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Authors: Lodewick Prompers, Elisha Kemp, Federico Dante De Falco, Schweta Batohi
Since the publication of the Draghi Report in September 2024, the focus of the European Commission’s leadership has been on enhancing the competitiveness and resilience of the EU Single Market. The Report has become the lodestar for the current Commission.
The latest initiative from the Commission is the Industrial Accelerator Act (IAA), which sets out a proposal for sweeping industrial policy legislation, framed as a response to – what the Commission has described as – the geopolitical weaponisation of dependencies, foreign subsidies and other distortions to the EU Single Market. In this blog post, we look at how it fits within the EU’s broader competitiveness and resilience agenda. For a detailed overview of the IAA, see our Sustainable Futures blog post.
To understand where the IAA fits into the broader picture, you can think of the IAA in terms of two distinct challenges the EU is trying to solve simultaneously: building a stronger trade defence around the EU, while tearing down trade barriers within the EU to create an environment in which European companies can grow into global champions.
Looking outward: strengthening the EU’s trade defences
The first dimension of the IAA reinforces the EU's external defensive perimeter: a line of instruments designed to ensure managed access to the Single Market to ensure at least a level playing field between EU and non-EU companies. From this perspective, the IAA complements a number of existing defences:
The IAA complements these instruments in two ways: through targeted EU-origin requirements in public procurement and public support schemes and FDI restrictions.
IAA procurement rules
Under the proposed IAA, minimum EU‑origin thresholds would apply to public procurement and public support schemes for steel, concrete, aluminium and vehicles, with limited opt‑outs for lack of alternatives, excessive cost or delay.
The rules also foresee mandatory exclusion of operators controlled from non‑partner third countries. Beneath the IAA’s EU‑origin framework sits a core fault line: “made in EU” versus “made with the EU”. The IAA starts from a relatively open position, treating content from Government Procurement Agreement parties and EU FTA or customs‑union partners as equivalent to EU origin for procurement purposes. This reflects both integrated allied supply chains and the constraints of the EU’s WTO commitments. That equivalence, however, is conditional and can be withdrawn by the Commission where third countries deny national treatment to EU operators, or where exclusion is justified by dependency or security‑of‑supply risks. The tension is therefore structural: pragmatic openness is the default, but a robust override mechanism allows the Commission to pivot towards genuine EU‑origin manufacturing where geopolitical or industrial concerns so require.
These new public procurement rules will operate in parallel with the FSR. Indeed, the IAA is expressly without prejudice to the FSR. Where a tenderer in a covered procurement procedure has benefited from foreign subsidies distorting competition, the Commission may require disclosure, impose redressive measures or even prohibit participation in the tender under the FSR. The practical effect is that suppliers from heavily subsidised sectors (batteries, solar PV, and EV components being the most obvious) may face both IAA origin requirements and FSR scrutiny in the same public procurement process, administered by different authorities and under different timelines.
IAA investment restrictions
The IAA would also impose stringent conditions on investors from countries that control more than 40% of global manufacturing in critical sectors such as batteries, electric vehicles, solar PV and critical raw materials. For an in-depth analysis of the FDI pillar of the Commission’s proposal, see our Foreign Investment blog post.
The IAA applies ‘notwithstanding’ the EU’s FDI Screening Regulation, meaning qualifying investors in critical sectors will face two parallel regimes: security-focused FDI screening in the affected Member State(s) and the IAA’s stringent conditions. Crucially, Member States will have to appoint an investment authority to vet FDIs in scope of the IAA, while the Commission retains the power to take over the screening in the case of investments with the potential to impact EU added value. This proposal may in particular create tensions between the different authorities in charge of FDI screening.
The proposal to introduce another layer of foreign investment screening, when the IAA first leaked, was met with some surprise, given agreement was only reached on a revised EU FDI Screening Regulation in December 2025 and a final version of that Regulation is expected soon. See our recent EU FDI Screening Regulation blog post for details.
Looking inward: boosting the competitiveness and resilience of EU companies
Within the EU, the focus of the Commission is on boosting the scale and competitiveness of European companies and strengthening the resilience of the EU economy.
In a Single Market Strategy adopted in 2025, the Commission identified the so-called “Terrible Ten” harmful barriers to the Single Market and everyone from President von der Leyen down agrees: the biggest drag on EU competitiveness is the Single Market's own fragmentation. The numbers are stark: estimates put internal barriers at the equivalent of a 110% tariff on services and 45% on goods, with labour mobility costs eight times higher than in the US.
Another barrier has been steady push-back against the move towards the Single Market. Mario Monti, internal market commissioner in the 1990s, recently commented that momentum behind the project dissipated because of rising “economic nationalism” in Member States and a loss of faith in markets, especially after the financial crisis.
Despite this, the EU has not been standing still, and the IAA is only the next step in the move to boost EU resilience via industrial policy. The Critical Raw Materials Act, the Net-Zero Industry Act (NZIA), and the Chips Act have already begun reshaping EU industrial policy, targeting supply chain resilience, clean tech procurement, and semiconductor capacity respectively. Seen together, these instruments signal a structural shift in EU industrial policy.
The merger guidelines review is another piece of the puzzle. Draghi and von der Leyen have both called for a more flexible, policy-aware approach to merger control – one that takes into account industrial policies at EU level and leaves more room for European companies to build the scale needed to compete globally. The new guidelines have been a topic of debate and it is not yet clear where they will land (see our recent blog post). Commissioner Ribera has in the meantime signalled that the new approach (whatever that may be) will be applied now already, without waiting for the revised guidelines to be finalised. Does this mean we can expect a pro-consolidation approach to mergers or a radical change to merger control enforcement? Probably not. There is more likely to be an evolution rather than a revolution.
So what does the IAA add?
The IAA does not override EU competition rules but sits firmly within the broader shift towards competitiveness and industrial resilience. Its second dimension targets the structural weaknesses holding the Single Market back: slow permitting, regulatory fragmentation and insufficient scale. To address this, the IAA introduces a single national digital access point, a unified permitting process for industrial manufacturing projects, and accelerated permitting extended to energy intensive decarbonisation projects. The single access point feeds into a unified permit-granting procedure based on a single application covering all required permits, coordinated by a single competent authority.
Critically, the IAA extends the streamlined permitting framework under the NZIA to all energy-intensive industry decarbonisation projects – including in petroleum, chemicals, plastic and basic metals. These projects will be automatically designated as "strategic projects", unlocking a dedicated toolbox of accelerated assessment procedures established under the NZIA.
At the cluster level, the IAA also requires Member States to prepare and issue, for each designated “Industrial Manufacturing Acceleration Area”, an aggregated baseline permit covering all permits and administrative authorizations commonly required for industrial manufacturing projects within that area, so that companies only need to obtain additional permits for activities falling outside the baseline.
The objective is therefore not merely administrative simplification, but the creation of conditions in which European firms can scale across national borders. However, streamlined permitting and reduced regulatory fragmentation will only take EU firms so far. The deeper question is whether the EU's merger control framework will keep pace with the industrial ambitions the IAA is designed to support.
Tension between IAA and merger guidelines review
More flexibility to allow mergers to achieve larger scale is one of the most contested industry proposals for the merger guidelines review and it is not yet clear what path the guidelines will take. Until (and unless) it is clear how the revised guidelines will allow scale in strategic industries, the gap between what the IAA is trying to build and what merger control is willing to permit may remain a live tension – and we could risk a structural asymmetry: IAA compliance encouraging integration and scale, and merger control potentially discouraging it.