The European Commission’s publication of draft merger guidelines marks a significant recalibration of EU competition policy, attempting to codify two decades of evolving case law while addressing modern challenges like digital markets, innovation dynamics, and global competitiveness. The proposed framework, which will replace the 2004 Horizontal Merger Guidelines and the 2008 Non-Horizontal Merger Guidelines, represents what Directorate-General Competition officials describe as “evolution, not revolution.” In practice, the Draft Guidelines tilt toward a predictable, principle-based approach while granting the Commission substantial discretion for case-by-case assessments. The public consultation period is underway, with the final version anticipated before the end of 2026.
New Theories of Harm Codified from Recent Case Law
The Draft Guidelines formalize several theories of harm that the European Commission has developed through enforcement actions over the past several years, providing both clarity and new tools for merger review.
Access to Commercially Sensitive Data
Vertical mergers that grant an acquirer access to competitors’ confidential information now face explicit scrutiny. The UMG/Downtown case serves as a foundational example, where the Commission required remedies because the acquirer would have gained access to rival labels’ contract details. Similar concerns arose in a vertical acquisition of a manufacturing subcontractor, where the purchaser would have obtained design specifications and production cost data for components supplied to its competitor.
Minority Shareholdings and Coordination Risks
The Draft Guidelines address competitive concerns arising from minority shareholdings between competitors, drawing directly from the Prosus/JustEat Takeaway decision. In that case, Prosus was required to reduce its stake in rival Delivery Hero and accept limitations on voting rights and access to commercially sensitive information. This codification signals that even non-controlling stakes may trigger remedies if they create information flow or coordination risks.
Portfolio Effects and Their Limits
The Commission explored but ultimately rejected portfolio effects theory in Mars/Kellanova, where it considered whether a merged entity’s broad product portfolio could create anti-competitive advantages through bundling or tying. While the theory was not sustained in that case, its inclusion in the Draft Guidelines indicates that the Commission remains open to applying it where evidence supports harm.
Entrenchment as a Standalone Theory of Harm
The concept of “entrenchment” now appears as an independent theory of harm, heavily influenced by the Booking/Etraveli case (currently awaiting judgment on appeal). Entrenchment occurs when a merger structurally increases barriers to entry or expansion without requiring evidence of outright foreclosure. This represents a significant expansion of traditional foreclosure analysis, allowing the Commission to challenge mergers that reinforce existing market power through structural changes rather than specific exclusionary conduct.
Labour Market Theories of Harm
The Draft Guidelines introduce a novel framework for assessing mergers’ impact on labour markets, treating companies as buyers and workers as sellers of labour. The Commission will evaluate whether a merger increases purchasing power in labour markets, potentially harming wages or working conditions, particularly where workers have few alternative employers. Importantly, only competition-related effects fall within scope; broader workforce impacts such as post-merger restructuring sit outside the competition analysis.
Foreclosure Theories Extended to Diagonal Mergers and Digital Markets
The Draft Guidelines consolidate the established vertical foreclosure framework covering ability, incentive, and effects, but extend these theories to “diagonal” mergers where no direct vertical relationship exists. For digital markets, the Guidelines explicitly address foreclosure strategies involving data access, interoperability, and post-sale quality of service restrictions. Critically, the Commission will also consider dynamic incentives, such as a merged entity extending or entrenching its market power over time, even in cases where traditional metrics like diversion ratios, departure rates, and margins would not identify a profitable foreclosure strategy.
Dynamic Assessment: Looking Beyond Static Market Indicators
The Draft Guidelines embrace a “dynamic” approach to merger assessment, moving beyond current market conditions and static indicators of competition to evaluate forward-looking capabilities and incentives to compete. This approach carries particular weight in research and development-driven sectors including technology, pharmaceuticals, and industries undergoing green transition or digitalisation.
The landmark Dow/DuPont decision established the foundational framework for assessing the loss of innovation competition between firms with overlapping R&D capabilities, even where 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 through 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 no specific product overlaps exist).
