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Authors: Eoin O’Reilly, Will Leslie, Claire Tobijanski
Even if a merger is likely to benefit consumers, any benefits must also be merger specific. Under the 2004 horizontal merger guidelines, the burden sits with the merging parties to prove that claimed efficiencies are a direct consequence of the merger and cannot be achieved to a similar extent by less anti-competitive alternatives, such as licensing or cooperation. The alternatives that might block the claimed efficiencies need only be “reasonably practical”, having regard to established business practices in the industry. In Deutsche Börse, the General Court considered that cooperation agreements can be “reasonably practical” alternatives where there is evidence that such agreements exist in the industry, even if they are not prevalent and even if the parties lack strong incentives to pursue them.
The test establishes a "but for" causality standard consistent with the “indispensability” condition under Article 101(3). Unless the merger is the only way of achieving similar efficiencies, they are not recognised. There is arguably a sound underlying logic to this. The Commission should not have to balance harms against efficiencies that can be achieved by less restrictive arrangements. If joint production is commonplace in an industry and delivers cost savings, merging parties cannot claim that a merger is needed to deliver those same cost savings. The standard is also consistent with the US test where “[t]he merger will produce substantial competitive benefits that could not be achieved without the merger under review”.
While the merger specificity requirement, as such, is logical and hard to argue with, the question is how high the bar should be set to prove merger specificity. If it is set too high, the risk is that the Commission fails to examine whether alternatives are sufficiently likely to deliver the same efficiencies as a merger, using the merger specificity requirement as an easy out. However, experience indicates that efficiency and collaborative coalitions often do not go hand in hand: hold-up issues (e.g. intellectual property leakage), contractual issues and significant transaction costs may be involved in establishing and maintaining complex alliances. Their inherent flexibility – which is why they are less anti-competitive – is the same reason why they are often poor substitutes for a merger. Merging parties are frequently put in a catch-22: if an efficiency is highly valuable, the merging parties should arguably have a strong incentive to find a way to achieve it without the merger; if it is not valuable, it does not outweigh the competitive harm. This leaves little room for the scenario where an efficiency is both valuable and unlikely to be achieved absent the merger.
The Commission is, moreover, both judge and prosecutor when assessing whether merging parties have proven merger specificity. Parties may be reluctant to put up a fight over efficiencies, which may be construed as an admission that they are needed to clear a merger and thus that the merger causes competitive harm.
The salutary tale of network sharing agreements in telecoms illustrates the high bar. In Telefónica Deutschland / E Plus, Wind / Tre / JV, and Orange / MásMóvil (amongst others), the Commission concluded that fixed and mobile network improvements were not merger specific since the parties could have entered into network sharing and other arrangements. In Wind / Tre / JV, the Commission dismissed the “impediments” to network sharing stemming from “incomplete contracts” out of hand, on the grounds, in particular, that there were “numerous” such agreements and its own views on why spectrum imbalances and customer mix would not impede any such sharing arrangements. The Commission may have disregarded too easily an assessment of how likely network sharing may be under the specific circumstances of the case. It is not because network sharing happens that it should always be a reasonably practical option in the concrete situation. Asymmetries between the parties, at the time or in the future, would impede network sharing, in effect substituting the Commission’s view for that of the merging parties.
What, then, is the solution? How should the Commission delineate between efficiencies that should be considered merger specific and those that should be disregarded?
A fully rounded analysis grounded in realism rather than the hypothetical “reasonably practical” test would seem sensible.
First, any less anti-competitive alternatives must be more likely than not to constitute the counterfactual against which to assess the merger specific efficiencies of the transaction. On that basis, if the status quo is more likely than not to prevail absent the merger (rather than a potentially complex joint venture, licensing arrangements or independent investments), then the efficiencies should be considered merger specific. Pre-existing internal documents may arguably play an important role here.
Second, if the merging parties continue to bear the burden of demonstrating that less anti-competitive alternatives are unlikely to achieve similar efficiencies, the Commission should bear the burden once the merging parties have done so on a prima facie basis. This would adhere to the proof-proximity principle, in that while the merging parties are best placed to demonstrate efficiencies from a merger, they cannot be required to prove a negative regarding the viability of every alternative commercial structure.
Whatever approach is adopted, what is clear is that merger specificity should act as a filter for genuine efficiency claims, not as a trapdoor to dismiss them. An approach grounded in commercial realities rather than idealistic theoretical alternatives would better equip the Commission to differentiate between efficiencies that count and those that should not. Ultimately, as is often the case in merger investigations, the issue comes down to the level and burden of proof. With calls from many quarters to recognise better the potential benefits flowing from mergers, an adaptation in the merger specificity review can play an important role in making this happen.
9 April 2026
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