The draft Guidelines propose an intellectually coherent framework for reconciling these opposing objectives. This allows, for the first time, arguments around the benefits of a transaction to play a meaningful role in merger assessment. But, in doing so, the draft Guidelines also give the EC increased avenues to attack transactions through expanded theories of harm, and greater discretion in key areas.
The EC is clear that it plans to apply the core elements of the draft Guidelines now—even before they are finalized (expected later in 2026). This makes it prudent to treat the draft as a live playbook for document strategy, case narrative, and remedy planning, where relevant.
We give you the main points and key takeaways.
A stronger role for merger benefits
The central liberalizing change embedded in the draft Guidelines is that the same legal standard of “more likely than not” applies to both theories of harm and “theories of benefit.”
This represents a significant departure from past practice. Previously, merger benefits (referred to more narrowly as merger efficiencies) were extremely difficult to deploy in merger defense as they had to clear a high bar to rebut harm. The draft Guidelines treat them as a co‑equal part of the assessment.
The draft Guidelines also say that a preliminary finding of harm is not a condition for efficiency claims to be raised. They encourage early engagement on efficiencies, including during pre-notification.
This “theory of benefit” framework is, therefore, a significant conceptual development that makes the system much more coherent. Rather than treating efficiencies as an afterthought, the benefits of the transaction are assessed alongside its risks to competition in an integrated and even way. The scope of potential efficiency arguments has also been expanded, as discussed further below.
Practical takeaway
Crafting a narrative and collecting supporting evidence on the benefits of a transaction must be front-loaded and undertaken for many more deals than previously, often before it is clear where competition concerns may arise or how they may need to be counterbalanced. In most cases, this will be a new workstream for parties and their advisors, creating more opportunities to defend a deal but also greater work and cost. Examples of evidence that tend to land well include internal investment plans, capacity/engineering constraints, R&D roadmaps, and governance documents showing why the merger is needed to deliver the claimed outcome.
Expanded theories of competitive harm to defend against
The draft Guidelines codify and considerably expand the EC's theories of harm. Traditionally mergers are assessed primarily in the context of a loss of direct competition (horizontal), a risk of foreclosure (vertical/conglomerate), and a risk of coordinated effects.
The competitive assessment will now cover these, plus six other distinct categories of anticompetitive effects: loss of investment and expansion competition; loss of innovation competition; loss of potential competition; “entrenchment” of a dominant position; access to commercially sensitive information; and portfolio effects. Even within the traditional theories of harm, the draft Guidelines capture new considerations, such as labor market monopsony effects, pivotal capacity, minority/common shareholdings, and coordination via AI and algorithms.
Many of these theories are not entirely new; they have been developed in the EC’s decisional practice in particular sectors and fact patterns. What is new is their systematization and the signal that they may be deployed more routinely and earlier in the review, including outside the sectors where clients have historically expected them.
Practical takeaway
The new approach creates a much larger surface area against which to defend a transaction. This means more intense (and costly) preparation of merger defense (including identifying relevant internal documents), wider ranging requests for information and a broader range of issues that may need to be addressed by remedies. This could make predicting merger outcomes more difficult and, therefore, mean assessing and allocating risk in deal negotiations is more challenging. It is also likely to mean longer pre-notification periods.
Looking at some of the new guidance on theories of harm:
Loss of investment and expansion competition
A merger may give rise to a significant impediment to effective competition (SIEC) if it significantly alters investment or expansion competition through the discontinuation, downsizing, delay, or redirection of investment projects.
This addresses mergers in sectors where investment is a key dimension of competition, such as capital-intensive industries and innovation-driven markets. It stands alone—so could apply even absent product market overlaps. It is probably the “newest” of the additional theories of harm and played no role in the previous guidelines.
The EC refers to “Relevant factors to assess the degree of dynamic competitive interaction between the merging parties’ investment and expansion activities include the magnitude and impact of planned investments in tangible assets, deployment timelines, the potential to enhance capacity and quality of assets, the merging parties’ track record in executing investments, their access to key inputs, their ability to leverage investments across markets and the potential for cross-market expansion through strategic investments.”
