The European Commission’s draft Merger Guidelines adopt the advice of the Draghi report on European Union competitiveness to tailor competition law to promote goals that have traditionally fallen under industrial, trade, and national security policy. Conceptual ambiguity and the convergence of these policy areas risk undermining consumer welfare, entrenching incumbents, and opening regulation to business capture, write Annika Stöhr and Oliver Budzinski.
This article is part of a symposium on the European Commission’s draft Guidelines on the assessment of mergers under Council Regulation. The new merger guidelines mark their first systemic update since their first release in two parts in 2004 and 2008. You can read the rest of the contributions to the symposium as we publish them here. We encourage responses to our symposium, which can be submitted to promarket@chicagobooth.edu.
The European Commission’s draft Guidelines on the assessment of mergers under Council Regulation (draft Guidelines) reflect a comprehensive engagement with a wide range of current challenges facing competition policy in the European Union and are the result of an extensive consultation process—which continues with the publication of the draft Guidelines. One of the notable changes in how European Union merger control is positioned is that the draft Guidelines explicitly intertwine competition enforcement with objectives that traditionally belong to industrial or trade policy, such as competitiveness, resilience, and technological sovereignty. Heavily inspired by the 2024 Draghi report on EU Competitiveness and built on the Commission’s 2025 Competitiveness Compass, the draft Guidelines suggest that merger control should contribute to Europe’s long‑term economic and strategic strength.
The growing emphasis on competitiveness, however, entails conceptual and practical risks. Should merger control remain focused on protecting the competitive process, a dynamic generally demarcated by specified markets or industries and independent of the nationality of the participating firms, or should it serve to promote competitiveness, understood as Europe’s ability to scale and compete globally? We welcome the Commission’s recognition that a free, open, and undistorted process of competition is the true source of competitiveness. Uninhibited competition spurs firms to innovate and find efficiencies. Coddled European firms won’t be able to compete in global markets. Yet, we remain deeply skeptical of integrating competitiveness as a somewhat independent policy goal within merger control. Doing so risks turning a legal instrument designed to safeguard competition into a tool of industrial policy driven by lobbying and short‑term pro‑growth narratives.
The Return – and ambiguity – of “competitiveness”
Since 2024, “competitiveness” has become somewhat of a central term in EU economic discourse. The Draghi Report diagnosed Europe’s weaknesses in innovation and capital intensity, while the Competitiveness Compass translated this into (more or less) measurable policy objectives. But the term itself remains ambiguous.
Economic theory offers no single concept of competitiveness. It may describe competitive performance, the productivity of firms, the attractiveness of entire jurisdictions for locating business and investment there, or a mixture of all of these. Policymakers must therefore specify whose competitiveness they pursue—individual firms, entire sectors, or the EU economy. Each understanding implies different instruments: competitiveness of Europe requires deregulation and de-bureaucratization (for which merger control is the wrong instrument) and intensifying competition. Artificially pushing competitiveness of firms and industries calls for subsidies and protectionist instruments. Without clarity about its meaning, competitiveness risks becoming a catch‑all justification for selective support, potentially undermining competition and neutrality in policy enforcement.
Competitiveness versus competition
In our view, the distinction between competition and competitiveness remains fundamental. Competition is a public‑interest mechanism securing efficiency, innovation, and consumer welfare through decentralized rivalry. Competitiveness, by contrast, is an outcome: firms perform well because competitive pressure pushes them to do so.
When competitiveness is achieved through intensifying competition, it aligns with social welfare objectives. When it is pursued instead of competition, by privileging certain firms or sectors, it turns against these aims. Protectionist industrial policy, selective state aid or lenient merger review aimed at (the not so new idea of) creating “European or national champions” erode the dynamic discovery process that makes firms competitive in the first place.
Competition is a public good; competitiveness is a private ambition. Fusing them inside enforcement policy risks compromising the rule‑based objectivity of merger control. The draft Guidelines’ frequent references to “scale” and “resilience” must therefore be handled with analytical discipline to avoid opening the door to discretionary politics and welfare-eroding rent-seeking from companies and industries.
Policy narratives and empirical realities
The political narrative accompanying the competitiveness turn holds that the EU has long over‑emphasized competition and neglected industrial strength. Yet, empirical reality contradicts this view. Across advanced economies, concentration and profit margins have grown, while merger control has often been lenient. The issue is not an excess of competition, but its decline.
Against this background, calls to relax merger scrutiny in order to “build scale” misconstrue the roots of Europe’s productivity challenges. Weak enforcement and pervasive red tape have already facilitated the rise of dominant “superstar” companies. Loosening control further would mainly empower incumbents—those most capable of lobbying—without creating the new, innovative mavericks Europe actually needs.
