On 30 April 2026, the European Commission published draft revised merger guidelines, representing a comprehensive update to the EU merger control framework.
The draft reflects structural shifts over the past two decades, including the rise of digital markets, geopolitical pressure on supply chains, and a greater emphasis on innovation, sustainability, and resilience. It recognises that consolidation can positively contribute to European competitiveness and investment capacity, and that mergers facilitating cross-border integration, global expansion, supply chain security, critical infrastructure and defense readiness may be viewed favorably, provided competition within the internal market is preserved. The Commission draws a clear line, however, between pro-competitive scale and consolidation that primarily entrenches domestic market power, a distinction subject to case-by-case assessment.
The draft notes that the Commission is open to substantiated evidence of merger‑specific efficiencies capable of outweighing potential competitive harm. Counterfactual arguments may prove decisive for securing merger clearance. In more complex cases that raise anti‑competitive concerns, collecting and substantiating such evidence at an early stage of the merger review process is important, bearing in mind that internal documents, prior conduct, and past transactions will be closely scrutinised and may support or undermine the case for the transaction.
The consultation period runs until 26 June 2026, with the final guidelines expected in Q4 2026.
Overview of Key Changes
Market Power
The draft guidelines confirm market power as the key organising concept of merger assessment, capturing the ability of undertakings to exercise competitive influence independently of market forces across both price and non-price parameters such as quality, innovation, investment, and sustainability.
The Commission suggests a structured market share classification: “low” below 10%, “moderate” from 10% to just under 25%, “material” from 25% to just under 40%, “high” from 40% to just under 50%, and “very high” at 50% or above. These categories serve as analytical reference points only; the overall competitive assessment remains holistic, taking into account competitive intensity, entry barriers, and market dynamics.
Innovation Shield
Perhaps the most concrete novelty in the draft is the introduction of the innovation shield, a safe harbour specifically designed for acquisitions of small innovative companies and startups. Where defined conditions are met, such transactions are, in principle, unlikely to raise competition concerns.
The Commission is unlikely to prohibit a merger in the following circumstances:
- No meaningful overlap in the same market, innovation space, or closely related market.
- An R&D project overlaps with an existing market, and the combined market share does not exceed 40%, with at least three independent competitors with comparable R&D projects remaining.
- Two R&D projects overlap, with at least three independent competing innovators remaining.
- Innovation capabilities overlap, with a combined share not exceeding 25% in the relevant innovation space.
- In startup acquisitions, the acquirer is neither the largest firm in the relevant market nor a designated gatekeeper under the Digital Markets Act.
New Theories of Harm Around Innovation and Investment Competition
Beyond the innovation shield, the draft sets out three distinct theories of harm relating to dynamic competition: the discontinuation or delay of overlapping R&D projects or pipeline products post-merger; a reduction in the overall pace of industry innovation through combined innovation capabilities; and the elimination of investment or expansion plans as a competitive force. These theories reflect a broader focus on how mergers may affect future innovative incentives and competitive pressure over time.
Entrenchment of Dominant Position
A new standalone theory of harm addresses the entrenchment of a dominant position, with relevance for large technology companies operating across interconnected digital ecosystems. A concern may arise where a merger allows a dominant company to acquire assets, such as data, intellectual property, or key distribution channels, that further strengthen its market position and reduce contestability over time, even where no current competitor is directly eliminated.
Digital Markets
Algorithmic pricing tools, privileged access to data, and strong network effects are identified as entry barriers that can amplify competitive harm in digital markets. The risk of market tipping, where a platform’s lead becomes self-reinforcing and forecloses competition, is explicitly addressed.
Sustainability
Sustainability is recognized as a parameter of competition, relevant to both merger assessments and merger efficiencies. Efficiency claims may expressly refer to sustainability benefits, including contributions to the transition to low-carbon technologies, with a flexible approach to the relevant time horizon provided such benefits are merger-specific and sufficiently substantiated to counteract the merger’s anticompetitive effects.
Labour Markets
The draft guidelines address competition in labour markets. A merger may raise concerns where it reduces competition between employers, potentially resulting in lower wages, worse working conditions, or reduced worker mobility. Transactions involving specialized workforces or concentrated local labour markets may require a dedicated labour market analysis.
Member State Measures
A new standalone section covers when and how Member States may intervene in EU-dimension mergers to protect legitimate public interests such as public security or media plurality. Measures must be genuine, proportionate, and non-discriminatory, and may not serve as a means of protecting national economic interests under a public policy label.
Efficiencies: Greater Weight, Earlier Engagement
The draft signals that demonstrated efficiencies will carry greater weight going forward. The Commission distinguishes between direct efficiencies, such as cost savings and economies of scale, and dynamic efficiencies that improve the merged entity’s ability or incentives to invest and innovate. Consumer benefits encompass not only lower prices but also improvements in innovation, sustainability, and resilience. Parties are encouraged to present efficiency arguments early, ideally before formal notification.
Outlook
The draft guidelines broaden the analytical framework for EU merger control without altering its fundamental objectives. The greater emphasis on dynamic competition, non-price parameters, European competitiveness, and efficiencies creates both new risks and opportunities for transaction parties. Businesses planning M&A activity in Europe may benefit from engaging with the new framework at an early stage of deal planning.
