Proposed Merger Guidelines Signal an Evolution in EU Merger Control

Introduction

The European Commission (“Commission”) has published a draft of its revised Merger Guidelines (the “Guidelines”). This revision represents the most significant overhaul of EU merger control in over two decades.  It draws on decisional practice developed by the Commission and the European Courts and responds to a profoundly altered economic and geopolitical environment characterised by the rise of digital platforms, artificial intelligence, and a renewed emphasis on European industrial competitiveness. The revision arrives at a time of growing political momentum behind calls for European companies to consolidate and achieve the scale necessary to keep up with global competitors in strategically important sectors.  The Commission's President, Ursula von der Leyen, noted that previous guidance had not kept pace with a “fundamentally” changed world and the Guidelines should now aim to support “Europe’s next champions”.

While there is a shift in tone towards a positive outlook on “scale and consolidation”, the Guidelines do not lower the bar for merger approval. The Guidelines do however expand on possible ways to demonstrate likely countervailing benefits that would provide a basis for clearance. The Commission’s Executive Vice-President and Commissioner for Competition, Teresa Ribera, has said for instance: “A merger that once would have been judged mainly on its short-term price effects must now be assessed also in terms of how customers are affected by its impact on European innovation, investment and supply security over the long term”.

Dealmakers should anticipate that established theories of harm will remain the Commission's primary analytical focus, even under the revised framework. And as before, the majority of cases will prove unproblematic in any event. But cases may come forward where the parties argue for clearance based on the expanded countervailing criteria. Indeed, the political impetus behind the Guidelines is in part a wish to encourage such deals. Political support for given deals may be voiced (think Siemens/Alstom), but the Guidelines do not introduce a power of political override. Rather, arguments will have to be supported by compelling evidence; and the Commission’s decisions will remain subject to review by the EU courts in Luxembourg.

The Guidelines are formally speaking a draft only, with a public consultation period running until 26 June 2026, and formal adoption anticipated before the end of 2026. In reality though the Commission already has an eye to them in its ongoing caseload. This OnPoint focuses on some of the key areas of interest in the Guidelines for dealmakers and their advisors.

Elevation of efficiencies

In a welcome development, the Guidelines allocate 15 pages to “Benefits from mergers (Efficiencies)”, compared to two pages in the existing guidelines, and state that “demonstrated efficiencies will play a key role in the assessment of mergers going forward”. Efficiency arguments have historically been viewed with scepticism and have never provided the basis for outright clearance of a case otherwise destined for prohibition. The Guidelines make clear that the greater the severity and certainty of the competitive harm, the more compelling the evidence of countervailing benefits that parties will need to provide.

New types of efficiencies are expressly recognised, for example:

1. ‘Scale’ is explicitly identified as an efficiency. This may be a combination of complementary products or result in procurement synergies that may not only result in cheaper products but also increase the ability or incentive of the merged firm to invest and innovate.
2. The Guidelines define ‘resilience’ as the “readiness and ability of the [EU] internal market… to continue servicing customers and to anticipate, withstand and recover from serious shocks”, encompassing supply-chain security, critical infrastructure, defence readiness, and investment in critical technologies.
3. 'Sustainability' is likewise established as a new category, with qualifying efficiencies including combinations of complementary assets that reduce environmental pollution and improved access to sustainable inputs.

Other non-price parameters are also recognised, including combining scarce assets or capabilities, wholesale cost savings, securing access to critical inputs, optimal allocation of scarce resources needed in R&D, and access to finance to invest or innovate for financially constrained firms.

The Guidelines distinguish between “direct” efficiencies, i.e. integration-driven improvements to cost or quality, and “dynamic” efficiencies, defined as those that confer or increase the incentives and ability to invest or innovate, with benefits that may materialise over a longer horizon. Both categories are assessed against the established three-limb test (efficiencies must be verifiable, merger-specific, and pass on benefits to consumers). Therefore, on the face of it, this indicates limited change, but there are helpful comments in the context of an efficiency case. For example, it is acknowledged that an assessment of dynamic efficiencies requires more ‘flexibility’ on timing and quantification. In addition, while the timeframe for assessing direct efficiencies will extend beyond short-term timeframes, generally up to 3-4 years in sectors such as telecoms and energy, it is recognised that the benefits of dynamic efficiencies may materialise over a longer period, though the draft does not provide a time frame.

Assessment of efficiencies

The Guidelines provide a detailed framework on the assessment of efficiencies. Parties are required to articulate a “theory of benefit”, i.e. a structured account of how the merger generates efficiencies and passes benefits to consumers, intended to counterbalance theories of harm. The theory of benefit should substantiate the nature and magnitude of those benefits in verifiable detail. In proving efficiencies “there exists no hierarchy” between qualitative and quantitative evidence. In the same vein the Guidelines, in a welcome development, downplay the role of ‘upward pricing pressure’ models, which are presented as complementary rather than determinative.

