OREANDA-NEWS. May 13, 2016. The Commission has concerns that the proposed takeover may reduce competition for railway equipment systems and subsystems in the European Economic Area ("EEA").

The opening of an in-depth inquiry does not prejudge the outcome of the investigation. The Commission now has 90 working days, until 20 September 2016, to take a decision.

Commissioner Margrethe Vestager, in charge of competition policy, said: "Millions of Europeans rely on trains every day to commute between work and home. Europe is also home to many manufacturers of locomotives and other rolling stock. The Commission must make sure that Wabtec’s takeover of Faiveley does not restrict effective competition and lead to less innovation in this technology-driven market, or to price increases for manufacturers, train operators and ultimately passengers."

Commission's competition concerns

The Commission has preliminary concerns regarding a number of markets for railway equipment systems and subsystems, in particular, in respect of the supply of complete brake systems and various brake components, such as friction materials, as well as pantographs.

These markets have high entry barriers due to the important technical and regulatory requirements applicable to safety-critical train equipment, such as brake systems. Significant investment in research and type approval of new products is therefore required to enter or quickly expand in these markets.

The Commission's initial investigation has shown that the proposed merger would remove a significant competitor from an already concentrated market. Wabtec and Faiveley are two of the world's largest manufacturers of various railway equipment systems and subsystems such as train brakes, doors and air conditioning systems, together with Knorr-Bremse of Germany.

At this stage, the Commission has concerns that the remaining manufacturers would be unable to sufficiently compete with and constrain the merged entity to ensure continued innovation and avoid price increases for customers.

The Commission will now investigate in-depth the proposed transaction to determine whether these initial concerns are confirmed.

The transaction was notified to the Commission on 4 April 2016.

Companies and products

Wabtec is a US-based company active worldwide in the production and supply of various railway equipment such as complete brake systems and their subsystems and pantographs. The company has a number of subsidiaries in the EEA such as Poli, MZT, Brecknell Willis and Stemmann-Technik.

Faiveley is a France-based company active worldwide in the production and supply of various train equipment including also complete brake systems and their subsystems and pantographs.

Merger control rules and procedures

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).

In addition to the current transaction, there are three other on-going phase II merger investigations:

More information will be available on the competition website, in the Commission's public case register under the case number M.7801.