What was meant to be a modernised merger rulebook built for the age of geopolitics and industrial scale may still leave Europe exposed to the systematic acquisition of promising European companies by large US incumbents. The European Commission’s newly unveiled revised guidelines do not appear to meet the ambition they set out to address.
The guidelines, published on April 30, reflect a Commission divided on what merger rules should acomplish. “The result is a text that sounds new, but operationally changes little beyond consolidating recent decisional practice,” said Tommaso Valletti, Professor of Economics at Imperial College Business School. “It is useful, but hardly transformative,” he continued.
The central divide is between “the broader Commission pushing for an industrial policy lens (typically, pro large incumbents), and the Directorate-General for Competition (DG COMP), which is holding the line”, said Valletti.
It essentially says: “We will weigh things that are difficult to compare, using discretion.” This does not create legal certainty. It creates a space for argument. — Tommaso Valletti, Imperial College Business School
Representing the broader Commission is president Ursula von der Leyen, who has pushed for a rulebook that enables European champions to emerge. Pushing back is Teresa Ribera, the Executive Vice-President responsible for competition policy, who has consistently argued that the real obstacle to European scale is single market fragmentation.
But European mergers do indeed face a serious hurdle. Just maybe not the one being addressed. More than half of the capital that European AI startups receive in growth-stage funding comes from foreign — predominantly American — investors. And Europe’s most significant AI exits have consistently gone to US acquirers: DeepMind and Silo AI for example.
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Who benefits, who decides
In a significant procedural shift, the new guidelines require companies to front-load their arguments about why a deal is good for investment and innovation. But the Commission still decides how to weigh those arguments — and the guidelines give no clear rules for how.
The risk is not just losing a small competitor. It is the systematic absorption of European capabilities by large (often US) incumbents. — Tommaso Valletti, Imperial College Business School
“The key passage on balancing harm and benefit is extremely open-ended, almost vacuous,” Valletti claims. “It essentially says: ‘We will weigh things that are difficult to compare, using discretion.’ This does not create legal certainty. It creates a space for argument.” A space which benefits those with more resources to navigate: incumbents.
A win for American incumbents
On acquisitions of nascent rivals — a firm that threatens an incumbent — the guidelines introduce an ‘innovation shield’: a set of safe harbour criteria designed to protect deals involving small innovative targets. But the criteria focuses “on the wrong side of the transaction”, said Valletti. Almost entirely on the characteristics of the target, its market share, the number of comparable R&D players remaining, its competitive overlap with the buyer.
“The real issue is the identity and incentives of the buyer,” Valletti said. “The risk is not just losing a small competitor. It is the systematic absorption of European capabilities by large (often US) incumbents,” he continued.
The US Advanced Micro Devices (AMD) did not buy the European Silo AI for its products. It bought 300 engineers, half of them with PhDs, and a decade of Finnish AI expertise for $665 million. This would have sailed through the Commission’s new innovation shield.
“The guidelines do not really grapple with this dynamic,” he said. “And that is a missed opportunity.”
The public consultation on the draft closes on June 26, with a stakeholder workshop scheduled for June 10. The Commission is targeting final adoption by the end of 2026.
