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What dealmakers need to know about the EU Commission’s new draft merger guidelines
On 30 April 2026 the EU Commission published its long-awaited draft revised EU merger guidelines (Draft Guidelines) for consultation. The Draft Guidelines have been in the making for some years now and represent the first update since the original guidelines were adopted more than two decades ago. They will replace both the horizontal and non-horizontal merger guidelines, now consolidated into one document. While the Draft Guidelines are still in draft form, and open for consultation (until 26 June 2026), they show the direction of travel, and the Commission is already taking them into account. It is therefore important to understand now what this all means for deals.
Updating the merger guidelines was a key priority for Competition Commissioner Ribera as part of her mandate and also reflects the recommendation of the Draghi Report for a greater emphasis on innovation and future competition, to give “adequate weight to the European economy's more acute needs in respect of resilience, efficiency and innovation”.
In a clear nod to the Draghi report and the new (geo)political environment, the Guiding Principles of the Draft Guidelines recognise that the approach to balancing different possible effects of a merger needs to be re-examined and “should give adequate weight to scale, innovation, investment and resilience as procompetitive factors that can benefit from a degree of consolidation and should assess the effect on future innovation potential”.
Announcing the consultation Ursula von der Leyen, President of the EU Commission, highlighted the importance of the new Draft Guidelines “to support companies to thrive, scale and innovate…so we can meet the realities of the fiercely competitive global economy and boost our competitiveness, while preserving the predictability and certainty that investors value most in Europe”.
Practical impact
There is definitely a change of tone and more openness to looking at pro-competitive factors of deals. Nonetheless, the Draft Guidelines do not abandon rigorous vetting of deals and indeed come up with new theories of harm that dealmakers will need to grapple with.
The Draft Guidelines provide greater scope for merger parties to justify their transactions but also add new enforcement tools to the Commission’s existing arsenal. Innovation, resilience and scale can be used to justify, but also to oppose, a proposed merger, and it remains to be seen how the Commission will balance harms and benefits under these new theories.
Merger parties have historically rarely relied on efficiency claims due to the high standard of proof required. Whereas the existing framework for assessing benefits has been retained, the guidance has been considerably expanded with additional detail and clarification which should assist the merger parties in making a detailed and credible ‘theory of benefit’. Combined with early engagement with the case team this should put the parties in the best possible position to achieve a positive outcome.
We have set out below some of the key changes introduced by the Draft Guidelines.
Positive guidance on pro-competitive scale-ups: the impact of global geopolitics and trade
The Draft Guidelines note that “the global geo-political and trade context has changed” and that “[i]ndustrial scale and global competitiveness have become increasingly important”. They recognise that “the growth and scaling-up of firms in the internal market so as to reach the necessary size to compete in global markets can be procompetitive and have a positive impact on the EU economy and its competitiveness, including on innovation and investment”.
This will be the case in particular where mergers combine complementary capabilities that drive technological and economic progress through new products, mergers that enable companies to enter other Member States or countries outside the EEA where they are not yet active, or that enable companies to be active in global markets where they face pressure from few global players, and mergers that increase the parties’ ability to invest in critical infrastructure, defence projects and critical inputs that increase the resilience of the internal market.
It does however remain important to distinguish the benefits of scale from increasing market power in a way that negatively impacts competitiveness or resilience of EU companies, and ultimately consumers.
Market power and dynamic competition
The Draft Guidelines contain an expanded section on the assessment of market power and clearly go beyond market shares in that assessment stressing that “market power is assessed using a combination of factors, none of which is individually decisive” with structural indicators, including the number of credible competitors, market shares and concentration levels, being “useful first indicators of the competitive importance of the merging firms and their competitors”. The Draft Guidelines point to factors such as low sensitivity to price, high profit margins, high barriers to competition (including issues such as non-resilient supply chains), barriers to entry (now including ecosystems and portfolio effects).
