‘There’s been a long-running debate since EU merger regulation came into being over 30 years ago about whether greater account should be taken of industrial policy, competitiveness, growth, and European champions,’ says Cleary Gottlieb Steen & Hamilton Brussels antitrust partner Nick Levy.
With the EU launching new draft merger guidelines intended to make it easier for companies to push through big deals that could allow them to build the scale needed to become European ‘champions’ to rival US corporate giants, the debate has ramped up.
‘We are entering a time when merger control is becoming more political, and the EU competition commissioner is under pressure to take account of broader policy objectives beyond purely competition-related considerations,’ says Levy.
The draft reforms, the first in more than 20 years, are intended to foster growth and make it easier for merging companies to argue the benefits of scale and competitiveness in merger reviews, helping European corporates better compete globally.
The planned overhaul follows the 2024 Draghi Report, which criticised merger control in the EU, arguing that it needed to change and take account of global developments and innovation, to maintain the bloc’s competitive edge.
Proskauer London antitrust partner Mary Wilks says: ‘The draft revised merger guidelines provide a better framework for engaging with the Commission. It is going to give you a more flexible way of arguing your case.’
To create this flexibility, the draft guidelines propose a greater focus on innovation, investment and the resilience of the internal European market.
If the reforms have the desired effect, they could pave the way for more mergers to be approved. However, it needs to be balanced against the Commission’s expanded definitions of theories of harm, which could be used to block a merger.
‘This is not a carte blanche and you still need clear and convincing evidence’
White & Case London antitrust partner Marc Israel says the impact of the reform could be significant but warns that much will depend on how it is applied in practice.
‘The biggest difference is the notion of the theory of benefit. It’s a balancing act, so to see how that is applied will be interesting. The Commission has a margin of discretion in applying the test, like when looking at scale and the points in the Draghi report about building European competitiveness.’
Linklaters Brussels antitrust partner Lodewick Prompers says the greater emphasis on efficiencies should make merger assessments more balanced.
He says: ‘Efficiencies used to be a hail mary argument that you would bring at the end. It was a sign that you were in trouble and it never succeeded. That will now be much more balanced.’
The draft reforms in the EU, which are open to consultation until 25 June, come after the UK Competition and Markets Authority (CMA) overhauled its processes to boost the speed and efficiency of mergers involving UK companies in 2024.
Cleary London M&A partner Nick Rumsby says that this reform has already made an impact on the UK deal markets and suggests the EU is trying to follow a similar path.
‘I think that there has been a shift in tone. Previously, there was a concern that getting deals done in the UK was harder than before, with the risk that potential acquirers would look to invest elsewhere,’ he says.
Rumsby continues: ‘Hopefully, this is no longer the case and, whilst there will be continued scrutiny for some deals and sectors, the perception of the UK now is that it is a good place to do transactions.’
Vinson & Elkins European antitrust head May Lyn Yuen also highlights the importance of the planned reform’s visible commitment to a business-positive environment.
‘From afar, it can seem as if the EU is focused on regulation. At least in terms of framing, if the Commission gives out the message that “we are business-friendly,” and “we are keen on dynamic growth,” then that is a positive.’
However, she warns that a more open competition regime will not automatically lead to an increase in dealmaking. ‘To what extent this is going to lead to an immediate surge of deals coming through, I’m a little bit more sceptical on that side,’ she concludes.
‘It’s about giving you more opportunities to bring in different facts that are relevant to effects on competition in your case’
Wilks adds: ‘I think the recent signals from executive vice-president Ribera have been that the Commission is still going to look very carefully at the effects on competition and consumers. So just because a merger will create a European champion, doesn’t mean you’re going to get it through. But you’re going to have more opportunities to counterbalance the initial concerns of the Commission.’
‘That’s really what it’s about, giving you more opportunities to bring in different facts that are relevant to effects on competition in your case,’ she stresses.
Linklaters’ Prompers agrees, arguing that – even in draft form – the change in narrative from the Commission is having some impact. ‘We’re seeing a lot of cases coming through now, where the Commission is applying these efficiencies and signalling to the market that they are willing to engage. This is not a carte blanche and you still need clear and convincing evidence, but the shift in practice is already there.’
He cautions that the reforms do not alter the underlying legal test, but instead give the Commission greater discretion in enforcement.
Israel also stresses that the extent to which the reform makes a difference will depend on how the new guidelines are applied in practice. Under the current timetable, the Commission is not expected to finalise the guidelines until November, with the formal changes not coming into effect until the end of 2027.
He concludes: ‘The draft guidelines are one thing, but – once adopted – how they are going to be applied in practice is another. Maybe there will be some deals that might have been difficult in the past that might be revisited, but we will have to see.’
