At the pointy end of rail development where really big things happen, there are four major global players. China's CRRC is backed by the state but it is a publicly traded conglomerate formed in 2015 by the merger of CNR and CSR. In rolling stock, Canada's Bombardier builds trains in many parts of the world and was, until recently, almost a shoe-in for urban rail systems. Germany's Siemens was usually Bombardier's main rival but it has blotted its copybook with revelations about widespread and institutionalised corruption across the group. The stink from a 2008 scandal still lingers. It is somewhat ironic that Siemens was the first foreign corporation to have a holding company in China, the country where the 2008 SEC complaint said was one of the countries where it paid the most bribes.

Of the big four, CRRC is by far the biggest with annual revenues of about USD18,000 million. The next two, Siemens and Alstom, combined, manage almost the same from their rail related businesses. The commercial imperative to combine operations, to reduce duplicated effort and of course, to avoid competing in a world where carving up the market by agreeing not to bid on the same contracts would result in prosecution. When making failed bids costs millions of dollars per bid, there is an obvious and direct bottom line benefit by not bidding on everything.

The competition authorities in both France and Germany have approved the deal which would, as part of its creation, would ensure that Siemens does not attempt to take more than 50% of the joint venture within five years of creation. The French government owns 20% of Alstom but it is not clear how this would translate to ownership of the new joint venture. The next hurdle was expected to be the EU Competition Authority which reports directly to the European Commission. There is no doubt that the deal has "a European Dimension" and that the EU must approve it. Cynics would say that as the application has the full support of the German and French governments that Eurocrats will simply rubber stamp it. But there are, within the EU, competitors - and then there is the soon-to-be non-EU UK where Bombardier and Hitachi build rolling stock. Spanish company Constructions y Auxiliary de Ferrocarriles ("CAF") has announced plans to build a new, small, assembly plant at Newport in South Wales - but the opening date of early 2018 has been missed and so has the revised date of mid 2018 despite CAF having a substantial order book for various rail operating companies in the UK. Any of these might object saying that the new venture would have a dominant market position. That may be true in that the new company would be significantly bigger than any of its rivals within the EU, but the fact that there are three very major players outside the new JV would militate against that argument. The EU, which is increasingly acting as if it's a federal government, a tactic which greatly pleases Germany and mostly pleases France, is unlikely to find reasons to prevent the creation of a global force in a growing market, especially when two (Bombardier and Hitachi) out of three of the competitors are not EU companies.

That, one might think, might be that. But no, The Australian Competition and Consumer Commission has "expressed preliminary concerns about the proposed merger of Siemens A.G.’s (Siemens) Mobility Division with Alstom S.A. (Alstom)."

The ACCC says that its review "has focussed on signalling systems for heavy rail passenger networks, particularly train interlocking systems and automatic train protection (ATP) systems. Signalling systems provide safety and traffic management controls on rail networks. Interlockings are the core of a signalling system; they set routes for the safe movement of trains across railway lines. Train protection systems ensure that trains comply with movement authorities issued by the interlockings."

The Chairman of the ACCC, Rod Sims, says "The ACCC’s preliminary view is that the proposed merger may
substantially lessen competition in the supply of heavy rail signalling systems for passenger rail networks in Australia, in particular interlocking systems and ATP systems. The loss of competition could result in increased
prices for customers, or lower levels of service, quality, or innovation. We have heard from many industry participants who have expressed competition concerns with the merger. We will continue to evaluate the
competitive options available to passenger rail networks in Australia."

And it's not only Australia: the UK is not best pleased, either. It has not begun an independent investigation (its ability to do so is heavily constrained by EU law) but The Office of Rail and Road (ORR) has said that the EU's investigation, announced in June, is welcome because, when it comes to infrastructure rather than rolling stock, the effect of the merger on competition would be significant.

The EU investigation says that it is concerned that the merger may lead to higher costs and less innovation. That indicates a fundamental failure to understand why the deal is so important to both companies and to the EU economy: right across the world, railways are in an arms race. CRRC is only one of several rail companies with Chinese government investment behind them. And around the world, there are many smaller companies. Price and innovation are the front lines for any business wanting to get contracts. The argument holds water only in relation to equipment already in situ.

The ACCC has jurisdiction because it has operating units in the country including MRX Technologies which it bought in 2017. It also owns signalling equipment company Invensys Rail. In 2015, Alstom bought GE (formerly General Electric)'s signalling business which also has operations in Australia.

The closing date for submissions to ACCC is 20 September and the full Statement of Issues is at http://registers.accc.gov.au/c...