Germany moves to control tech takeovers

World
Europe

By CGTN’s Guy Henderson

Germany appears to have taken a significant step towards protectionist measures, while other European countries worry about a US turn towards protectionism.

The government passed a new regulation Wednesday giving it veto over high-tech takeovers.

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Under current law, the German government can block a company from outside the EU acquiring more than 25 percent of a German entity if the deal endangers public order or national security.

But the law is largely restricted to highly sensitive sectors like defense IT security.

And the new change in law significantly expands its scope, allowing ministers to investigate deals involving a wide range of companies operating in “critical infrastructure”.

Officials said the change in law was designed to protect German business. But German business was ungrateful, saying it could do more harm than good.

Ötech, a German tech company, is in partnership with a Chinese firm to jointly develop a smart off-grid household power plant. The company was worried that the new measure would bring collateral damage.

“It's something we’re really worried about because any type of involvement into a long-term partnership can lead to a lot of work to re-evaluate the legal situation. Restrictions don’t help us a great deal,” said Jürgen Landrock from Ötech.

Some are concerned that the move was a reaction to last year’s 4.5 billion euro (5.2 billion US dollars) acquisition of Kuka, Germany’s largest maker of industrial robotics, by Midea, a Chinese appliance maker, which sparked a debate about record levels of inbound Chinese investment.

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Since then, spending has slowed. Not enough to allay concerns about particularly Chinese state-backed takeovers, which German authorities argue can be unfair.

As Germany works out how to handle China’s growing state-backed corporate clout, some said more protection would not be the right choice. But others suggested the latest measures would have less impact.

“Investment is a challenge, when you take over the shares and try and control the company policy. But at least, it is very difficult for a government to control a process like that, since everybody is depending on each other,” said Eberhard Trempel from German Global Trade Forum.