The European Commission plans to relax how it evaluates mergers; draft guidance would make regulators weigh innovation, extra investment and the single market's resilience more heavily.
Shift in test for deals
The European Commission is reviewing rules it has used since 2004 and is preparing fresh guidance that would alter how mergers are assessed across the bloc. The draft proposals, seen by the Financial Times, would explicitly factor in whether a transaction would boost innovation, spur investment or strengthen the resilience of the single market when regulators decide whether to clear a deal.
That would shift the emphasis away from purely market concentration and immediate anticompetitive harm. The commission, which enforces competition law in the European Union, has told member states it will publish proposals for feedback in April.
Executives planning cross-border mergers could find some deals easier to clear, but competition lawyers will have to decide how to weigh long-term strategic gains against the usual consumer-harm tests.
Political momentum for 'European champions'
Brussels officials and business leaders have increasingly argued that Europe needs larger firms able to compete with giants based in the United States and China.
Proponents contend that allowing mergers that create pan‑European groups will help domestic companies invest more, innovate faster and secure supply chains.
Hyder Jumabhoy, Partner at White & Case LLP and Global Co‑head of its Financial Institutions Industry Group, said the change would be particularly important for banks. "This would represent an important move to support the advancement of one or more pan‑European banking champions," he said, adding that it would help EU lenders compete internationally.
Jumabhoy noted that Europe's top 20 banks have built up sizeable buffers in recent years. "Many of these lenders also have robust M&A appetite, with the Europe’s top 20 banks having accumulated approximately US$600 billion in excess capital over the last 3 years," he said. "If merger rules are relaxed, we expect to see transformational M&A accelerate."
Member‑state resistance
Not every capital welcomes a looser approach. Finland, Ireland, the Czech Republic, Estonia and Latvia have warned against watering down competition rules in the name of creating national or continental champions. The five countries told other EU governments that relaxing merger law is unnecessary and that size alone shouldn't be the chief aim of a tie‑up.
The group argued that Europe can develop strong companies where the economic evidence supports consolidation, but that the primary focus should be on deals that lead to greater efficiency, faster innovation and fair competition rather than special treatment for large firms. They urged policymakers to pursue resilience and supply‑chain security through industrial or sectoral policies instead of rewiring competition law.
Those capitals also flagged empirical doubts about a simple link between concentration and investment, particularly in telecoms. They said the evidence that larger operators invest more is, at best, mixed and shouldn't be assumed as a general rule when assessing mergers.
What would change in practice?
The draft guidance would give regulators explicit licence to weigh strategic benefits when deciding clearance. In tight cases, the commission might approve a deal that increases market share if the companies can show it will spur investment, speed up product roll‑outs or strengthen supply lines.
It's not yet clear how regulators will actually weigh those competing factors. Competition authorities have long used efficiencies arguments to justify deals, but courts have set constraints on what efficiencies count and how they must be proven. Giving weight to broader goals such as innovation or resilience will require new evidentiary frameworks and testable standards so that decisions can survive legal challenge.
Industry groups that favour consolidation will press for clear, predictable criteria. Companies contemplating cross‑border tie‑ups say current uncertainty can deter deals or lead to drawn‑out remedies that blunt the strategic benefits of consolidation.
Sectoral implications and likely targets
Banks are often cited as prime candidates for consolidation if merger rules are softened. Jumabhoy highlighted banking as a sector where boards have been considering deals now that many institutions are no longer state‑owned and capital positions look healthy.
Telecoms is another sector in focus. Operators have argued that scale is needed to fund costly network roll‑outs and to compete with global cloud and platform companies. Governments sympathetic to champions see larger telecom groups as a way to boost investment in next‑generation networks and secure strategic digital infrastructure.
But the five opposing member states warned that concentrating provision in a handful of suppliers can reduce resilience and make the bloc vulnerable if those firms face shocks. They urged sectoral measures — for example in procurement, industrial strategy or state support rules — rather than broad exemptions from competition law.
Legal and institutional hurdles
If the commission changes its approach, it will need to write new guidance and then make sure national enforcers apply it consistently. That means competition lawyers at national authorities and the commission must develop common approaches to assessing longer‑term benefits and mapping counterfactuals — the scenario of what would happen without the deal.
Courts will also play a role. Decisions by the European courts have repeatedly narrowed the scope for speculative efficiencies. If the commission begins to clear more deals on a forward‑looking innovation rationale, companies will need to present concrete, quantifiable plans showing how a merger will deliver the promised gains.
Timing and next steps
The commission has told member states it plans to publish its proposals for consultation in April. That will start a period of debate among EU governments, competition authorities and business groups about the scope and limits of the new test. The rows already visible between capitals suggest the consultation will be closely fought.
If Brussels adopts the draft approach, it will signal a clear political choice: to tilt competition policy in favour of building firms with global scale. How that choice is turned into enforceable tests will determine whether the measure simply loosens the bar for some transactions or produces a sustained wave of pan‑European consolidation.
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"If merger rules are relaxed, we expect to see transformational M&A accelerate," said Hyder Jumabhoy, Partner at White & Case LLP and Global Co‑head of its Financial Institutions Industry Group.
This article was created with AI assistance.
