The European Union and its member states are quickly updating merger rules to address killer acquisitions and the economics of digital platforms. In a new article published in the Antitrust Law Journal, Anna Tzanaki explores how these endeavors challenge the institutional design of EU merger control and how this design can evolve to tackle new economic and geopolitical problems without forfeiting founding legal principles.
Europe has a “killer acquisitions” problem. Deals whereby large incumbents buy small innovative startups with no or low turnover to eliminate future competition go under the radar of the EU Merger Regulation (EUMR) and its financial thresholds at which companies have to report their mergers to the European Commission. However, unlike other jurisdictions, the EU’s problem is not economic alone. It is also political.
In the eyes of the European Commission, killer acquisitions of innovative EU startups by foreign firms present an existential threat to the EU’s prospects for future innovation, competitiveness and ultimately growth and prosperity. At the same time, fragmented regulation of such deals, which may often be of global economic significance, by member states is a threat no less to the EU internal market. An EU-level solution to killer acquisition concerns was imperative, yet it would require revisiting the historic compromise between Brussels and member states regarding the clear-cut division of jurisdiction over merger cases underlying the EUMR.
Accordingly, the economic debate has not only catalyzed a dramatic rethinking of how Europe should govern mergers in dynamic, innovation-driven markets, but it has also prompted the Commission to adopt drastic measures to strategically expand its competence over below-threshold mergers. Although the European Court of Justice put a hold—for now—on the Commission’s efforts to unilaterally extend the EUMR, these developments have de facto transformed the institutional design of EU merger control by redrawing and complicating the boundaries between EU and member states’ jurisdiction over mergers. A law and economics analysis reveals that the current state of affairs is suboptimal and a better EU “killer” solution is needed.
The economics of killer acquisitions and the politics underlying the EUMR
The economic logic behind the epithet “killer” mergers is straightforward. An incumbent firm might purchase an emerging rival to shut down or slow its innovation efforts and preempt future competition. Empirical work shows these acquisitions are most common in pharmaceutical markets, where innovation is pipeline-based and substitution patterns are easier to identify. In digital markets, fewer transactions fit the archetypal “hard killer” profile, but that does not mean the risks are lower. Here, complex ecosystems are often at play, where the boundaries between substitutable and complementary products or activities are fluid, and innovation trajectories are hard to predict. All the while, dominant platforms may acquire promising entrants early, before turnover levels reveal competitive significance.
The EU’s problem in identifying anticompetitive mergers is not just a question of updating and finetuning merger analysis. Rather, the real challenge for the EU is how the EUMR divides legal responsibilities for merger control—what are called “competences”—between the EU and member states’ competition authorities. Since its inception, EU merger control has relied solely on rigid and high turnover thresholds to determine jurisdiction. The EU would be responsible for regulating very large, cross-border mergers while member states would have jurisdiction over smaller mergers that impacted their national markets. This division of labor reflected a delicate political bargain struck between the Commission and member states in 1989 to convince the latter to give up some of their national powers for an EU “one-stop-shop” merger control system to arise.
Accordingly, the Commission has no authority to review transactions below EUMR thresholds and must review all notified mergers (in contrast to the American system, where merger enforcement by federal antitrust agencies is selective both above and below HSR thresholds). Below-threshold mergers have been the exclusive domain of member states unless they decide to refer a case upwards for review at EU level. Yet, killer acquisitions are too small to trigger investigation at the EU level, and too important to be left to member states, which may lack the institutional wherewithal to investigate them and may not be best placed to analyze mergers with cross-border or EU-wide impact.
What is more, the EUMR’s rigid institutional design, originally seen to promote legal certainty and a one‑stop‑shop system, may not only look outdated in fast-moving, innovation‑driven sectors, but could in fact amplify killer acquisition concerns. With empirical research revealing the strategic behavior of firms that tend to structure transactions just below mandatory notification thresholds, a built‑in “deterrence gap” could plague EU merger control as deals involving promising but low‑revenue targets could reliably avoid Brussels’ scrutiny.
A workaround EU solution and its discontents
Acutely aware of this blind spot, the Commission found a “pragmatic” solution in a historically narrowly construed and rarely used provision, Article 22 EUMR, which allows member states to refer cases upward for review at the EU level. Its use would conventinently avoid a formal and cumbersome reform of the EUMR and its thresholds that would entail political renegotiation with member states. Originally, Article 22—also known as the “Dutch clause”—was designed to enable small member states lacking merger control to have their interests represented in merger reviews, while later it was streamlined to allow joint referrals from competent member states in cross-border merger cases that trigger multiple national filings.
However, with new guidance issued in 2021, the Commission reinterpreted Article 22 in a sweeping way, allowing any merger below EU and national thresholds to be referred to Brussels, regardless of whether the referring member state had competence in the specific case under their existing merger control regime. In addition, the Commission could “invite” such referrals, regardless of and before notification at the national level. These changes marked a radical reversal of prior practice and effectively turned Article 22 into a de facto EU “call-in” power enabling the Commission to examine virtually any deal in any sector, anywhere in the world. Notably, the Council of the EU had rejected an even more modest configuration of this power during the negotiations that culminated in the agreed upon EUMR.
