A Guide To The Proposed Changes To EU Merger Rules

The European Commission (“Commission”) has released draft updates to its merger guidelines (EU Merger Guidelines), marking the most significant revision of the EU merger framework in more than 20 years. While the legal standard for merger control remains unchanged (i.e., whether a concentration would significantly impede effective competition (“SIEC”) within the meaning of Article 2 of Council Regulation (EC) No 139/2004, these updates reflect a shift in how the Commission intends to assess transactions in a modern, innovation-driven economy.

The most immediate change is structural. Instead of maintaining separate rules for different types of mergers, the Draft Guidelines are moving to a single, unified framework (Para. 3). In practice, this aligns the Draft Guidelines more closely with how mergers are assessed and shifts the focus away from formal categorization toward the overall competitive effects of a transaction. It also signals a reduced reliance on traditional “safe harbor” indicators such as market shares and concentration thresholds, which are no longer treated as decisive on their own, as other competitive factors may also contribute to a determination of potential market concentration. Interestingly though, the Draft Guidelines now define specific concentrations levels ranging from “low” (10-25%) to “very high” (over 50%).

The Draft Guidelines also adopt a broader view of competition. While price remains relevant, the draft makes clear that it is not the only measure that matters (Para. 19). Greater emphasis is placed on factors such as innovation, quality, sustainability, resilience, and security of supply. This reflects the reality that competitive dynamics are increasingly shaped by long-term investment, technological capability, and access to key inputs, particularly in digital and data-driven markets.

Future competition takes on a more prominent role, too, which is consistent with international trends, including the OECD Merger Recommendation. The Draft Guidelines confirm that the Commission will look closely at how a transaction may affect innovation pipelines, investment incentives, and the emergence of new competitors (Paras. 47–50; 53). This includes situations where a target may not yet be a significant market player but has the potential to exert competitive pressure over time. Even transactions involving relatively low market shares may therefore attract closer scrutiny in the right circumstances. The range of potential concerns is correspondingly wider. The draft highlights risks such as reduced incentives to innovate, the loss of potential or emerging competitors, and the strengthening of market positions through control of data, technology, or distribution channels (Paras. 47–50; 53; 56–65). It also reflects a greater focus on ecosystem effects, where a firm’s position across related markets can reinforce barriers to entry or expansion.

On the other side of the analysis, the Draft Guidelines provide additional structure around efficiencies. Both direct efficiencies, such as cost savings and dynamic efficiencies, including enhanced innovation or investment capacity, may be taken into account (Paras. 76–82). The standard remains demanding. Efficiencies must be merger-specific, supported by credible evidence, and capable of offsetting any identified harm (Paras. 78–80; 83–85). In practice, this places a premium on early preparation and a well-documented evidentiary record. The draft also introduces the concept of an “innovation shield,” under which certain acquisitions of smaller or early-stage innovators may proceed where they support innovation without materially affecting competition (Para. 51). The conditions for applying this concept are narrowly defined and are likely to be tested carefully in practice.

Another notable development is the explicit inclusion of labor market effects. The Draft Guidelines consider whether a transaction reduces competition for workers, including impacts on wages, mobility, or working conditions (Paras. 160–161). While job losses alone are not a basis for blocking a deal, the Draft Guidelines consider whether a merger reduces employment options or gives companies too much power over wages and working conditions (Paras. 161–162).

Mergers involving startups are generally seen as low risk, unless there is clear evidence that the smaller company could have become a significant competitor in the future. Concerns are mainly focused on situations where large, dominant companies acquire emerging rivals before they have a chance to compete (Paras. 160–162).

Taken together, the Draft Guidelines point to a more forward-looking and evidence-based review process, with greater scope for discretion in how different factors are weighed. The Draft Guidelines also reflect a broader shift in competition policy toward considering labor market dynamics as part of the competitive assessment (Paras. 160–162). Interestingly, qualitative evidence, including internal business documents and strategic materials, is also likely to play an increasingly important role alongside economic analysis (Para. 11). For businesses, this reinforces the importance of early and comprehensive merger planning, supported by a clear and consistent narrative around both competitive risks and transaction benefits (Paras. 47–53; 160–162).

Finally, it’s worth noting that the Draft Guidelines bring artificial intelligence and advanced algorithms into the framework for assessing whether a merger might facilitate tacit collusion or coordination among competitors. The Draft Guidelines recognize that algorithmic pricing and reliance on large datasets can increase market transparency, thereby allowing competitors to monitor others behavior and align market practices. In addition, the Draft Guidelines address transactions where a dominant company acquires an innovative, AI-focused firm. Even if the merging companies are not close competitors today, the Commission can evaluate whether control over key AI technologies, infrastructure, and complementary data pools creates significant barriers to entry that restrict future market expansion.

In conjunction with the relatively new and revamped 2023 US Merger Guidelines, parties with a proposed cross-border transaction should now pay particular attention to enhanced factors of analysis in both jurisdictions. These factors would include new presumptions of illegality, the impact of vertical integration, the potential elimination of competition and the impact on labor markets.

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.