In a major development, new flexibility is provided on ‘out-of-market’ and ‘collective’ consumer benefits. Harm arising in one market cannot generally be balanced against benefits accruing in an unrelated market. However, it is recognised that benefits arising on related markets can be considered, provided the group of consumers “negatively affected by the merger and benefiting from the efficiencies are substantially the same”; and collective benefits can be considered if harmed consumers substantially overlap with the group that benefits from the efficiencies. The Guidelines go further and in a significant departure from the Commission’s current policy, they expressly recognise efficiencies that bring benefits to the society at large as well as those that “further the objectives of EU policies recognised in EU Treaties”. This may offer a ‘lifeline’ to mergers in concentrated industries, such as telecommunications, which may generate efficiencies outside the group of customers negatively affected by a merger.

Innovation and R&D

The Guidelines represent a significant shift in the treatment of innovation in merger investigations. Rather than treating innovation merely as a competitive parameter to be assessed and weighed in individual cases, there is a forward-looking framework for assessing the potential benefits and harm. This constitutes an evolution of the static approach in the existing guidelines.

The Guidelines recognise that innovation frequently demands large-scale, sustained investment with uncertain returns, and that mergers may in certain circumstances represent the only viable path to achieving such scale. At the same time, the Guidelines reflect an expansive approach to innovation harm under which the Commission may challenge transactions that eliminate head-to-head innovation rivalry even absent current price competition. In a step towards transparency and legal certainty, the Commission introduces an “innovation shield”, i.e. a safe harbour for acquisitions of small innovative companies or R&D projects. The Guidelines describe the conditions under which such transactions are unlikely to raise competition concerns. The innovation shield's real-world application will be pivotal in determining how ‘killer acquisitions’ are treated going forward, and in particular whether the new framework succeeds in having the Commission focus on genuinely problematic acquisitions while approving transactions that foster innovation competition across the EU.

Anticompetitive effects

The Guidelines set out a comprehensive and expanded catalogue of theories of harm through which a merger may result in competition concerns. The list and details of theories of harm have grown, encompassing loss of investment, expansion, potential competition or innovation competition, as well as entrenchment. In keeping with the Guidelines’ new theme of ‘dynamic’ merger assessment, theories of harm are reframed as existing on a “continuum” between direct and dynamic effects, rather than as discrete analytical boxes.

Theories such as loss of investment and expansion competition will be particularly relevant in sectors where firms compete through investment in networks and capacity rather than on price alone. Entrenchment is a new standalone theory of harm, applicable where the merged firm gains control over assets in a way that creates or reinforces barriers to entry and expansion. There is also a significant extension of guidance on loss of potential competition. A merger between an incumbent and a potential competitor can give rise to anticompetitive effects where cumulative conditions are met, including that the potential competitor has scarce or special capabilities or value propositions compared to incumbents and other potential entrants.

Loss of innovation is described in a dedicated section, building on the theories of harm developed in the agrochemical cases. It draws a distinction between two categories: loss of specific innovation (comprising competition between pipeline and existing products and overlapping R&D projects) and loss of general innovation (comprising overlapping capabilities or R&D activities across broader innovation spaces).

Co-ownership

The draft includes a brief reference to common ownership, appended to its discussion of minority shareholdings. The sole authority cited is a footnote to Dow/DuPont, yet common ownership formed no part of the actual findings in that case. It featured only in an annex, as a conjecture that the Commission did not rely upon. The underlying theory, which the Commission recites, is that the presence of overlapping institutional investors on the share registers of competing companies may somehow reduce those companies' incentives to compete. The theory remains however highly contested. Many will consider it disappointing to see it referenced in the Guidelines in a manner that implies it reflects established practice.

Labour markets

Labour markets have been a recent focus of competition discourse in the United States. The draft expands merger review to cover ‘labour market effects’, assessing whether a merger grants the combined entity excessive buyer power over workers to the detriment of wages and conditions. The Commission has no track record of such analysis under the EU Merger Regulation, such that there is scepticism in respect of how enforcement may develop in practice. Some would argue that labour markets are ill-suited to traditional market definition, and existing EU and domestic legislation already provide extensive worker protections.

Looking ahead

The Guidelines represent the most significant re-statement of EU merger policy for 20 years. They formalise the Commission’s enforcement practice developed over the years and they articulate new approaches, in particular in relation to efficiencies. The Guidelines provide a transparent framework that should enable dealmakers and their advisors to better anticipate likely theories of harm, marshal supporting evidence at an early stage, and evaluate potential efficiency arguments as a central feature of filings. Whether they introduce a surge in cross-border consolidation remains to be seen, but the area is ripe for challenging cases to come forward.