Importantly, the Draft Guidelines recognise that in some industries or markets a static assessment of market power does not fully capture the competitive strengths and weaknesses of a business. This will be the case where innovation or investment in new products, services or processes is an important parameter of competition. In such cases the Commission will take into account the ‘dynamic competitive potential’ of the relevant businesses to assess their impact on the competitive process, including factors such as R&D expenditure, patent portfolios, pipeline products, access to competitively significant inputs such as data and technology.
Evidence and internal documents
The Draft Guidelines now include a section on “Evidence”. They explain that the Commission relies on evidence of any kind and the evaluation of such evidence is unfettered. All types of evidence are taken into account in a holistic manner including information provided by the parties (which must be complete, correct and not misleading), economic evidence, extracts from internal documents prepared by the merging firms in the ordinary course of business, views of customers and competitors and other third parties, and reports by industry experts or public entities. When it comes to internal documents, the Commission stresses that internal documents “drawn up in close connection with the events they relate to or by a direct witness of those events, and including statements running counter to the interests of the relevant party, should be regarded as particularly reliable and credible evidence” whereas “internal documents drawn up after the announcement of the merger, or close to such date, have generally limited value in terms of exculpatory evidence”.
New theories of harm
The Draft Guidelines bring together the previous Horizontal and Non-Horizontal Guidelines with their separate analytical frameworks, and all mergers will now be subject to the full analytical framework of the new Draft Guidelines and all its theories of harm. Existing theories of harm have been expanded and updated and a number of new theories of harm have been added, reflecting the Commission’s approach in its recent decisions:
Loss of investment and expansion competition
A merger may lead to a significant impediment to effective competition (SIEC) if it significantly changes investment or expansion competition processes by discontinuing, downsizing, delaying or redirecting investment projects. Investment competition may be adversely impacted even if the merged entity were to proceed with the investment projects planned before the merger, because the merged entity’s incentive to compete and invest in the future would be expected to decrease after removing a competitive pressure.
This may be particularly relevant in industries where businesses compete through investment in infrastructure, networks, capacity or technologies. Where they compete in an existing product market, removing that competition may also remove investment or expansion competition between them.
Loss of innovation competition
The assessment of the loss of innovation competition is not focused on any specific future outcome but on whether a merger significantly impedes the process of innovation rivalry itself.
A merger may result in an SIEC where it: (i) impedes the innovation competition process by eliminating competition between the merging parties; (ii) impedes overall innovation capabilities and efforts in the industry; or (iii) alters the parameters of competition in future product markets, particularly by reducing incentives to initiate or continue R&D projects that would otherwise compete with each other.
The Draft Guidelines distinguish two sub-theories of harm:
- Loss of specific innovation competition: arising from overlaps between R&D projects or between R&D projects and existing products, which may lead to discontinuation, delay or redirection of one or both parties' projects.
- Loss of general innovation competition: where a merger between firms with overlapping innovation capabilities may significantly impede early-stage innovation competition, ultimately reducing the likelihood that consumers benefit from new or improved products.
New ‘innovation shield’ for small innovative companies
The Draft Guidelines introduce a new ‘innovation shield’. Under this, transactions involving small innovative companies, including start-ups and R&D projects, with a dynamic competitive potential will not give rise to a finding of an SIEC in a number of scenarios, depending on the nature of the overlap created by the transaction and factors such as the parties’ combined market shares and the number of businesses with similar competitive potential remaining on the market.
Entrenchment of a dominant position
Entrenchment occurs where the merged entity obtains control over certain assets in a way that creates or reinforces existing barriers to entry and expansion and results in reduced market contestability. It can give rise to dynamic anticompetitive effects by deterring the prospect of future entry, expansion or innovation by existing or potential competitors. A merger may result in an SIEC where it leads to entrenchment of a dominant position within a core market, or across closely related markets.
In its assessment of entrenchment, the Commission will consider whether there are effective and timely counterstrategies competitors could use to prevent the reduction of contestability.
