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The Competitiveness Compass: recalibrating the true north for merger control?
The Competitiveness Compass: recalibrating the true north for merger control?
29 January 2025
Competitiveness is the new Leitmotiv of the second von der Leyen Commission. Today, the European Commission published its Competitiveness Compass. It foreshadows the changes in policy, legislation and enforcement that the EC intends to launch.
Following the Draghi Report’s wake-up call, the Compass calls for simplification and better coordination for all policies and describes how the EC plans to turn the “transformational imperatives” into enhanced competitiveness for the EU.
Alongside calls for simplification and better policy coordination, there are two changes for competition enforcement. One is a call for a new framework for State Aid that we discuss in another blog post. The one we are discussing here concerns the future guidelines for merger control. Both measures are for the EC to take forward; they do not need Council or Parliament approval. This is as close to executive orders as it gets in the EU, but we will still need to hold our breath until the drafts are ready and can be adopted by the College of Commissioners.
Changes coming for EU merger control?
The Compass reinforces the mission letter to Teresa Ribera, the Commissioner in charge of competition.
Revamping of merger control rules to promote innovation, protect security and help create “European champions” in key sectors
By 2026, new merger guidelines ought to reflect the need to “keep pace with evolving markets and tech innovation”. The EC promises a “fresh approach better geared to common goals and allowing companies to scale up in global markets”. The EC intends to focus on “innovation, resilience and the investment intensity of competition in certain strategic sectors”. Draghi had put the emphasis on more consolidation in the defence and telecoms sectors.
The EUMR does not leave room for sector specific merger control. Innovation benefits and synergies should feature more prominently throughout. The EC has already intervened in numerous mergers where it found that innovation was harmed. And we may see a new openness to innovation remedies. These tools may matter more in some sectors than in others, but a move to sector-specific merger tests could not be achieved with guidelines.
The Compass does not explicitly say which sectors will benefit most. Defence, automotive, critical medicines, energy, capital markets and space as well as ensuring investment in digital technologies (e.g. semiconductors) and network infrastructure (e.g. fibre, satellite, wireless 6G and cloud computing) all feature prominently elsewhere in the document.
Removing barriers and promoting consolidation: Can we expect an innovation defence?
The Compass highlights the benefits of scale for competitiveness. It pledges to enhance market integration in the energy sector through the Affordable Energy Action Plan and to “remove barriers to market-driven consolidation of financial markets infrastructure”. It refers to the Letta Report’s criticism of barriers in sectors such as electronic communications, energy, financial markets and defence, and wants these barriers to be removed. This should allow more scale in industries that are characterised by “mainly national players” that suffer from “a combination of structural weaknesses and decades of underinvestment” (defence).
Promises to simplify everything – but will this extend to merger control rules?
The EC commits to “an unprecedented simplification effort”. So should we expect further simplification in merger control?
For mergers that do not raise competition concerns, a lot of this work seems to have been done by the previous Commissions. 80% of all cases now benefit from a simplified review:
The scope for simplification in complex cases seems to be limited. The courts have held the EC to high standards. Any ability to cut corners (presumptions, limitation of evidence, etc.) would require a reform of the EUMR itself. But there will no doubt be pressure for speed and a more targeted approach.
What’s next?
Potential changes to merger control rules will be an area to watch in the coming months and throughout 2025, with further information likely to come with the following:
- Omnibus simplification – The EC is expected to publish its Omnibus proposal in February 2025, potentially outlining details regarding the simplification of merger control rules.
- Single Market Strategy – The EC's Single Market Strategy is due in Q2 2025, which may include merger control measures to support, and make the most of, the Single Market.
- Draft Horizontal Merger Control Guidelines – Draft Guidelines for consultation are expected in 2026, with more details on the timeline coming later this year.
The Compass notably emphasises that merger rules must be "clear and predictable". However, it does not address plans to deal with killer acquisitions and below-threshold mergers, to close the enforcement gap left by the Illumina/Grail judgement. Despite Ribera's acknowledgment that more action is necessary to deal with this issue, the Compass omits this. Now, national competition enforcers are busy filling the Illumina gap. The Commission largely watches from the sidelines. If companies sign a small transaction, are then asked to prepare an Italian filing only to be referred to the Commission and having to notify there again to get unconditional clearance, there should be some room for further simplification. Stay tuned.