The European champion would still be ten times smaller than the Chinese but would have factual monopoly in Europe. I don’t think blocking the merger was entirely unreasonable.
The parent comment is describing a scenario where the Chinese company may get a factual monopoly in Europe because it can outcompete the two European companies due to economies of scale.
Chinese companies will get a factual monopoly no matter what, as long as they keep comparing imports vs domestics on prices. It's not like East Asian "subsidies" are going to end in 3 to 6 months, years, even decades. The imports from timbuktu will be just perpetually cheaper by being imports.
Wouldn't cases of possible corporate-enabled espionage, like the one being discussed be a big competitive advantage for the European companies, regardless of their pricing or scale?
And that competitive advantage could presumably give them more scale?
So the major, common and probably most destructive, theme is the ecosystem of specialised tender companies. I mostly know this from the software side, but if you start working on such projects, you'll quicky find out that there's a persistent ecosystem of companies which specialize for these tender signups.
People employed there optimize for winning them (at any cost - quid-pro-quo agreements aren't rare in my experience). It's common for several such companies to collude in a way that they get awarded the tenders in a circle ("I get this one, next one is for you.")
Afterwards, they outsource the work to the cheapest lowest bidder (usually IT studends in the cases I've seen for software development, but essentially they'll be bottom of the barrel juniors). The quality of such products is about the same as the quality of any outsourced product which is built only to satisfy a checklist at the end. The US equivalent of that would be a corporation getting a defense contract and then basically have everything built by the cheapest outsourcer in India or similar location.
Funny enough, university labs (or spinoffs) tend to be major part of this ecosystem, using grad students as workforce - their credentials tend to give them legitimacy over smaller companies.
The results are as disastrous as you can expect - companies a HNer could expect to win usually don't (due to lack of specialized knowledge on how to game the tender process, lack of connections and cost) and those that do are really there to do the bare minimum, shed the work as much as possible and deliver something they can't get sued over.
It's also not uncommon to see whole chains of such companies - the winner sometimes shares some outsourcing work with "losers" they outsource work further, skimming the funds on top and essentially outsourcing everything to the cheapest engineer they can find.
Dealing with any public EU project has been nothing but misery for me personally (as you can imagine from this post :) and this environment bred some of the most toxic workplaces I've worked with. The products were universally terrible and rarely actually useful for the purpose.
As much as I want independent EU software ecosystem, I don't think using public funding can breed anything but more corruption.
> As much as I want independent EU software ecosystem, I don't think using public funding can breed anything but more corruption.
Well, you described what happens when you outsource everything.
Governments used to ... gasp ... employ people to do tasks so that you didn't have to outsource every single piddly task. And since those employees could do the tasks, there was a floor such that selecting nobody and doing it in house was always an option.
Yes, that has different failure modes. However, you have more levers over those failure modes as opposed to a single lever of "Head to court and try to win a legal case."
The system as bad as it is can be good as well. Let some consultants find out how to get the bids, and others how to do it well, and can be a outsourced third party. It gives differentiation without everyone needing to be large enough to actually bid on the contracts.
He is describing how bidding for publicly funded projects fails, because the bidding process designed to avoid corruption has been poorly designed (or corrupted by lobbying) such that it effectively sidelines honest and qualified bids.
I would say this is a typical outcome with well meaning bureaucrats in a democracy, not capitalism
It sounds exactly like how business works in my experience. It’s just the principle agent problem showing up in the government that same way it does in the private sphere.
I mean, if you’re at a place that uses staff aug and managing a project it’s just something you have to watch out from your vendors as table stakes. Whenever a new vendor was hired my fellow low level managers would be making bets on how long before they switched out their best guys with some fresh out of college junior that they’d give a fancy title to.
I understand what gp is nominally describing; I asked the question, after all. I am just pointing out that the exact same pressures/dynamics that were described also underpin capitalism.
As someone who barely interacts with the people that care about tenders, my impression is that people that usually win are the ones better at playing the game rather than better at the job. The job later is potentially repackaged in chunks and offered to other players that in turn will do the same downstream. Something like Romania gets EU fund money to build roads in Romania with a German engineering project, German contractors, German supplied materials, but Romanian workers.
Or in a more particular case part of recycling trash in Germany is basically being dumped illegally in Poland for a while and the same companies keep operating and winning contracts because why not.
You create a political class full of lawyers, and you get a country where lawyers thrive, who would have thought?
This is one of those things that is so obvious as to not require a source. Just sharing my perspective on this conversation, I don’t think it’s an unreasonable question to ask if you’re unfamiliar with the space
I'm with you on this. I feel like too much boogye-man-ing and FUD scaremongering is taking place on the cover of "China evil and has giants" in order to justify breaking anti-monopoly laws and allowing our own monopolies to form under this justification, that will only benefit shareholders of those companies but eventually harm European consumers via lack of innovation due to lack of competition, price gouging and the European workers via the inevitable layoffs that follow such mergers.
If you have two large, slow, bureaucratic and uncompetitive companies, then merging them together won't make the resulting giant less so, but the contrary, it'll be even more inefficient and uncompetitive, and then expect government bailouts because now they're too big to fail.
You either believe that monopolies produce worse products or you don't.
If you believe it, the "I know they are bad" -> "but we need to complete with the boogie man" -> "we need to build our own monopoly" argument is just confusing. So we should make worse products to be competitive?
If you don't believe it, you should be explaining why monopolies make better products, not arguing that desperate times call for desperate abandonment of logic.
So, in order to avoid the negative consequences of a European monopoly, we make sure that a Chinese monopoly prevails? That doesn't seem like a wining strategy for Europe.
