The Office of Rail and Road (ORR) welcomes the European Commission's decision to open an in-depth investigation into the proposed merger of Siemens and Alstom. ORR, the economic regulator for railway markets in Great Britain, considers that the merger would have a significant detrimental impact on competition in important British rail markets. ORR will continue to engage closely with the European Commission, who are reviewing the merger, to ensure that Britain's public interest is taken into account.
Siemens and Alstom are both important players in key rail supply chains, particularly for signalling and rolling stock. ORR is concerned that if the merger were to go ahead, the combined business would become extremely powerful, and that competition in Great British markets would be significantly reduced, potentially adding significant costs to the detriment of passengers and taxpayers.
Siemens and Alstom are the two main competitors for large-scale signalling works. ORR considers that together the two companies would control around 75% of the British rail signalling market. For some specific elements of signalling, such as interlocking, their share is likely to be even higher. ORR estimates that a merger could increase costs by tens of millions of pounds each year because of reduced competition. This would add costs to Network Rail, which buys these services and is funded by passengers and taxpayers.
ORR is also concerned that the merger would reduce the number of potential bidders for new rolling stock manufacture contracts. In the recent HS2 rolling stock tender, valued at £2.75bn, Alstom and Siemens were two of five companies bidding for the contract. This loss of competition could add significant costs to the detriment of the travelling public.
ORR considers that arguments about the scale and significance of Chinese entry, which have been widely cited as a justification for the merger, have been over-exaggerated, particularly in relation to Great Britain.
Chief Executive, Joanna Whittington said:
"Competition in the supply chains which support Great Britain’s railway is essential if passengers and taxpayers are to receive a high quality service at an efficient cost.
"We are concerned that the proposed merger of Siemens and Alstom will significantly reduce competition, leading to increased costs in Britain’s railway signalling and rolling stock markets. That is why we are setting out strong arguments to the European Commission and pressing for significant structural remedies to ensure competition in key railway supply chains is protected."
Notes to editors
- Our consolidated non-confidential version of our representations to the European Commission made during its initial review of the merger can be found here: https://orr.gov.uk/__data/assets/pdf_file/0018/28323/siemens-alstom-merger-phase-1.pdf
- ORR is the independent economic and safety regulator for Britain’s railways, and monitor of performance and efficiency for England’s Strategic Road Network. We regulate Network Rail including setting the targets it has to achieve and report regularly on its performance. We regulate health and safety standards and compliance across the whole rail industry. We also oversee competition, (concurrently with the Competition and Markets Authority), and consumer rights issues – seeking a better deal for rail passengers and taxpayers. We also regulate the HighSpeed1 link to the channel tunnel.
- Interlocking, in basic terms, is equipment and technology which controls the movement of trains. Interlocking prevents trains from undertaking conflicting movements by only permitting trains to move when routes are set, locked and trains detected in safe combinations.