Pro Market - The EU Must Revise Its Merger Guidelines To Strengthen Innovation, Security, and Democracy
Max von Thun, Europe Director at the Open Markets Institute, co-authored a piece with fellow Claire Lavin urging the European Commission to revise its merger guidelines. They argue that competition policy must look beyond prices to safeguard innovation, security, and democracy—ensuring a stronger and more resilient 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.