Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: EC to investigate acquisition of railway equipment maker Faiveley by Wabtec, (May 12, 2016)

By Linda O’Brien, J.D., LL.M.

The European Commission (EC) has opened an in-depth investigation under the European Union (EU) merger regulation to assess the proposed acquisition of Faiveley Transport of France by Westinghouse Air Brake Technologies Corporation (Wabtec) of the United States, the EC announced today. The Commission has concerns that the transaction may reduce competition for railway equipment systems in the European Economic Area (EEA). The EC was notified of the transaction on April 4.

Based in the United States, Wabtec is active worldwide in the production and supply of various railway equipment, such as complete brake systems, 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.

The EC had preliminary concerns regarding a number of markets for railway equipment systems and subsystems, particularly 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. Significant investment in research and type approval of new products is therefore required to enter or quickly expand in these markets.

The EC'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, together with Knorr-Bremse of Germany. The EC 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.

“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,” said Commissioner Margrethe Vestager, in charge of competition policy. “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.”

Companies: Faiveley Transport; Westinghouse Air Brake Technologies Corporation

News: AcquisitionsMergers Antitrust