Recent cases illustrate the Commission’s growing comfort with forward-looking analysis. In AAM/Dowlais and Veolia/Uniper Hungary Energetikai, the Commission cleared mergers resulting in high market shares in fossil fuel-related markets, reasoning that regulatory change meant high shares would not endure. In RTL/Sky DACH, the Commission pulled back from requiring advertising space-related remedies in a broadcasting merger because of significant and increasing competitive pressure from global streaming platforms. These decisions demonstrate that the Commission already applies a forward-looking lens where markets undergo structural change.
The Draft Guidelines explicitly acknowledge the importance of innovation and investment for European competitiveness, offering detailed guidance on how the Commission will assess harm to investment, expansion, and innovation through a dynamic approach that considers the potential loss of innovation-driven competition.
A Question Answered: How Does the “Theory of Benefit” Work in Practice?
The most significant shift in the Draft Guidelines is the proposed new approach to efficiency claims, where efficiencies will be assessed alongside the analysis of harm using the same “more likely than not” standard. Efficiencies have historically been considered only after the competitive assessment, based on three cumulative criteria requiring merger specificity, verifiability, and consumer benefit. In practice, this meant no merger raising consumer harm has ever been approved solely on the basis of countervailing efficiencies. The Draft Guidelines now place efficiencies at the heart of the assessment rather than treating them as an afterthought.
To succeed, benefits must on a lasting basis at least offset the identified harm to competition. 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 merged entity will maintain or build on efficiencies, and the more likely that consumers will suffer long-term harm. Benefits must accrue to substantially the same consumers who would be harmed, though they can arise in a related market.
Longer Timeframes for Evaluating Benefits
The Draft Guidelines are explicit in their openness to longer timeframes when evaluating whether benefits will materialise, particularly 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. However, the Draft Guidelines also acknowledge that a longer timeframe for benefits to materialise might make them less quantifiable and could impact the assessment of verifiability.
Types of Mergers Identified as Potentially Beneficial
The Draft Guidelines identify four categories of mergers likely to be viewed favourably:
- Mergers combining complementary products to create new solutions at lower prices where few alternatives exist
- Mergers enabling scale to reduce costs and increase the ability and incentive to compete on innovation and investment
- Mergers promoting internal market integration through cross-border expansion
- Mergers improving access to critical or sustainable inputs to increase resilience or sustainability to the benefit of EU consumers
The Innovation Shield: Protections for Small Acquisitions
The Draft Guidelines introduce an “innovation shield” to clarify when acquisitions of small innovative firms are unlikely to raise competition concerns. This establishes an “in principle” finding that no competition concerns exist for deals meeting certain conditions based on market shares, transaction size, and the presence of sufficient alternatives in the relevant market. The innovation shield framework may also frame Member States’ use of call-in powers, a welcome step toward deal certainty.
However, the innovation shield’s practical application remains uncertain. 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. Companies should approach the shield as a potential safe harbour rather than a guarantee, recognising that the factual burden may be substantial.
Mergers for Scale: A New Openness to Industrial Strategy Considerations
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 merger assessment should give adequate weight to wider factors. Scale can be beneficial, particularly in global industries with high capital intensity and rapid innovation through R&D.
The Draft Guidelines identify several ways in which scale can positively affect EU competitiveness: driving innovation and technological progress, enabling EU market integration and expansion, and boosting security and resilience. However, they 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.
What This Means for Merger Parties and Practitioners
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 requires parties to consider the range of benefits a deal brings and to gather supporting evidence well in advance of signing, so robust arguments can be deployed in discussions with the Commission from the outset. The re-centring of the Draft Guidelines around pro-competitive benefits should remove fears that merger benefits will be characterised as an “efficiency offence” by the Commission or viewed with suspicion as masking anti-competitive harm when deployed early.
Nonetheless, the real test will be how the Commission exercises its discretion in practice, particularly in marginal cases where benefits are real but difficult to quantify. 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. But the emphasis has shifted. Efficiencies are no longer an afterthought; they sit alongside theories of harm in a single, integrated assessment. Dynamic effects, innovation rivalry, and scale considerations are woven into the analytical framework. For companies contemplating transactions that raise novel or complex questions, the message is clear: prepare early, build a comprehensive evidentiary record, and be ready to articulate both the competitive risks and the countervailing benefits with precision and conviction.
