European Union - Market Insights

Emerging trends for EU merger control

The European Commission recently published draft merger guidelines (the “Draft Guidelines”) for public consultation which, when finalised, will replace the 2004 Horizontal Merger Guidelines and the 2008 Non-Horizontal Merger Guidelines. The Draft Guidelines consolidate, update and modernise the Commission’s approach to merger assessment. The draft seeks to strike a delicate balance between those who advocate for a more permissive framework (and to allow the emergence of “European champions” to compete on a global scale) and those who believe that a predictable and principle-based approach is the way forward — evolution, not revolution as Directorate-General Competition officials have framed it. The balance appears to tilt towards the latter, while giving the Commission sufficient discretion to decide on a case-by-case basis, applying the same fundamental principles as it always has. At the time of writing, the draft had just been published for consultation, with the final version expected before the end of 2026.

We discuss below the key themes: an expanded catalogue of theories of harm reflecting recent case practice; the approach to assessing “dynamic competition”; the new approach to balancing harm with benefit; the “innovation shield”; and the express discussion of mergers for scale.

Recent cases developing new and evolving theories of harm

The Draft Guidelines codify a number of theories of harm that have been developed in recent cases.

• Access to commercially sensitive data drove vertical remedies in UMG/Downtown, where the acquirer would have gained access to rival labels’ contract details. Similar concerns arose in relation to the vertical acquisition of a manufacturing subcontractor, which would have given the purchaser access to the design specifications and production cost data of components supplied to its competitor.
• Minority shareholdings between competitors shaped sell-down requirements in Prosus/JustEat Takeaway, where Prosus was required to reduce its stake in rival Delivery Hero and accept limits on voting and information rights.
• Portfolio effects were developed but ultimately rejected in Mars/Kellanova.
• “Entrenchment”, where a merger structurally increases barriers to entry or expansion without requiring evidence of foreclosure, is now identified as a standalone effect, drawing heavily from Booking/Etraveli (awaiting judgment on appeal).
• The Draft Guidelines set out a new theory of harm for labour markets, framing companies as buyers and workers as sellers of labour. The Commission will assess whether a merger increases purchasing power in labour markets, harming wages or conditions, particularly where workers have few alternative employers. Only competition-related effects are in scope; broader workforce impacts such as post-merger restructuring fall outside the analysis.

On foreclosure theories of harm, the Draft Guidelines consolidate the established vertical framework on ability, incentive and effects but also apply these theories to “diagonal” mergers where there is no vertical relationship and update foreclosure strategies for the digital world (namely to data, interoperability, post-sale quality of service restrictions, and so on). They also specifically highlight that the Commission will consider dynamic incentives, such as the merged entity extending or entrenching its market power over time, even in cases where an assessment based on diversion ratios, departure rates, and margins would not identify a profitable foreclosure strategy.

Dynamic assessment

The Draft Guidelines embrace “dynamic” assessment, looking beyond current market conditions and static indicators of competition to forward-looking capabilities and incentives to compete. This is particularly important in R&D-driven sectors including tech and pharma, and sectors undergoing the green transition or digitalisation. Again, the Draft Guidelines reflect, not depart from, the direction of travel of recent cases. The landmark Dow/DuPont decision established a framework for assessing the loss of innovation competition between firms with overlapping R&D capabilities, even where the resulting products remain uncertain. That approach has since been applied in Bayer/Monsanto and Pfizer/Seagen, among others. The Draft Guidelines now codify these principles, setting out a structured assessment of specific innovation competition (overlaps between R&D projects, or between R&D projects and existing products) and general innovation competition (overlapping R&D capabilities at the industry level where there may be no overlaps between specific products).

Recent cases illustrating a longer-term approach to merger effects include clearing mergers leading to high market shares in fossil fuel-related markets on the basis that regulatory change meant that high shares would not endure (AAM/Dowlais and Veolia/Uniper Hungary Energetikai). The Commission recently pulled back from requiring advertising space-related remedies in a broadcasting merger because of significant, increasing competitive pressure from global streaming platforms (RTL/Sky DACH). These cases show the Commission already applying a forward-looking lens where a market is undergoing structural change.

The Draft Guidelines expressly acknowledge the importance of innovation and investment for European competitiveness, offering detailed guidance on how the Commission will consider harm to investment and expansion, and harm to innovation, taking a dynamic approach and looking at the potential loss of innovation-driven competition.

The “theory of benefit” — putting efficiencies at the heart of the assessment

One area of significant change is the proposed new approach to efficiency claims, where efficiencies will be assessed alongside the analysis of harm, applying the same “more likely than not” standard to efficiencies as to harms. This is arguably the most significant shift under the Draft Guidelines. Efficiencies have previously been considered only after the competitive assessment and based on a framework of three cumulative criteria requiring merger specificity, verifiability and consumer benefit. In practice, this meant that no mergers raising consumer harm have been approved on the basis of countervailing efficiencies.