Practical takeaway
This theory will turn heavily on internal investment documents. Assume investment plans, capex committee decks, and expansion roadmaps will be requested and tested against the filing narrative. Deal teams should align early on:
- what projects would realistically proceed absent the deal
- what the transaction changes (capability, timeline, risk appetite)
- how that change benefits customers.
Defending against this theory of harm is likely to prove difficult in practice. Dynamic factors such as “the potential for cross-market expansion through strategic investments" are inherently subjective. Disproving such an allegation given the EC's discretion in treatment and weighing of the evidence may be an uphill battle.
Capacity constraints and pivotal capacity
The draft Guidelines codify the concept of “pivotal capacity” as a tool for assessing market power in capacity-constrained markets: a firm is “pivotal” if a portion of market demand cannot be met without its capacity, and the EC may use the change in pivotality resulting from a merger as an indicator of increased market power.
Pivotality is not a new concept. It was a prominent feature in Tata/ThyssenKrupp JV, interestingly a merger that would have contributed to EU industrial resilience in steel, but which was nevertheless prohibited. However, embedding pivotality in the draft Guidelines is a material and negative development for industrial sectors such as steel and chemicals. It will make mergers between European industrial players more difficult.
Practical takeaway
The practical implications for deal teams, including the need to demonstrate non-pivotal status and, where pivotality is indicated, to build the “theory of benefit” and potential remedies, will increase costs and deal uncertainty. These issues were explored in detail in our article Consolidation: Making the case for strategic M&A in EU industrials.
Entrenchment of a dominant position
The draft Guidelines provide structured guidance on entrenchment for the first time. A merger gives rise to this competition concern if a dominant firm acquires assets that are related to its core market and are important for effective competition in that market, and whose control restricts rivals’ ability to enter or expand.
Practical takeaway
While the entrenchment framework is specifically designed to capture ecosystem acquisitions by larger digital platforms, it applies across all sectors. All dominant companies acquiring assets that are “unique, scarce or otherwise strategically important” should consider this potential hurdle. Acquisitions of IP, data, important customer acquisition channels, and infrastructure, are likely to fall under particular scrutiny.
Coordination via AI and advanced algorithms
The draft Guidelines flag that artificial intelligence and pricing algorithms, alongside mechanisms such as shared pricing tools and most-favored nation (MFN) clauses, may facilitate coordination. MFNs can dampen incentives to price aggressively, while algorithmic tools can enhance the ability to monitor and respond to market behavior, making coordination more stable. The EC can be expected to scrutinize pricing dynamics closely in merger reviews going forward, particularly where digital tools or contractual structures may reinforce each other.
The approach should be read alongside the EC’s recent review of the Digital Markets Act (DMA). The report confirmed the EC will continue monitoring AI services as a priority, ensuring DMA compliance where AI is integrated into designated core platform services or potentially warrants standalone designation (e.g., virtual assistants), as well as the AI Act’s own transparency and risk-classification obligations for high-risk AI systems.
Practical takeaway
Audit internal deal materials (especially synergy narratives) for statements implying improved pricing ability or predictability. Merger case teams in the EC are unlikely to have a strong understanding of the technology or how it generates synergies, suggesting a “teach in” type meeting may be wise to avoid misunderstanding.
Labor market concerns
The draft Guidelines confirm that, where a merger creates or reinforces monopsony or oligopsony power over workers, the competitive assessment must take into account labor market effects, e.g., on wage levels or working conditions.
Practical takeaway
This consideration adds a new dimension for larger employer mergers or transactions involving companies with a specialized or location-specific workforce—careful due diligence will be vital.
Minority shareholdings and common ownership
The draft Guidelines introduce a framework for assessing minority shareholdings as a potential standalone competition concern. Non-controlling minority shareholdings of 5% or above may give rise to an SIEC even absent additional rights, particularly where they lower incentives to compete.