The first test case of the EU’s expanded power came when it investigated the merger between Illumina and Grail, two U.S. companies with the target—the latter—having no turnover in the EU. As such, the merger was not notifiable under the EUMR or in any member state. Yet, in 2021 the Commission accepted referrals by several member states, all of which were non-competent. The Commission ultimately prohibited the transaction in 2022. It then ordered Illumina to unwind its acquisition of Grail, which had been completed in the meantime. Although the EU General Court upheld the EU’s jurisdiction to examine the merger, in September 2024 the Court of Justice struck down the Commission’s new approach to Article 22. The EU’s highest court held that the Commission cannot accept referrals from member states that do not have the competence to review the case under their national merger control rules and that the attempted expansive interpretation of Article 22 contradicts the logic, purpose and institutional balance of the EUMR. Legislative reform, rather than administrative creativity, would be required to close gaps.
This put a stop to the Commission’s increasing practice of accepting such unlimited referrals. In response, the Commission withdrew its Article 22 guidance, cancelled its previous enforcement decisions, and suspended review of a similar high-profile deal between Microsoft and Inflection. But as a result of the Illumina/Grail judgment, member states are now proposing or introducing national “call-in” powers that would allow them to review problematic below-threshold mergers at the national level or to refer them to the EU.
In turn, the Commission repositioned, stating that they can accept referrals from competent member states based on the “traditional” interpretation of Article 22. This interpretation too would expand the scope of Article 22 and the Commission’s merger competence, albeit in a more limited way. Based on this reading, the Commission accepted a “call-in” referral from a single member state to review Nvidia/Run:ai. Although the Commission ultimately cleared the deal, Nvidia later challenged the Commission’s power to establish EU jurisdiction over the transaction under Article 22. The pending court judgment is expected to clarify the legality and limits of this approach.
Other developments are further reshaping the powers of the European Commission. The Digital Markets Act (DMA), adopted in 2022, obliges designated “gatekeepers”—large digital platforms like Amazon and Meta—to report all acquisitions in the digital sector to the Commission, regardless of size or notification requirements. The goal was merely to promote transparency in the M&A market. But in combination with Article 22, the EU would establish a powerful two-step system with increased visibility into gatekeeper acquisitions via the DMA, followed by selective enforcement under the EUMR. For that reason, the DMA provides that the Commission must provide a list of reported acquisitions to member states, which may in turn trigger EU competence via the backdoor.
In addition, in 2023 the EU Court of Justice delivered another highly consequential judgment. Towercast revived early EU case law that had remained dormant since the adoption of the EUMR, confirming that national competition authorities (and courts) could use Article 102 TFEU as an ex-post enforcement mechanism against mergers by dominant firms that were not reviewed ex ante and not referred to the Commission under Article 22 EUMR. Member states have already begun to explore this alternative route. As a side deal to member states’ agreement to the EUMR, the Commission committed to disapply the procedural rules that would enable it to enforce Articles 101 and 102 TFEU against concentrations below the EUMR thresholds. This commitment did not bind member states’ powers, which as Towercast now confirmed could be put to use. Thus, while the judgment opened additional pathways for antitrust enforcement against potential killer acquistions at national level, it interfered with the Commission’s efforts to centralize merger enforcement at EU level in select cases via Article 22 of the EUMR.
The consequences of these developments are quite striking. The repurposing of Article 22 transformed the fixed division of EU and national merger powers into one of overlapping competences (i.e., from a “zero-sum” to a “non-zero-sum” game). This has de facto eroded the EUMR’s brightline jurisdictional rules and unleashed jurisdictional competition between the EU and member states over below-EUMR threshold transactions. The possibility of national enforcement based on Article 102 TFEU reinforces this potential antagonistic dynamic.
And yet, the EU’s Article 22 solution to killer acquisition concerns, in its current “uncoordinated” form, is unlikely to be optimal or effective either. The discretionary nature of Article 22 referrals does not guarantee “one-stop shop” review of appropriate cases at EU level, while its broader use without limiting principles undermines predictability and risks overdeterrence. Expediency creates its own discontents.
Options for reform and the way forward
So how should the EU system of merger control evolve to effectively address dynamic competition and innovation concerns without overdeterring transactions? Several reform options that sit along a continuum of more or less centralization are on the table. One is to revise the EUMR thresholds—lowering them or supplementing them with additional criteria such as transaction value, as other jurisdictions have done. Another is to streamline the operation of case referrals, making it more principled and transparent while still allowing targeted EU review of problematic cases (e.g. with multi-jurisdictional impact). A more radical alternative would be to embrace a U.S.-style model of fully concurrent merger competences coupled with soft coordination between federal and state authorities. Finally, the EU could pursue a hybrid approach, supporting reforms that enable greater decentralization but also principled centralization and coordination where needed through enhanced network governance. Measured against certain economic criteria, every institutional option has its own costs and benefits. Option two is the most feasible in the short term in the EU whereas option four appears to be the more mature and ambitious one.
For nearly four decades since coming into being, nothing seemed to shake the institutional setup of EU merger control. Yet, the killer acquisitions debate quickly highlighted a tension between enforcement flexibility and legal certainty for business, with the design of the original EUMR clearly favoring the latter. Now that the cost of keeping such simple but fixed system may be too high, both for the Commission and member states, a move towards a more efficient and dynamic system of EU merger-competence allocation may be not far from sight.
Author Disclosure: The author reports no conflicts of interest. You can read our disclosure policy here.
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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