Europe wants bigger companies to boost its global position. EU industry ministers backed the Commission’s plan to rewrite its merger rules but several warned that the push for scale must not come at the expense of competition and consumers.

Member states have “broadly welcomed” the draft guidelines, with many backing its proposed innovation shield for startups and scale-ups. However, several ministers stressed that the new criteria should “complement, rather than replace, effective competition enforcement and the protection of consumers and SMEs (small and medium enterprises)”.

The debate was the last political checkpoint before the European Commission finalises its first full rewrite of the merger guidelines since 2004. The draft was published on 30 April. Vice-President for Clean, Just and Competitive Transition Teresa Ribera told an OECD conference on September 8 that the final guidelines “will be adopted and published before the end of 2026”.

More room for scale and innovation

Under the EU Merger Regulation, the Commission can block a deal only if it would significantly harm competition, such as by leaving customers with fewer suppliers or higher prices. That test is unchanged.

What is new is that companies can argue, on broader grounds and from the start of a review, that a deal deserves approval because it helps them scale up, invest, innovate or secure supply chains. The guidelines set out how Brussels will weigh those benefits against the harm to competition.

Tommaso Valletti, Professor of Economics at Imperial College Business School, told EU Perspectives in May, that the draft’s approach to weighing harms against benefits “does not create legal certainty. It creates a space for argument”.

That concern surfaced last week, when a number of ministers asked for “concrete analysis of economic benefits for the internal market” and guidance to ensure “legal certainty, predictability and transparency”.

The buyer matters too

The warning that the new rules must not weaken competition mirrors an argument seven countries made in February. In a joint paper, the Czech Republic, Estonia, Finland, Ireland, Latvia, Romania and Slovenia argued that making European companies bigger should not be the main goal of merger policy. “Size in itself should not be the primary objective,” they wrote.

Ireland, one of the seven, now holds the rotating Council presidency and chaired last week’s debate. The presidency’s discussion paper “seeks to focus the debate on how the guidelines incentivise innovation in the internal market while at the same time balancing scaling up with effective competition”, a senior EU diplomat told journalists ahead of the meeting.

Missing from the debate, at least as the Council reported it, is the question of who is doing the buying. The innovation shield is meant to make it easier to approve takeovers of small, innovative companies. But it judges those deals almost entirely by looking at the company being bought, not the buyer. That leaves the door open for large US firms to acquire Europe’s most promising startups.

“The real issue is the identity and incentives of the buyer,” Mr Valletti said in May, warning that large, often American, companies could steadily buy up Europe’s expertise. AMD’s $665 million takeover of Finland’s Silo AI, bought largely for its engineers, is the kind of deal that would sail through the shield.

The final text, due within weeks, will show whether Brussels has dealt with the buyer question, and whether ministers get the clearer rules they asked for.