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The European Commission (EC) has published draft new Merger Guidelines – its first major update since 2008. Paul Armstrong, Federica Grilli, Julie Bon, and Ben Forbes have responded to the consultation. View our full response below or download a copy.
Key points from our submission:
The counterfactual could go further. The Guidelines now address failing firms and refer to the "exit of firms" from a market, but they also exclude changes "under the control of a party to the merger." A firm exiting for strategic reasons sits between the two. It would help if the Commission clarified whether a counterfactual in which a target exits, or becomes a weaker competitor, can be considered.
The innovation shield is a welcome addition – with one question. The shield gives certainty to deals that leave at least three independent innovators. However, it may exclude sectors where R&D capability is already concentrated for reasons unrelated to the merger. These are also the sectors where the Commission's framing prioritises scale. Clarifying how the shield applies here would be useful.
Efficiencies get proper treatment, but the bar set might be too high. For the first time, the Guidelines treat the benefits of a merger as part of the main analysis rather than an afterthought – a real improvement that should support pro-consumer deals. One point on the threshold: an efficiency now has to "only occur because of the merger." A practical test of whether the merger is the most effective, likely, and timely route to the benefit – closer to the CMA's approach – may work better.
A note on symmetry. A contract treated as too weak to prevent foreclosure on the harm side is treated as a credible alternative to the merger on the efficiency side. And the complementarity that grounds an entrenchment concern is often the source of the efficiency. Applying the same standard of proof on both sides would add consistency.
Remedies aren't covered. The Guidelines widen the theories of harm but don't address remedies. Linking the two would support the predictability that the Guidelines aim for.
You can find our full response below or download a copy.
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