In all of Europe, citizens are asking themselves how the continent can remain prosperous without sacrificing the fairness that has long defined its social market economy. Companies have a related question: how they can invest more, grow faster, and compete in a world shaped by American scale and Chinese state-backed industrial strength.
These two questions are already inseparable. Europe cannot defend its model of social welfare without greater wealth creation, but it also cannot safeguard it by abandoning the rules, predictability, and principles that underpin the success of the single market.
“We need a modernised EU competition policy that supports our broader goals of competitiveness, but also social fairness and security”
The competition policy is at the heart of this issue. We have to do more to help companies scale up in global markets while at the same time enabling European businesses and consumers to reap all the benefits of effective competition. In other words, we need a modernised EU competition policy that contributes to our broader aims of competitiveness, but also to social fairness and security.
The European Commission has today published the first draft of the new merger directives for public consultation. These guidelines set out how we evaluate mergers and acquisitions that could affect competition and welfare in the EU. The central idea of the new draft is clear: Europe must take into account a more complex world when assessing transactions, but keep competition at the center of every decision.
That balance matters. Some have argued that Europe should simply relax merger control so that European companies can become larger. Others worry that any change could undermine the single market and innovation. Neither position gets to the heart of the matter.
The draft guidelines do not aim to loosen the rules, much less to give free rein. Instead, they aim to incorporate the internal and external realities in which EU companies operate into the analysis. For example, when their research and development budgets are dwarfed by the state aid enjoyed by global competitors, or when geopolitical use of supply-chain vulnerabilities by a third country could be leveraged against the Union. It is also designed to provide clarity to businesses on how they can support their arguments about the long-term positive effects of a merger on investment, innovation, and European resilience to shocks, from cyber-attacks to pandemics.
When Europe’s merger rules were last comprehensively revised, in 2004, the global economy was very different. Supply chains were less global and more stable. Geopolitical tensions were lower. Capital markets and innovation dynamics worked very differently. And digitalisation had not yet accelerated the pace at which industries can emerge or disappear.
Today, resilience matters more. Innovation cycles are faster. Clean technologies require greater and longer-term investments. Security concerns increasingly shape economic policy. A merger that in the past would have been judged mainly by its short-term effects on prices must now also be evaluated for its long-term impact on European innovation, investment, and supply security, as well as how all of this affects customers.
The draft guidelines respond to this expanded reality by broadening the focus of the analysis. It makes it clearer that the European Commission must take into account long-term investment incentives, capacity for innovation, resilience, and the evolution of markets over time when evaluating a transaction, because all of these elements affect customers’ interests. This does not mean accepting vague promises from merging firms. On the contrary, companies will have to provide credible evidence that a merger that raises concerns in some respects can also deliver benefits that reach consumers and the economy as a whole.
“We will be open to authorising a deal when the long-term benefits to consumers outweigh the short-term harms”
When companies have good arguments to show that their merger and acquisition activity can advance the public welfare, we will listen. We will be open to authorising a deal when the long-term benefits to consumers exceed the short-term harms, for example by driving European innovation forward.
We want companies to drive deals that can help deepen the integration of the European internal market. When companies team up to create a new operator that reduces the EU’s reliance on other global players, this benefits both the internal market and European consumers.
Let us be clear: this is not deregulation. It is modernisation. Strong markets are not rule-free markets. They are markets governed by clear and predictable rules that reward efficiency without allowing the accumulation of power that could be abused.
Effective competition remains the backbone of Europe’s merger control. Protecting competition in the modern economy means looking not only at the market as it exists today, but also at the market that could emerge tomorrow. This is especially important for young companies.
Europe wants more startups to become growing enterprises, and for more growth-stage companies to remain European. Our revised approach can give greater certainty to innovators whose value may not be fully reflected in current market shares. It can also help identify cases in which a large firm acquires a smaller competitor not to develop its ideas, but to neutralise a future rival.
“Europe will not create globally competitive firms simply by changing the way it reviews business transactions”
However, the merger policy alone cannot solve Europe’s competitiveness problem. Europe will not build globally competitive firms solely by changing how it reviews business transactions. If European companies sometimes struggle to match the scale of their foreign rivals, it is often because they have to expand into twenty-seven partially connected markets rather than into a truly unified single market. Capital remains fragmented. Savings are abundant, but too often they are not channelled into productive investment within Europe. Telecommunications remain cut by national borders. Energy systems are too disconnected. No merger directive can substitute for the full integration that is still missing.
The founders of the postwar European project understood that markets needed openness and rules. That intuition remains valid. In a more uncertain world, Europe’s strength still lies in a market of 450 million people governed by the rule of law, not discretion or arbitrary decisions. The task now is not to weaken that model but to update it. By modernising merger control and preserving competition, Europe can show that prosperity and fairness continue to go hand in hand, and that our single market remains our strongest bedrock in an increasingly global, challenging era.
