Europe’s new draft merger guidelines: an evolved framework for a competitive era

The European Commission has published its new and highly anticipated Draft Merger Guidelines, the first comprehensive restatement of EU merger assessment in almost two decades. The draft consolidates two previously separate instruments into a single analytical framework organised by competitive effect rather than merger type. Its most consequential change is the formal introduction of a theory of benefit as a central analytical concept, sitting alongside the established theory of harm from the outset of any transaction review. The Commission has also significantly broadened the analysis, with an expanded list of harms and benefits that can play a role in the overall assessment. Although the Commission is not exactly ''relaxing'' the rules to create "European champions", it is certainly widening their application and recalibrating its approach to deal reviews by offering much more room for broader policy considerations.

The policy context

European Commission President Ursula von der Leyen, identifying competitiveness in her Political Guidelines as one of the greatest challenges facing Europe in the new world order, advocated for a new approach to competition policy more supportive of European businesses scaling up so they may innovate, compete and lead worldwide.

The Draghi Report on European Competitiveness, in turn, dedicated a chapter on revamping competition policy which urged the Commission to be more forward-looking and agile. The chapter specifically stressed the need to give adequate weight to innovation, future competition, defence and resilience in decisions and assessments. In that context, it recommended updating the existing merger guidelines to make them fit for purpose, for example, by explaining how the Commission assesses the impact of a proposed merger on the incentive to innovate and what evidence merging businesses can present to benefit from an "innovation defence".

Von der Leyen's mission letter to Commission Vice-President Teresa Ribera translated Draghi's recommendation into a specific mandate for updating the merger guidelines. The Competitiveness Compass reinforced that mandate. The Draft Merger Guidelines of 30 April 2026 are the direct product of this deliberate policy sequence and an extensive stakeholder consultation, with its analytical concepts already informing recently closed and ongoing proceedings. Formal adoption is expected towards the end of 2026. The public consultation on the draft closes on 26 June 2026.

Competitiveness and scale

The Draft Guidelines recognise that mergers may enhance European competitiveness, including with respect to innovation, investment and resilience. This focus on competitiveness is not entirely unprecedented. The EU Merger Regulation (EUMR) already welcomes mergers that increase the competitiveness of European industry. However, the Draft Guidelines now explicitly link competitiveness with scale, noting that the scaling-up of firms within the internal market to reach the necessary size to compete globally can be procompetitive and have a positive impact on Europe's competitiveness. This is particularly the case for global markets characterised by high capital intensity and rapid R&D innovation. It is a positive signal to EU businesses that the Draft Guidelines state that scale-enhancing mergers contribute to European competitiveness. That said, the Commission is only welcoming scale that preserves effective competition. It is not accommodating dominance, oligopolies, monopolies, monopsonies or for that matter "champions" in the name of competitiveness.

Scale and market power: a distinction that matters

Scale and market power are not the same thing, and the Draft Guidelines are unambiguous on that point. They state that market power is the ability to profitably maintain prices above competitive levels or to reduce quality, choice, capacity, output, investment, innovation, privacy, sustainability or resilience below competitive levels. The draft highlights that some mergers can even harm competitiveness by increasing market power.

Market power is central to the assessment of the possible anticompetitive harm, as it relates to the precise mechanism underlying that harm: not the size of the merged entity but the accumulation of market power through removing the competitive constraints that previously kept prices down, quality up and investment flowing. A firm that gains scale but continues to face effective competitive pressure cannot exploit that size to the detriment of its customers. The consequence for scale-related arguments is direct. The greater the market power created by a merger – dominance, monopoly, monopsony – the less likely it is that scale efficiencies will outweigh harm.

Efficiencies: from afterthoughts to upfront theory of benefit

The most consequential novelty in the Draft Guidelines is the elevation of efficiencies from a defensive response to a first-order analytical concept. Traditionally, parties raised efficiency arguments only after the Commission had identified harm. The draft changes that setup. A preliminary finding of harm is no longer a condition for efficiency claims to be submitted. The Commission states in the draft that it will actively welcome early engagement on efficiencies, including in the pre-notification stage at the very beginning of the procedure. The vehicle for articulating the claimed efficiencies is the theory of benefit. We are already seeing this change in approach in cases currently being examined by the Commission.

Reassuringly, the draft categorically acknowledges that greater clarity regarding the role of efficiencies in the overall assessment is important to avoid chilling effects on deals that would otherwise be beneficial for customers and the EU internal market. Accordingly, the draft details the different types of merger synergies, such as economies of scale and scope, that may lead to efficiencies.

The list of efficiencies itself has expanded significantly in the Draft Guidelines, which, alongside price and output, now expressly recognise efficiencies related to innovation, investment, resilience and sustainability. The Draft suggests a forward-looking approach that gives weight to such efficiencies. It also recognises that for some markets, there is a need to adjust the time periods for benefits that stem from claimed efficiencies to materialise.