The Draft Guidelines are explicit in their openness to longer timeframes when evaluating whether benefits will materialise, notably for innovation-based markets with inherently uncertain outcomes. The previous two-year post-merger timeframe has been replaced with a fact-based assessment of the appropriate timeframe, depending on the characteristics and dynamics of the markets concerned. The Draft Guidelines are clear, however, that a longer time frame for benefits to materialise might make them less quantifiable and impact the assessment of verifiability.

The Draft Guidelines identify types of mergers likely to be beneficial:

• mergers combining complementary products to create new solutions at lower prices where few alternatives exist;
• mergers enabling scale to reduce costs and the ability and incentive to compete on innovation and investment;
• mergers promoting internal market integration through cross-border expansion; and
• mergers improving access to critical or sustainable inputs to increase resilience or sustainability to the benefit of EU consumers.

To clear the merger, the benefits need, on a lasting basis, to at least offset the identified harm to competition. In assessing this balance of theories of harm and theories of benefit, the Draft Guidelines give the Commission a margin of discretion. A sliding scale applies: the greater and more immediate the harm, the more certain and substantial the benefits must be. Additionally, the lower the post-merger effective competitive constraint on the merging parties, the less likely it is that the merging parties will maintain or build on the efficiencies and the more likely it is that consumers will suffer in the long run. Benefits must accrue to substantially the same consumers who would be harmed, though they can arise in a related market.

A new “innovation shield”

The Draft Guidelines introduce an “innovation shield” to clarify when acquisitions of small innovative firms are unlikely to raise concerns. This establishes an “in principle” finding that there are no competition concerns for deals meeting certain conditions based on market shares, size and the presence of sufficient alternatives in the relevant market. This “innovation shield” framework may also frame Member States’ use of call-in powers, which is a welcome step in the direction of deal certainty.

It remains to be seen whether the innovation shield will have wide practical application. The requirements are demanding, the Commission retains broad discretion, and the required factual analysis of rival projects and competitive potential will not always be possible for merger parties to self-assess.

A new approach to “mergers for scale”?

The Draft Guidelines emphasise how mergers can increase EU firms’ scale, competitiveness, and resilience, signalling a potential willingness to allow “mergers for scale” that might have been challenged in the past. The Commission acknowledges that the geopolitical and trade context has changed, and that the assessment of mergers should give adequate weight to wider factors. It flags that scale can be beneficial, particularly in global industries with high capital intensity and rapid innovation through R&D. The Draft Guidelines identify various ways in which scale can be positive for the competitiveness of the EU, aligned with the broader discussion of pro-competitive post-merger benefits (discussed above), including driving innovation and technological progress, enabling EU market integration and expansion, and boosting security and resilience.

However, the Draft Guidelines also draw a clear line between pro-competitive scale and market power. Scale benefits must flow through to consumers. A merger that increases market power in a way that harms EU businesses and consumers will not be treated as positive, however strong the scale rationale.

Conclusion

The Draft Guidelines represent a considered update of twenty-year-old guidance to reflect case practice over the last two decades, the application of theories of harm to digital markets and innovation-based competition, a reframing of harms versus benefits through an expanded category of benefits the Commission will take into account, as well as guidance on the assessment of wider industrial strategy considerations such as resilience, sustainability and the need for European companies to scale and remain globally competitive.

The fundamental legal principles underpinning EU merger control remain intact. The statutory “significant impediment to effective competition” test is unchanged. The Commission continues to bear the burden of proving harm, while parties still bear the burden of demonstrating efficiencies. However, the emphasis has shifted. Efficiencies are no longer an afterthought; instead, they sit alongside theories of harm in a single, integrated assessment. Dynamic effects, innovation rivalry, and scale considerations are woven into the analytical framework.

Deals that raise competition concerns will still face close scrutiny, but the door is now open to weigh a transaction’s benefits alongside its adverse effects. This will require parties to consider the range of benefits that a deal brings and to gather supporting evidence well in advance of signing deals so that robust arguments can be deployed in discussions with the Commission from the outset. The re-centring of the Draft Guidelines around the pro-competitive benefits which can arise from mergers should remove fears that merger benefits will be characterised as an “efficiency offence” by the Commission (or, if deployed early, viewed with suspicion as masking anti-competitive harm). Nonetheless, the real test will be how the Commission exercises its discretion in practice, particularly in marginal cases where the benefits are real but difficult to quantify.

The authors would like to acknowledge the assistance of Andrea Chong (Associate) and Catherine Hammon (Senior Knowledge & Innovation Lawyer) in writing this article.