Max von Thun and Claire Lavin argue that the European Commission must revise its merger guidelines to emphasize how competition policy can protect goals beyond prices, including innovation, security, and democracy. This will create a more prosperous European Union.
After two decades, the European Commission is undertaking a much needed update of its Horizontal and Non-Horizontal Merger Guidelines. These Guidelines—while not formally binding—are closely followed by European Union (EU) officials investigating mergers. They are thus highly influential in determining which takeovers receive scrutiny, which risks enforcers focus on, and which transactions are blocked or cleared. In short, the Guidelines—and the merger enforcement decisions which they shape—play a major role in protecting Europe’s markets, citizens, and democratic processes from excessive concentration of private power.
The failure of merger control so far
At risk of stating the obvious, the world, and thus the context in which the Guidelines are enforced, has changed dramatically since 2004 when the Guidelines were last updated. Europe’s markets have become more concentrated as small cliques of firms consolidate their control of key industries, enabling them to earn monopoly rents and exploit customers, suppliers and workers that depend on them. In the technological sphere, a small number of foreign tech giants control Europe’s critical digital infrastructure, exclude local challengers, undermine the region’s sovereignty, and weaken its democracies. In many other areas, from defense and medical equipment to critical raw materials and renewable energy, Europe has become dangerously dependent on a handful of dominant foreign suppliers.
European merger control, which could have limited if not entirely prevented some of these trends, has failed to do so due to a lack of resources and by prioritizing the theoretical efficiencies and lower short-term prices that come with scale. Over the past two decades, enforcers in Brussels and member states have allowed countless mergers to sail through, often without an in-depth investigation due to a high financial threshold for requiring merging firms to notify regulators. According to a report by S&P, more than 12,000 M&A deals were implemented in the EU in 2024, yet only 392 were notified to the Commission. According to the Commission’s statistics, since 2004, only 3% of the 7,326 mergers notified to the Commission faced a detailed investigation, while only 15 were stopped.
This feeble approach might be justified if, on average, mergers created more benefits than costs for society. Yet as demonstrated by an extensive literature, the result of most mergers is higher prices and corporate profits, with little in the way of countervailing efficiencies, investments or innovation. As Melissa Schilling explains, a “considerable body of research concludes that most mergers do not create value for anyone, except perhaps the investment bankers who negotiated the deal.” In a 2024 report, the European Commission itself recognized the harms from (partly merger-driven) consolidation in Europe, observing that this has led to higher prices, greater wage inequality, less business dynamism, and reduced resilience to external shocks, such as disruptions to global supply chains as occurred during the Covid-19 pandemic.
While merger enforcement cannot undo this consolidation, as an ex-ante tool that defines which mergers and acquisitions can go through, it can and should prevent it from getting even worse. To achieve this, the EU needs to overhaul its current approach of assuming most mergers are benevolent and become much more ready to stop harmful deals, particularly those involving already dominant firms. Above all, the revised Guidelines should be designed to promote organic business growth through internal investment and innovation over artificial expansion driven by anticompetitive acquisitions.
What should the next Guidelines look like?
In the Open Markets Institute’s recent submission to the Commission’s consultation on the Guidelines, we highlight several key areas where EU merger enforcement should be refreshed in response to today’s pressing challenges.
First, fundamental changes are needed to the architecture of the Guidelines themselves to maximize the chances of harmful mergers being adequately investigated, and where necessary, blocked. To this end, our submission calls for the introduction of a rebuttable presumption of illegality for acquisitions by the largest and most powerful firms. In practice, this means that proposed acquisitions by such firms would be prohibited by default unless they were able to demonstrate benefits which outweigh the presumed harms to competition. For an even smaller subset of “super-dominant” firms, we propose an outright merger cap banning them from making any further acquisitions.
Introducing such legal presumptions would not only prevent the most powerful corporations from accumulating further economic and political power, but also significantly reduce the strain on the Commission’s limited resources by limiting the need to comprehensively investigate transactions that are highly likely, if not certain, to be harmful. Our submission also suggests various criteria through which such dominant and super-dominant firms could be identified, including both acquirer-specific and industry-wide data points. These parameters would include, for instance, turnover, margins, profits or market capitalisation for the acquirer and market shares, barriers to entry and past and/or likely entry for the industry.
Second, European competition policy should not be limited to the narrow objective of promoting consumer welfare and its emphasis on prices. While corporate concentration is often harmful to consumers, who pay higher prices for less choice and lower quality, it is also detrimental to a broader set of equally (and arguably more) important stakeholders, including small businesses, suppliers, workers and, ultimately, citizens. Concentrated markets undermine key public policy objectives, from a diverse media sphere and resilient supply chains to a clean environment and a robust democracy. While competition policy cannot fix every problem, it can do more than it does today. Fortunately, the Commission’s consultation engages with many of these considerations.
Third, the revised Guidelines should take a much broader approach to digital mergers, which do not fit enforcers’ traditional analytical frameworks and tools. The Commission’s current approach to reviewing mergers, which involves defining distinct horizontal or non-horizontal markets, calculating market shares, and identifying overlaps between parties’ activities, is fundamentally unsuited to today’s market realities and business models, particularly in the tech sector. In so-called digital ecosystems that combine a broad and diffuse set of assets and technologies that synergistically support one another, harms to competition often arise without there being clearly defined markets, market shares, or overlaps.
Building on the recent judgement from the Court of Justice of the European Union that recognizes data protection law violations as a potential abuse of dominance, European enforcers should also formally scrutinize the impact of acquisitions on both individual user privacy and business compliance with data protection law, given that large tech firms often use takeovers as a means of acquiring valuable personal data, which they then exploit to expand their market power. The Guidelines should also empower the Commission to intervene early and aggressively in the tech sector given the risk of markets irrevocably “tipping” toward oligopoly or even monopoly, as appears to be happening before our eyes with artificial intelligence (as described in an Open Markets report).
Fourth, EU merger control should be based on the principle that robust competition, not consolidation, is the driver of economic prosperity. While this might seem obvious, there have been numerous calls in Europe to water down merger enforcement in favor of so-called “European champions” able to compete on the global stage. While such calls have a superficial appeal to them, in reality a European merger bonanza would end up hurting consumers (through higher prices), workers (through lower wages) and innovators (through greater barriers to entry) while doing little to boost Europe’s global competitiveness. As many informed observers have pointed out, firms that do not face intense competition at home are unlikely to thrive in even fiercer global markets.
Conclusion
By implementing these changes and others we put forward in our submission, the Commission has the chance to steer the European economy in the interests of citizens, workers, entrepreneurs, and democracy, instead of waving through consolidation from the sidelines. By giving civil society organizations, consumer advocates, trade unions and academics greater input in merger investigations, the Commission can also bolster its limited resources while also strengthening its democratic legitimacy.
Over in the United States, the government is quickly dropping its commitment to anti-monopoly enforcement (see, for instance, the U.S. Federal Trade Commission recently dropping its fight against non-compete bans, as well as the Trump administration’s dismissal of dissenting FTC commissioners and DOJ officials and the clearance of the controversial merger between Hewlett Packard and Juniper). The EU has a chance to not only protect competition at home but to lead the global fight against monopoly and oligarchy and serve as a model for other nations seeking to rein in concentrated corporate power.
Authors’ Disclosures: The authors work for the Open Markets Institute, which receives funding from foundations such as the Lumpkin Family Foundation, William and Flora Hewlett Foundation, Wallace Global Fund, Omidyar Network, Open Society Foundations, and Schöpflin Stiftung.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
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