Direct and indirect efficiencies

Direct efficiencies, typically comprising cost savings or quality improvements, flow directly from the combination of assets and businesses. These are now joined by a new category of dynamic efficiencies. Dynamic efficiencies confer the ability or increase the incentives of merging firms to invest or innovate, and their resulting benefits may materialise over a longer time horizon. By investment, the Commission implies investment in assets, and by innovation, it implies investment in innovation. The underlying incentives may differ, with innovation outcomes likely to be more uncertain than asset investments.

All claimed efficiencies, whether direct or dynamic, must be verifiable, merger-specific and beneficial to consumers. Synergies that lead to direct efficiencies may also lead to dynamic efficiencies and merging parties need to demonstrate whether a synergy leads to direct or dynamic efficiencies or both. Parties must build the evidentiary foundation at deal origination.

A new architecture: one framework, two pillars, multiple parameters

The Draft Guidelines consolidate the 2004 Horizontal Merger Guidelines and the 2008 Non-Horizontal Merger Guidelines into a single analytical instrument. The substantive EUMR test of whether a merger results in a significant impediment to effective competition (SIEC) remains unchanged. The Commission, in its SIEC assessment, examines whether a proposed merger affects different parameters of competition such as price, quality and output. It is notable that the draft also lists investment, innovation, privacy, sustainability, resilience (including security of supply) and media diversity as specific parameters of competition. In our view, these stem from "classic" parameters of competition such as quality and output. But by specifically highlighting them, the Commission aligns EU merger control with its industrial policy (for example, the Clean Industrial deal), legislation in these domains such as the GDPR, and its bourgeoning toolbox to address geopolitical challenges, including the proposed Industrial Accelerator Act.

A merger can have an impact, negative or positive, on one or multiple parameters of competition, and that impact is subject to an overall assessment with two opposing analytical pillars. A theory of harm that sets out how a merger may give rise to anticompetitive effects and a theory of benefit that sets out how specific merger efficiencies arise and, in doing so, maintain or enhance effective competition to the benefit of customers and consumers. The Commission bears the burden of establishing harm, and the parties bear the burden of substantiating benefit. This has not changed.

Forward-looking analysis and the counterfactual

As part of its SIEC assessment, the Commission considers whether there is causality between a merger and the competitive effects. It conducts a forward-looking analysis of the merger's effects in comparison with the "counterfactual", which is the expected future market situation without the merger taking place. In most cases, pre-merger conditions are the relevant starting point for the counterfactual analysis, but not always. The Draft Guidelines, helpfully, include a specific framework to account for a more forward-looking assessment when pre-merger conditions do not reflect normal or foreseeable future market conditions. This is important because future events or market evolutions may lead to a conclusion that the current market position of the parties or their competitors does not reflect, but rather under- or overestimates, their competitive potential.

Market power, dynamic potential and the competitive assessment

Analysing market power at the time of the proposed merger and how removing competitive constraints through the merger increases that market power is paramount for assessing any possible anticompetitive effects. However, a static assessment of market power is not always enough, for example, in markets where innovation or investment in new products, services or processes is an important parameter of competition. What is relevant here is a forward-looking approach to identifying market power to assess the influence a firm may have or its ‘dynamic competitive potential'. A static assessment may not capture competitive strengths when the products are not yet commercialised, or conversely, may not capture weaknesses of firms that have relatively high market shares but lack sufficient dynamic competitive potential.

To assess dynamic competitive potential, the Draft Guidelines list various innovation-related and investment-related factors. Innovation-related factors cover indicators such as past, current and expected R&D spending; access to competitively significant inputs (such as data or user traffic); the ability to exploit network effects, including if one of the parties has a wider ecosystem; and the high valuation of a target. Investment-related factors concern how firms' business models shape the ability and incentive to invest and expand within and across markets.

Dynamic entry or expansion of competitors and timeliness

The predicted entry or expansion of competitors is a type of countervailing factor limiting the market power of the merging parties. The Commission examines whether entry or expansion would occur in a timely manner to countervail the increase in market power due to the merger. Although the Commission normally considers entry or expansion timely if it occurs within two years, it is open to considering longer time periods in specific cases. For instance, where the harm is likely to arise only several years after the merger, the Commission may consider entry and expansion likely to occur within longer timeframes.

Competitive assessment and multiple theories of harm

Practically all theories of harms mentioned in the Draft Guidelines have already been applied by the Commission in recent cases; the Commission even includes reference to those cases in the draft. The draft therefore reflects and further develops existing theories of harm, rather than providing altogether new ones. The Commission is also not prevented from applying new theories of harm in the future if these fall within the rather open-ended concept of an SIEC.

