Schneider-Legrand merger: was Bruxelles "Wrong or Right"to block the merger?

Résumé du document

This document will answer the following questions: Why did the European Commission decide to block the French merger? What was the opinion of Henri Lachmann (the CEO of Schneider Electric) about the veto? Is it usual to meet with this kind of refusal in Europe? What are the arguments against Mario Monti's position on merge and acquisition? And how to restore the Merger Task Force's credibility after the judgment of the European Court of First Instance?

Extraits

[...] This represents a contradiction in the economic reasoning. o The Commission's analysis is based on speculative or artificial theories. There is a lack of understanding of the industrial context in which the mergers takes place Majority of the officials of the Commission's competition team are lawyer with only a few economists. Therefore, it is alleged that the Competition team lacks economic expertise to precise estimate the markets affected and the impact. Companies have also complained that the competition have not much expertise of how a business works and hence, do not consider the business sense conveyed in the mergers. [...]

[...] It seems there exists a moral problem in the Commission. Some Europeans admire him for standing up to the Americans by blocking Jack Welch's audacious bid to merge Honeywell into General Electric. Others worry about his methods and decisions, which are increasingly being challenged in court. They restore the Merger Task Force's credibility by doing following things: Mario Monti wants to appoint a chief economist recruited from academia, on the US model, to help officials keep within mainstream economic thinking. [...]

[...] This represents a contradiction in the economic reasoning. The Commission's analysis is based on speculative or artificial theories. There is a lack of understanding of the industrial context in which the merger takes place: In world of rapid concentration within industries and increased cross-border exchanges, the Commission still focuses on national geographic markets. However, without a certain degree of concentration on their national market, or a diversification in other categories of products, companies might not be able to compete efficiently in the world market. [...]

[...] Did Schneider Electric and Legrad's merger result into a dominant position? According to the Commission, yes but this was at a national market level, especially in France as showed previously and not at the European Market level where the newly created company would have had a similar size to other European competitors such as Siemens. Therefore, for the Commission creating national champions does not go in pair with effective competition. However this macro-economic analysis does not take into account the possible decrease in costs following a merger. [...]

[...] Schneider-Legrand merger: was Bruxelles “Wrong or Right”to block the merger? Question number Why did the European Commission decide to block the French merger? The European Commission blocked the French merger because it considered that this would result into a dominant position of the merged group in some European Countries, notably France. The European Commission divided the markets for electrical equipment against national lines. The European Commission divided the market in several sectors and showed that for two main sectors: electrical switchboards and wiring accessories the combined market share would have been between 40% to 90% which was a proof of a dominant position dominant position can be considered when the market share is higher than 50%). [...]