Where is Europe’s Google or Tesla, its Alibaba or BYD? Amid the angst over the continent’s failure in recent decades to give birth to corporate world-beaters, a finger is often pointed at the EU’s rigorous merger rules. In his 2024 report on reviving competitiveness, former European Central Bank president Mario Draghi argued — among many other ideas — that EU competition policy should take more account of the need to stimulate innovation and create businesses able to compete globally. As the FT has reported, Brussels is now planning its biggest shake-up of its merger code for decades. But competition policy can only do so much.
The last big reform in 2004 put protecting consumers from soaring prices at the heart of merger policy. Vigorous intra-EU competition was prioritised as the best way to ensure dynamism. But the global context has been transformed. An overriding focus on price is less appropriate in the new world of powerful tech platforms and AI “hyperscalers”, which puts a premium on scale and huge investment in research and infrastructure. As proponents of reform warn, EU companies risk being structurally disadvantaged against US and Chinese rivals. Geopolitical risk also makes it more vital to secure supply chains, energy and materials.
There is a danger, though, of excessively loosening merger guidelines that were long seen as among the most successful parts of the EU’s regulatory regime. Size and consolidation should not become an end in themselves; bigger companies do not automatically invest more — having achieved market dominance, there can be a temptation to exploit their position. But draft guidelines drawn up by the European Commission, though subject to change through wrangling by member states, appear to strike a sensible balance.