Common ownership (i.e., shareholders in common between merging firms and their competitors) is also explicitly called out as a factor that may mean competition post-merger will be softer than market shares suggest.
Practical takeaway
Parties to deals involving investment funds or institutional investors need to be alive to this new consideration. A systematic mapping of shareholdings at the outset of deal planning will help to identify any areas of potential concern.
The analytical lens: dynamic competition, market power, and scale
The draft Guidelines introduce an analytical lens that reflects evolving market realities, with a particular focus on dynamic competition, market power, and scale:
- The draft Guidelines elevate dynamic, forward looking analysis by considering capabilities and incentives to compete for future business alongside short term constraints. This approach inevitably increases the EC’s discretion when assessing a transaction—reasonable disagreement on forward-looking dynamic questions is entirely plausible, and the EC has a great degree of leeway to weigh the evidence when making this judgment.
- The text introduces the concept of “dynamic competitive potential” for markets where innovation or investment is an important parameter of competition, supported by specific indicators such as pipeline R&D, time to market, complementary assets, and network effects. The guidance acknowledges that a static snapshot may understate or overstate competitive strength, and that out of market constraints, entry and expansion, and buyer power must be considered where relevant, while recognizing their typical limits.
- On structural indicators, the text aims to codify descriptive bands for market shares—“low” under 10%, “moderate” 10–25%, “material” 25–40%, “high” 40–50%, and “very high” 50% or more—while cautioning that shares and HHI often require corroboration and that other evidence may dominate where shares have limited probative value.
One of the most significant conceptual shifts in the draft Guidelines is the clear positive framing of scale-enhancing mergers in Europe.
The EC states unambiguously that it “regards positively” mergers that increase procompetitive scale while maintaining effective competition. For example, mergers may now be viewed favorably where they:
- combine complementary activities from different member states without generating significant overlaps
- enable companies to enter other member states or be active in global markets
- secure access to critical inputs or strengthen the EU’s defense readiness and supply chain resilience.
Despite the positive messaging around scale, it is fair to say that mergers with these characteristics would likely always have been permitted. It remains to be seen how much of this part of the draft Guidelines is new style versus new substance.
The EC also signals that start-up acquisitions are “unlikely to give rise to competition concerns” subject to specific conditions (see further below). This reorientation echoes the Draghi Report’s call for EU competition policy to better support European industrial competitiveness in global markets, and to ensure that founders and investors in start-ups/scale-ups do not have their plausible exits blocked by merger control.
Overall, references to dynamic competition and dynamic effects are pervasive. On a conservative count, approximately 40 of the draft’s paragraphs explicitly discuss dynamic concepts. Explicit references to “scale,” “scale‑enhancing,” or “economies of scale” appear in more than a dozen paragraphs.
Practical takeaway
This new approach signals a shift to a more dynamic, narrative-driven analysis, meaning that parties must now build a broader evidentiary case around future competition, capabilities, and incentives. While this may significantly increase the EC’s discretion and reduces predictability, it also creates new opportunities to defend deals through well-substantiated efficiencies, including arguments on scale, innovation, resilience, and global competitiveness, which are now explicitly acknowledged (as discussed further below).
The “innovation shield” and safe harbor logic
A notable addition to the draft Guidelines is the “innovation shield,” under which the EC “in principle” will not find competition concerns in cases involving a small innovator, start‑up, or R&D project with dynamic competitive potential, provided specified conditions are met.
For example, the shield may apply where neither party is active nor expected to become active in the same relevant market or innovation space, or in a closely related market or space.
The shield sets out specific structural conditions for different types of overlaps.
For example, where a transaction leads to an overlap between one party’s R&D project and another party’s existing activities, the shield applies if the merging parties do not have a combined market share of more than 40% in the relevant market, and there are at least three other firms with R&D projects with competitive potential similar to those of the merged entity. In the specific case of a start-up acquisition, even where these criteria are not met, the shield can still apply if the acquirer is not the largest firm in the relevant market or a designated gatekeeper.
