The European Commission on Thursday put forward a proposal to revamp the European Union's merger control framework, aiming to give merging firms a broader set of arguments to defend transactions designed to create larger European players.
Under the draft rules, companies would be able to present evidence that a proposed merger advances goals such as sustainability, resilience, investment and innovation. This would mark the first time anywhere that such arguments can be used formally in merger scrutiny, according to the Commission's proposal. Firms would carry the burden of proof, however, and would need to demonstrate that any claimed benefits enhance their ability or incentives to invest or to develop new or improved products, services, distribution or production.
While the changes open a new avenue for deal justification, the Commission made clear that its enforcement focus is unlikely to shift away from core competition concerns. Regulators are expected to continue to scrutinise whether transactions could lead to price increases that harm consumers or have an adverse effect on competitors. The proposal indicates that the threshold for accepting public-interest style benefits will be high.
The overhaul also contains another novel element described as an "innovation" provision. Under this measure, regulators would refrain from intervening in certain transactions involving start-ups or research and development projects when those deals are likely to enhance competition. At the same time, that protection would not apply where the acquirer is already the largest player in the relevant market, or where the company falls under the gatekeeper designation of the Digital Markets Act - a measure aimed at curbing the market power of major technology firms.
Those changes follow calls from some EU member states and industry groups, notably in the telecommunications sector, for a more flexible approach to transactions intended to build European champions to better compete with U.S. and Asian rivals. The Commission reiterated that it acts as the EU's competition enforcer and invited feedback on the proposals, setting a consultation deadline of June 26.
Implications and context
- By formally recognising sustainability, resilience, investment and innovation as potential merger benefits, the Commission provides companies with new legal arguments to support consolidation plans.
- Regulators will still prioritise traditional competition tests, keeping consumer price effects and impacts on rivals central to merger review.
- The innovation-related non-intervention element targets transactions involving start-ups and R&D projects, but excludes deals led by dominant firms or those covered by the Digital Markets Act.