By Valentina Pop and Emre Peker 

BRUSSELS -- The European Union on Wednesday blocked a planned merger between the rail units of Germany's Siemens AG and France's Alstom SA, a move critics said would hamper Europe's ability to compete with China.

The European Commission, the EU's antitrust authority, has long been skeptical about the deal, arguing it would damage competition within the bloc. A merger would lead to higher prices for signaling systems and the next generation of very high-speed trains, the EU said.

The planned merger -- which would have created a European rail giant with combined annual revenue of roughly EUR15 billion ($17 billion) -- had the support of French President Emmanuel Macron, who had said it would create the rail equivalent of European aircraft maker Airbus SE.

But national authorities from Germany to the U.K. sided with the commission, countering political arguments in favor of creating a "European champion" and stressing the need for healthy competition within the bloc's massive market.

"Siemens and Alstom are both champions in the rail industry," European Competition Commissioner Margrethe Vestager said. "The commission prohibited the merger because the companies were not willing to address our serious competition concerns."

Berlin and Paris have in recent weeks criticized EU's competition rules that in their view hamper the bloc's ability to counter China's increasingly aggressive economic policies. French Finance Minister Bruno Le Maire told France 2 television Wednesday that the EU's decision would serve Chinese interests, calling it an economic and political mistake.

"Europe urgently needs structural reform in the way it shapes its industrial future in a globally connected world," Siemens President and Chief Executive Officer Joe Kaeser said in a statement. "Protecting customer interests locally must not mean that Europe cannot be on a level playing field with leading nations like China, the United States and others."

Alstom didn't immediately respond to the decision.

German Economy Minister Peter Altmaier on Tuesday unveiled industrial policy plans to revamp his country's competitive edge in relation to China and the U.S., calling for regulators to look beyond domestic markets and allow the creation of "European champions."

Any changes to the bloc's competition rules will take several years before entering into force, however.

Canada's Bombardier Inc., the main competitor of the French and German rail companies, said Wednesday's decision was "based on the law and facts," preventing a deal that "would have severely undermined the health and competitiveness of the whole European rail market."

Write to Valentina Pop at valentina.pop@wsj.com and Emre Peker at emre.peker@wsj.com

 

(END) Dow Jones Newswires

February 06, 2019 06:37 ET (11:37 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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