‘European champions’: Scholz's and Macron's old-new vision of mega-corporations

The German and French governments are calling for an amendment to EU competition rules to pave the way for mega takeovers, especially for larger telecommunications companies and airlines. They are also pushing for more "targeted" subsidies so that companies can grow better. This emerges from a paper called "Impuls" for a "new agenda to strengthen competitiveness and growth in the European Union", which the Franco-German Council of Ministers adopted on Tuesday evening at Schloss Meseberg in the presence of Federal Chancellor Olaf Scholz (SPD) and French President Emmanuel Macron.

According to the paper, "structural competition problems in the global context" are to be solved. This is a "basic prerequisite for the competitiveness of European companies". It is important to "allow the formation of consortia and consolidation in key sectors" such as mobile networks and aviation, also "to strengthen European resilience".

However, there should not be a carte blanche for takeovers. At the same time, merger control must be strengthened "to address strategic acquisitions by potential competitors that hinder innovation ('killer acquisitions')". What is therefore needed is a "thorough implementation and monitoring" of the Digital Markets Act (DMA), "which could be financed by supervisory fees". In other words, big tech companies should share in the financial burden of their own monopoly control, as is already the case with the Digital Services Act (DSA).

Global champions made in the EU should fix it

In general, Germany and France want to advance the ecosystem for telecommunications (TC) and digitalization. Europe needs "the best possible coverage with state-of-the-art mobile networks that use the latest network technologies such as 5G standalone". It is therefore necessary to "urgently address issues of fragmentation and resilience in the mobile sector". When it comes to standardizing the next generation of mobile communications, 6G, the two EU motors are calling for "European forces to join forces so that we can play a leading role in shaping the standard". The European cloud market must also be strengthened.

However, the passage on large company mergers in particular is not really new. The EU Commission has been working for a good ten years to strengthen individual European companies - especially in the infrastructure sector - for global competition. There are only a handful of telcos in the USA, but over 200 in Europe, it is often said. In 2019, the head of Deutsche Telekom, Timotheus Höttges, described it as a consequence of failed regulatory policy that the standard European telecommunications company serves one million customers, while the comparable figure in China is 400 million. "European champions" are also needed in areas such as the cloud, chipsets, AI and software, which all merge to form the "value chain of the future".

The European Commission's current White Paper on building Europe's digital infrastructure of tomorrow once again reflects the desire of Internal Market Commissioner Thierry Breton in particular to build global champions in the telco sector. Italian Prime Minister Enrico Letta also emphasized in his Single Market Report presented in April that "size matters", particularly regarding the telecommunications sector. He calls for action to be taken against fragmentation in this sector, as well as in the areas of energy and finance.

Skepticism at the Cartel Office

The prohibition of the merger between Siemens and Alstom by the EU antitrust authorities has fueled the debate. The Commission's examination approach is often described as "technically correct" but "wrong for Europe". It makes sense to improve the chances of success of European companies "that excel in competition worldwide and in Europe through quality, innovation and attractive prices", explained the President of the German Federal Cartel Office, Andreas Mundt, back in 2019. But softening competition control would be counterproductive.

(anw)