Direct and potential competition

First, the Commission indicates that a merger between competitors (horizontal mergers) may reduce head-to-head competition because of (a) the parties’ combined high post-merger market shares creating or strengthening a dominant position and (b) how closely they competed before the merger. Under this theory, the Commission pays attention to specific issues, such as bidding and purchasing markets (including labour markets), network effects, and minority shareholdings in competitors of 5% or more. The Draft Guidelines retain the soft safe harbours in the current 2004 horizontal guidelines: a combined post-merger market share below 25% is, in principle, less likely to raise concerns. This is even the case for market shares between 25% and 50%, if market concentration (measured by the Herfindahl-Hirschman Index (HHI)) is not very high and the merger will only increase concentration to a limited extent (small HHI delta). The current 30% market share threshold as a safe harbour for vertical mergers is, however, not included in the Draft.

Even when there is no horizontal overlap, the Commission may rely on a separate theory of harm based on the loss of potential competition between the merging parties, if the potential competitor already significantly constrains the competitive behaviour of the other party, who as an incumbent already has market power.

Investment, expansion and innovation competition

Another theory of harm that the Commission identifies is the loss of investment and expansion competition, because a merger may make it more attractive to stop, scale down, delay or change an investment project. In line with this, the Commission also points to a possible loss of innovation competition, where the merger reduces the incentive to continue R&D projects (leading to the loss of pipeline products) or even prevents the start of new projects. Acquisitions of start-ups/killer acquisitions also fall within this theory of harm. For this type of harm, the Commission introduces a soft safe harbour, the Innovation Shield. Under this soft safe harbour, the Commission assumes there is no harm if the parties to the merger have no, or only limited, overlap in the relevant market through their R&D projects. This shield does not cover killer acquisitions by either the largest firm in the relevant market or by undertakings which are designated as gatekeepers under the Digital Markets Act (DMA) and already dominant firms.

Foreclosure and entrenchment

Unlike the 2008 non-horizontal guidelines, the Draft Guidelines now provide a unified framework that applies to all types of foreclosure: input, customer and conglomerate. Foreclosure occurs when the merged firm leverages its market power from one market into a related one, for instance restricting downstream competitors' access to inputs or upstream competitors' access to customers. Conglomerate foreclosure is typically effectuated via tying or bunding, with the combination of products in related markets allowing the merged entity to leverage a strong market position from one market to another.

The Draft Guidelines incorporate a new section on dynamic foreclosure incentives which are especially relevant in markets where in order to compete firms must achieve or maintain a critical level of scale, data, or customer reach and where competitive advantages tend to be self-reinforcing (network effects, data accumulation). Here, the merged entity may not have an incentive to engage in foreclosure to capture immediate gains but instead may have the incentive to engage in foreclosure to strengthen or entrench its market power over time. The Draft Guidelines also operationalise a separate theory of harm targeting the entrenchment of a dominant position. Such entrenchment occurs when the merged entity gains control over assets in a manner that structurally creates or reinforces existing barriers to entry and expansion. Entrenchment of a dominant position can occur within a "core market" or across closely related markets, or across an "ecosystem" of several distinct but interconnected markets.

Portfolio effects, access to information and coordination

Mergers that lead to the gaining of access to commercially sensitive information of rivals or increase the merged entity’s market power over a portfolio of products are also on the Commission’s radar. As are mergers in oligopolistic markets that may lead to collective dominance between the few competitors which remain on the market after the merger. This may incentivise negative effects on price competition. While collusion on prices is already prohibited by antitrust law, merger control focusses on tacit coordination when the market is transparent and only few players are left.

Foreign direct investment screening

Since the publication of the current guidelines in 2004 and 2008, parallel merger control regimes that protect interests other than competition have become more common, increasing the risk of diverging outcomes. This, in particular, concerns investment screening to protect national security. Because national security remains a national competence, member states have their own investment screening regimes (see our previous coverage of the Dutch regime). The EU can only coordinate these national regimes, which it has done through the FDI Screening Regulation that is currently undergoing a revision (see our previous coverage).

The Commission recognises the importance of FDI screening in its Draft Guidelines, but at the same time repeats its position that FDI screening is only allowed when it genuinely reflects the protection of public security or media plurality, or when screening is done under prudential rules, for example in the financial sector. In recent years, the Commission has acted firmly against member states that misused their screening powers, and it now underlines its stance in a section aimed specifically at member states. The Commission explains that investments from investors based in other member states benefit the internal market and must not be excluded because of favouritism but only if there are genuine concerns.

What next?

The Commission has published the Draft Guidelines for public consultation which concludes at the end of June 2026. The Commission has indicated that it will finalise its review process in the last quarter of 2026. If the focus on merger benefits is retained in the final version, that would certainly play its part in supporting the EU's economy transition towards new horizons. This in turn primarily depends on whether the Commission, its officials, and the legal advisers to the notifying parties, are actually willing in practice to change the starting point of their analysis by focusing upfront on merger benefits. Only then will EU merger control genuinely reflect a push for greater competitiveness set out in the Draghi report and the Competitiveness Compass. If the underlying assumption remains that invoking efficiencies always means there is some harm to offset, the Draft Guidelines will not change the current merger control process in any meaningful way, despite their new language and will just be old wine in a new bottle.