Competitiveness in the draft Guidelines
The draft Guidelines embed competitiveness deeper than any of their predecessors. In Part I, Section A.1, the Commission describes merger control as both protecting competition and boosting competitiveness and growth. Pro‑competitive mergers are portrayed as enablers of integration, innovation, and expansion, while the creation of scale within the internal market is presented as potentially positive. However, the draft Guidelines leave the underlying concept of competitiveness undefined. It appears to combine firm-level competitiveness through scale, technological capabilities, and innovation with broader sectoral notions linked to resilience and strategic autonomy without clarifying which objective should ultimately guide enforcement.
We appreciate the implied insight that sustained competitiveness depends on an undistorted competitive process. However, if this remains the decisive reasoning—as it should—there is no need to emphasize competitiveness as often as the draft Guidelines do: procompetitive mergers are not the ones crucially scrutinized by merger control. By contrast, it is only those that raise considerable anticompetitive concerns that become regulated. A strict and forceful merger control inherently serves the competitiveness of the European economy without any case-specific “competitiveness” considerations on the firm or industry level.
Overall, the language of the draft seems to blur analytical boundaries. Concepts such as “resilience of the internal market” or “defense readiness” extend far beyond standard competition analysis, whereas “security of supply” could simply be understood as one of the positive effects of functioning competition. The inclusion of these concepts in merger control risks giving politically well‑connected actors a new vocabulary to argue for tolerance of market power under the banner of strategic importance, while they are merely seeking anticompetitive privileges that dynamically erode social welfare through a re-orientation of company efforts and investments away from innovation activities and towards rent-seeking behavior.
By introducing such open‑ended goals into the significant impediment to effective competition (SIEC) test, the Commission’s primary standard to measure the competitive outcomes of a merger, the draft Guidelines could compromise legal certainty and objectivity. It risks weakening enforcement precisely when mounting global concentration makes strong, evidence‑based merger control (even) more necessary. We see three concrete dangers potentially arising:
1. Politicization through lobbying: Firms and associations will inevitably rebrand their growth agendas as “pro‑resilience” or “strategic,” seeking exemptions from rigorous scrutiny. This risks transforming merger control into an arena of industrial lobbying rather than evidence‑based enforcement: the rent-seeking incentives of privileged companies converge with a political body (the European Commission), which is incentivized by short-term politics compared to more independent competition authorities elsewhere.
2. Favoring incumbents over entrants: The rhetoric of “scale” and “European/national champions” tends to privilege large players with political leverage. However, those have rarely been the ones developing and implementing disruptive innovation. True competitiveness arises from entry, innovation, and contestability, not from consolidation of established power.
3. Analytical vagueness and enforcement drift: The broader and less measurable the objectives become, the harder it will be to identify a SIEC or to justify prohibitions courts can uphold. Vagueness invites discretion and erodes the consistency that competition law requires.
The alternative is to focus on competition‑based competitiveness: restoring enforcement strength while improving Europe’s business environment so that genuine rivalry can produce innovation and—where necessary—scale. Robust competition in the internal market is what ultimately allows European firms to successfully compete globally.
Towards a balanced framework
A credible balance requires a continued separation of competition and industrial policy, while accounting for the interconnectedness of the two fields. The draft Guidelines already contain the proper analytical safeguards: efficiencies must be verifiable, merger‑specific, and passed on to consumers. These criteria must remain the decisive filter. Any benefits in terms of “strategic autonomy,” “defense capacity,” or “resilience” that cannot meet this standard should be addressed—if at all—through transparent industrial instruments, not within merger control.
Moreover, strengthening Europe’s institutional competitiveness—simpler procedures, faster decision‑making, coherent regulatory frameworks—would foster investment and innovation more effectively than relaxing enforcement thresholds. The EU should therefore enhance the competitive process itself rather than provide political shortcuts to those claiming strategic status.
Conclusion
The draft Guidelines reflect a genuine and legitimate ambition: to make Europe stronger, more innovative, and more resilient. Yet the path to that goal does not lie in sidelining competition. Effective competition is the foundation of long‑term competitiveness. We therefore welcome the Commission’s acknowledgement that open markets and competition are essential drivers of Europe’s productive strength. But we caution strongly against the growing influence of lobby‑driven narratives emphasizing scale and pro‑growth consolidation. If left unchecked, they could repurpose the new draft Guidelines to justify concentration rather than control it.
Competitiveness achieved through competition fosters innovation and welfare; competitiveness pursued instead of competition breeds dependency and stagnation. A reinvigorated, impartial, and empirically grounded merger control, resistant to political capture, therefore remains an important element in safeguarding Europe’s economic dynamism and global competitiveness.
Authors’ Disclosures: The authors report 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.
Subscribe here for ProMarket’s weekly newsletter, Special Interest, to stay up to date on ProMarket’s coverage of the political economy and other content from the Stigler Center.
