- The European Commission opened a May 2025 consultation to revise the Horizontal and Non-Horizontal Merger Guidelines, aiming to adopt updates by end-2027.
- The review would shift merger analysis toward innovation, investment, entry, and other dynamic competition factors rather than mainly market-share and concentration metrics.
- Options include a unified counterfactual framework (including for potential competition and failing-firm scenarios) and clearer guidance on assessing future market developments.
- The Commission is also considering greater recognition of pro-competitive innovation effects and efficiencies, especially R&D- and scale-related claims, alongside broader policy goals like sustainability and resilience.
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The EU’s planned overhaul of its merger control Guidelines is one of the most significant shifts in competition policy in over 20 years. The review—launched via consultation in May 2025—explicitly aims to recalibrate the analytical framework for mergers in light of macroeconomic changes such as digitalization, decarbonization, globalization, and geopolitical supply-chain vulnerabilities.
Innovation, investment, and dynamic competition emerge as central themes. The Commission is seeking to move beyond static structural indicators (e.g., market shares, concentration ratios) towards metrics and frameworks that better capture a transaction’s ability to foster or impair innovation, enable firms to scale, respond to global competitors, or generate spillovers. Notably, the Draghi Report serves as a key anchor for these reforms, having argued for an “innovation defence” in merger review.
One proposed modernization is the unification of the counterfactual analysis, particularly to address issues around potential competition and failing firms. Under this approach, the Commission would replace the “three-limb failing firm test” with a more coherent two-stage test. This could reduce legal complexity and offer more predictable outcomes for merging parties by smoothing how future market developments are assessed.
Efficiencies are another major lever: combining pro-innovation efficiencies with static harm assessments into a more holistic appraisal could shift enforcement outcomes. Parties may have greater room to argue for efficiencies that are “out-of-market,” longer-term, or harder to quantify—especially those tied to R&D investment, scale in innovation-intensive sectors, or access to global supply chains.
The proposed reforms interact with broader policy objectives: resilience, sustainability (including clean technologies), digital ecosystems, and ensuring EU firms are not disadvantaged relative to firms in jurisdictions with foreign subsidies or lax regulation. However, these cross-cutting goals raise questions over whether introducing non-competition objectives (like labor or defense sector consolidation) might dilute clarity or predictability of merger decisions.
Supporting Notes
- The public consultation was launched on 8 May 2025, covering revisions to both the 2004 Horizontal and 2008 Non-Horizontal Merger Guidelines.
- Deadline for comments was set at 3 September 2025.
- The EC expects revised Guidelines to be adopted by end of 2027.
- Focus Paper C in the consultation deals specifically with “Innovation and other dynamic elements in merger control.”
- The Draghi Report (September 2024) called for more forward-looking and agile merger control and the possibility of an “innovation defence.”
- Cleary’s proposals under Topic C include assessing positive innovation effects, replacing the failing firm test with a unified counterfactual analysis, providing guidance on timeframe for innovation/investment effects.
- The EC has commissioned an economic study on dynamic effects of mergers, including parts on theory, empirical case studies, and likelihood.
- Stakeholder workshops are scheduled for 4 December 2025 and 20 January 2026.
- In sector-specific contexts, parties are encouraged to better integrate innovation narratives into merger filings—as seen in tech cases like Nokia/Infinera, where innovation scale was central.
- Proposed reforms suggest greater acceptance of efficiency claims (especially R&D, scale, synergies) and of pro-competitive scale benefits, currently underrecognized.