to impartial efficiency criteria and not to political opportunism. Europe needs more efficient, competitive, and innovative firms. Sponsoring mergers which remove competition would achieve the opposite.

Massimo Motta (ICREA-Universitat Pompeu Fabra and BSE)
Martin Peitz (University of Mannheim and MaCCI)

Among the more than 40 international economists who have signed the letter are several current and former professors from the BSE Master's in Competition and Market Regulation, Competition Economics Summer School, and professional courses on topics such as Abuse of Dominance and Mergers. Professor Motta is the Scientific Director of the Master's program and teaches in all of the Competition programs offered by the Barcelona School of Economics.

Visit Massimo Motta's website to view the letter and most up-to-date list of signers

Media coverage and translations of the letter

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