Germany Inc.'s Bid to Be World Champion Hits EU Antitrust Snags

(Bloomberg) -- German Chancellor Angela Merkel’s desire to nurture more “global players” has turned Berlin’s gaze toward Brussels and to reshaping European Union rules that clamp down on mergers and technology giants.

Merkel, facing her final years as German leader, has criticized the EU for focusing too much on competition in narrow European national markets at the expense of the bigger picture worldwide. She’s already laying the groundwork that could see Germany make changes in 2020 when it gets a six-month stint in charge of EU ministerial meetings.

"There’s a sense that the current approaches don’t work," said Alan Riley, a senior fellow at the Atlantic Council, an American think tank. German industry is particularly aware of the vulnerability of European companies against Asian and American rivals, especially as trade disputes ramp up, he said.

Berlin wants to change the rules of the game. Since last year, the German government can block foreign takeovers of firms with valuable technology it deemed important; it stopped a Chinese bid for the first time this summer. That prompted the EU to play catch-up by drafting its own guidelines to expand what member countries, including Germany, could target in the name of their national interest.

Germany may want to be seen "more as a thought leader and determining the direction of travel" on antitrust enforcement, said Nelson Jung, a German lawyer at Clifford Chance LLP in London. At the same time, the U.K.’s exit from the EU will "change the balance of power quite considerably" and may allow "greater protectionist thinking to take hold, which the U.K. would always have combated in the past.”

Merkel wants EU law to loosen to allow for global champions, she said last month, adding that China and the U.S. have a handful of major telecom operators while Europe has more than 20.

"To my mind, this can’t end well,” she said. “The European Union must understand that if we want to be a player in global innovation, we have to adapt our competition law to the new global issues."

German companies are eager for more leeway to grow: Siemens AG wants to create a rail champion while Deutsche Telekom AG complains that the EU’s approach hinders telecom deals it says are needed to drive investment.

The EU’s increasingly tough merger reviews frequently target German firms. Deutsche Lufthansa AG had to drop its plan to buy collapsed airline Air Berlin on EU opposition last year. Deutsche Boerse AG’s planned takeover of a British rival was vetoed, as was a German cement deal. German carmakers are also targeted by an EU cartel probe, after record fines for truck manufacturers.

Siemens got a particularly sharply worded EU statement in July on its plan to merge with French rival Alstom SA. The companies’ argument that China’s CRRC was likely to pose a threat in Europe "appears unlikely," the EU said.

Europe’s dearth of big technology companies and its fractured telecom landscape are often blamed on Brussels. And while the U.S. sees crackdowns on the likes of Google and Facebook Inc. as extreme, firms like Axel Springer SE say the European Commission, the EU’s antitrust authority, hasn’t gone far enough to protect them.

Germany’s economy ministry is on the case, tasking a group of experts to look at potential changes to the EU competition framework. One of the suggestions would allow antitrust enforcers intervene more swiftly by merely taking it for granted -- instead of seeking to prove -- that large internet platforms are the most powerful in the market. Another proposal might target Inc. by allowing German law to focus on powerful “intermediaries.”

Germany’s call for champions and criticism of EU merger control has so far been handled deftly by the EU’s antitrust chief Margrethe Vestager who insists she’s open to approving deals that create big European companies -- as long as they don’t destroy any chance smaller companies might have to compete against them.

Vestager defended her track record at the commission, telling European lawmakers last month that she’s helped create local champions by approving deals like the combination of beer giants Anheuser-Busch InBev SA and SABMiller and the purchase of Germany’s Opel by PSA Group, the French maker of Peugeot vehicles, to create Europe’s second-largest carmaker. And if Germany wants changes in antitrust enforcement, she’s open to ideas.

"They are more than welcome” to make proposals, she told reporters in October. “We ourselves take an interest in the future of competition policy."

©2018 Bloomberg L.P.