Practical takeaway
This framework provides important protection for start‑up exits and pipeline‑overlap deals, clarifying when dynamic rivalry is unlikely to be harmed, while preserving effects‑based scrutiny. However, with the conditions for falling within the safe harbor as yet untested, time will tell how easy it will be for firms to rely on the safe harbor in practice. Parties seeking to rely on the shield should plan to substantiate each condition with contemporaneous evidence (pipeline comparators, credible third‑party constraints, and internal documents showing realistic competitive positioning).
Efficiencies: a more generous and dynamic approach
As we discussed at the beginning of this note, the draft Guidelines signal a meaningful recalibration of the EC’s historically restrictive approach to efficiencies (or “theories of benefit” in the new terminology).
The EC introduces a formal distinction between direct efficiencies (e.g., cost savings, quality improvements, and elimination of double marginalization) and dynamic efficiencies (improved ability or incentive to invest or innovate).
Both categories are subject to the same three cumulative conditions: verifiability, merger specificity, and benefit to consumers. However, the dynamic efficiency framework is notably more flexible, accepting benefits may arise over longer time horizons (beyond the current two years) and recognizing that precise quantification may not be possible where investment leads to entirely new products or technologies.
Resilience and sustainability benefits are explicitly recognized as capable of constituting direct or dynamic efficiencies, including gains from increased security of supply, diversification away from unreliable sources, and innovation in clean or sustainable technologies.
Significantly, while sustainability is mentioned as a potential dimension of competition in certain cases, specific dis-benefits to sustainability that arise from the transaction are not called out as a theory of harm. This is important for the coherence of the regime, since output expansion, even of an unsustainable product, can still make a positive contribution to competition.
The draft Guidelines further acknowledge that consumer valuation of quality benefits should be interpreted broadly, encompassing use value benefits, non-use value benefits (e.g., environmental concern) and collective benefits. Collective benefits that accrue to a wider section of society can be taken into account to the extent they benefit consumers harmed by a merger through the internalization of consumption externalities. However, the quantifiability of these types of efficiency is yet to be tested in practice.
Practical takeaway
The draft Guidelines significantly upgrade efficiencies (now framed as "theories of benefit") from a defensive argument to a central and flexible pillar of the analysis. Parties should proactively build and present both direct and dynamic efficiency claims early in the process, including pre-notification, without waiting for a preliminary finding of harm.
The EC’s new approach seems to lower the evidentiary burden on the parties, although the core conditions (verifiability, merger specificity, and consumer benefit) remain. But how this will unfold in practice (and how parties will be required to substantiate their claims) will largely depend on how the EC exercises its discretion and its evolving decisional practice.
Article 21: EC stoutly defends its antitrust jurisdiction in mergers from encroachment by member states claiming “public interest” intervention
The draft Guidelines address, for the first time, the framework under which member states may intervene to protect legitimate interests other than competition, such as public security, media plurality, and prudential rules.
The EC draws a clear distinction between these three recognized interests (which can be pursued without prior notification) and other public interests (which must be notified and approved before adoption). It also clarifies that measures must be proportionate, non-discriminatory, and compatible with other provisions of EU law.
The draft Guidelines introduce a presumption of compatibility for national measures that mirror or implement requirements mandated by EU authorities, including the European Central Bank and European banking supervisors in financial sector deals, authorities acting within the EU foreign direct investment screening framework, and media plurality review bodies acting consistently with European Media Freedom Act recommendations. This is significant in the context of recent tension between the EC and member states over the use of golden power and other national intervention tools.
Practical takeaway
The EC is attempting to “clarify” (i.e., constrain) member states’ ability to intervene in merger control on public interest grounds. It is unclear whether the EC's own guidance will be a strong enough legal basis to do this against a motivated member state. But the attempt is welcome—a clear framework for assessment based on proportionality and non-discrimination is easier to predict and navigate.
In deals that are likely to attract political attention, it is increasingly important to align merger control strategy with parallel regulatory tracks (FDI, sectoral approvals) and to plan communications and timing accordingly.
