Mega-mergers: EU Commission wants to pave the way for industrial champions

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The EU Commission has given the go-ahead for a reform of the comparatively strict European merger directives. To this end, it launched a public consultation on Thursday. According to the accompanying information and the detailed questionnaire, the Brussels government institution wants to recognize the technology, telecommunications and defence sectors, including aviation, as areas in which the "European champions" that have been invoked for years should be created. Economies of scale are required there, it is said. If necessary, the EU competition authorities could be more open to consolidation in these sectors in future.

Commission President Ursula von der Leyen (CDU) called on her new competition chief Teresa Ribera from the Social Democrats back in September to "develop a new approach to competition policy". This must "provide greater support for companies that are expanding on global markets".

The Spaniard has now announced that she is aiming for a "comprehensive and ambitious revision of the EU merger control guidelines". The planned amendment would modernize the framework "for assessing the impact of mergers on competition". "Disruptive changes" such as digitalization must be taken into account. Only in this way "can we ensure that our merger control policy continues to serve people, encourage innovation and strengthen Europe's resilience and leadership".

Digitalization as a challenge

In addition to the survey, the Commission has published seven thematic papers in which it explains a broad range of current challenges as well as the legal and economic parameters of its competition policy. These include competitiveness and resilience, market power, innovation, decarbonization, digitalization, efficiency gains, defence and labour law considerations.

The main objective of merger control is and remains "to maintain a vibrant and competitive internal market with dynamic competition", the executive body assures. The requirements for mergers enable companies to "grow, innovate, invest and offer better products". At the same time, they prevent "the concentration of market power in the hands of one or a small number of companies", which could harm consumers and other companies and reduce productivity and economic growth in the EU.

The consultation runs until September 3. Following this, it is likely to take at least another two years before the reform is finalized. At the same time, France and Germany are trying to revive their relations and make a new push to strengthen competitiveness in the face of growing concerns about technological and security dependency, particularly on the USA and China.

Merz and Macron position themselves

"We will work to establish competition rules at EU level so that world-class European champions can emerge in key sectors," wrote French President Emmanuel Macron and the new German Chancellor Friedrich Merz (CDU) in a joint opinion piece in the newspaper Le Figaro on Thursday. The tenor is familiar: last year, Macron and Merz's predecessor Olaf Scholz (SPD) called for an adjustment of EU competition rules to pave the way for mega-mergers.

"The direction is clear: the current focus on short-term effects and prices must change to a more holistic view," Gerwin Van Gerven, antitrust law partner at the law firm Linklaters in Brussels, welcomed the exploratory talks to the Politico portal. Alessandro Gropelli from the telecommunications lobby Connect Europe also praised the change in political perspective: the sector is "capital-intensive and we urgently need economies of scale to boost growth and competitiveness again".

Consumer advocates counter

In principle, the Commission has been working for over ten years to strengthen individual European companies – for global competition, particularly in the infrastructure sector – . In 2019, the CEO of Deutsche Telekom, Timotheus Höttges, described it as a consequence of failed regulatory policy that the standard European telecommunications company serves one million customers, while the comparable figure in China is 400 million. Former central bank chief Mario Draghi recently proposed reducing the fragmentation of the European telecommunications market in his competition report. The high number of providers in Europe makes it difficult to invest in important infrastructures such as 5G and 6G.

The Commission should not weaken merger control in a way that would harm consumers, argues Vanessa Turner, Senior Competition Advisor at the EU consumer protection association Beuc. The telecommunications sector is a good example of how politicians are under massive pressure from established companies to allow greater market consolidation. The justification that this would lead to higher investment in infrastructure remains vague.

(akn)