Labour issues (monopsony power)
The Draft Guidelines now include specific points concerning the effects of a merger on labour markets (monopsony effects). The Commission will now consider whether a merger results in an impact on employees by reducing competition and thus impacts the choices workers’ have for employment and their remuneration.
Non-controlling minority stakes
The Draft Guidelines include guidance on non-controlling minority shareholdings and common institutional ownership. The Commission may examine these as potential competition concerns. This will be key for deals involving private equity or other investors that have minority holdings in multiple companies in a given sector.
New approach to efficiencies: a “theory of benefit”
A key change and feature of the Draft Guidelines is significant more openness to considering and analysing efficiencies brought about by a merger. The Draft Guidelines significantly expand on the Commission’s current guidance on merger efficiencies and now explicitly cover benefits to innovation, investment, resilience and sustainability. The Commission recognises that greater clarity around efficiencies is important to avoid chilling effects on transactions that would otherwise benefit consumers and the internal market more widely.
Where the merging parties consider that the merger gives rise to efficiencies as part of their prospective analysis, they must articulate and substantiate a ‘theory of benefit’ that sets out how the specific merger efficiencies occur and maintain or enhance effective competition to the benefit of consumers. Early engagement, including during the pre-notification stage, is encouraged as it will allow the Commission to take the theory of benefit into account early on in the process.
The Draft Guidelines distinguish between direct efficiencies (which result directly from the merger and result in lower prices, new and improved products, higher quality and variety) and dynamic efficiencies (which confer the ability or increase the incentives to invest or innovate). The analytical framework remains the same and both categories of efficiencies have to meet the three cumulative conditions of verifiability, merger specificity and consumer benefits, but the Draft Guidelines provide greater clarity around the framework. Scale, resilience and sustainability may in some cases lead to verifiable, merger-specific benefits to consumers.
The guidance on balancing benefit and harm now includes out-of-market and collective benefits, provided they are valued by and fully compensate substantially all harmed consumers and improve parameters of competition in the relevant market(s) in the EU where they accrue.
New guidance on Member States’ protection of legitimate interests
Under Article 21(4) of the EUMR Member States can take appropriate measures to protect legitimate national interests in otherwise unproblematic mergers. The Draft Guidelines include new guidance on the types of measures Member States can adopt in order to protect their legitimate interests against transactions that have been reviewed under the EUMR.
Public security, plurality of the media and prudential rules are expressly recognised as legitimate interests, but Member States may adopt measures pursuing any other legitimate interests than the maintenance and development of effective competition in the internal market pursued by the EUMR (eg safeguarding the provision of a vital service and consumer protection have been considered by the Commission). Member States bear the burden of proving that their measures comply with the substantive and procedural obligations of Article 21 EUMR and the wider general principles of EU law such as the principles of proportionality and non-discrimination. They will need to clearly state the exact reasons and provide specific evidence as to why their measures meet these objectives.
The additional guidance reflects recent cases where the Commission challenged interventions by Italy and Spain in relation to the banking sector.
Next steps and key lessons for deals
The consultation is open until 26 June 2026. The Commission aims for the Guidelines to be finalised and take effect by the end of the year, but it is important to note that it has already started to adopt an approach that is aligned with the concepts of the Draft Guidelines ahead of their formal adoption.
The landscape has clearly changed. The Draft Guidelines create a comprehensive analytical framework to assess all types of mergers. They show openness on pro-competitive factors and benefits a merger may bring including scale, innovation, resilience, sustainability and other efficiencies. On the other hand, they do not abandon rigorous analysis, and indeed create additional theories of harm that merging parties will need to grapple with.
It will be important to engage in a thorough analysis upfront and take into account possible (and now expanded) theories of harm as well as pro-competitive benefits. In particular, it is now open to parties to clearly show the pro-competitive rationale of a deal and point to the efficiencies and benefits of a deal for consumers and/or EU policy objectives such as innovation, investment, scale for global markets, resilience and sustainability. Merging parties should therefore carefully consider the new Draft Guidelines and frame their strategy accordingly to maximise chances of a successful regulatory outcome.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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