Competitiveness has become the organizing principle of the European Union's economic debate. From industrial policy to capital markets, from energy to digital infrastructure, the message from policymakers is clear: the EU must invest more and scale faster.
This political priority is reinforced by tangible institutional signals. The mandate given by President Ursula von der Leyen to the European Commission's competition leadership calls for alignment with the EU's competitiveness agenda.
EU heads of state and government have recently agreed to allow a degree of company consolidation in strategic sectors, starting with telecommunications, to enhance investment and innovation.
European Council President Antonio Costa was explicit: this consolidation must be part of a "social contract," and the ongoing review of the Merger Guidelines — the rules governing how the Commission evaluates mergers in the bloc — should play important role in fostering "true European champions."
The political direction is clear: the new Horizontal Merger Guidelines — covering transactions between competitors in the same market — should adopt a more dynamic approach. The question is whether the Commission's Directorate-General for Competition will follow suit.
The limits of the current Merger Guidelines
EU merger control is designed to assess whether a transaction would significantly impede effective competition. The guidelines define market power as the ability to increase prices, but also to reduce output, choice, quality or innovation.
Yet the analysis remains tilted toward short-term price effects and gives far less weight to dynamic effects on investment, quality and innovation — all crucial to competitiveness. This is understandable: while prices are measurable, investment, quality and innovation are harder to quantify.
However, using short term price effects as the guiding variable in assessing merger operations reflects a form of institutional risk aversion.
In practice, uncertain price effects are often enough to build a case against a merger, whereas uncertain but plausible gains in investment, quality or innovation are discounted as too speculative.
But risk aversion should not be the guiding principle of merger control. At a minimum, the system should aim for risk neutrality — an approach that recognizes that the risk of blocking a merger that could benefit consumers and investment should weigh as heavily as the risk of approving one that could harm competition.
Boosting productive investments
A modern approach to merger control acknowledges that competition is multidimensional.
In capital-intensive sectors such as telecommunications, energy or pharmaceuticals, competition is driven less by marginal pricing than by investment incentives, scale, resilience and long-term capacity.
In telecommunications, the EU's single market is split among nearly 100 mobile operators, with an average of about 5 million subscribers each, while just three national operators serve the U.S., each with well over 100 million customers. This difference in scale is reflected in investment: annual telecom capital expenditure per capita is about €100 in Europe, compared with roughly €230 in the U.S.
A telecommunications operator unable to finance the rollout of 5G infrastructure cannot become a credible competitor — regardless of the number of players in the market.
Another bias shapes how mergers are conditioned. When the Commission identifies concerns but does not block a deal outright, it requires the merging parties to accept remedies — binding conditions designed to prevent the transaction from hampering competition. This often requires the companies to divest part of their business so that a new or smaller competitor can take its place.
The objective is to maintain a certain number of players in the market, on the assumption that more firms automatically mean more competition and lower prices. But in capital-intensive sectors divested assets frequently end up with operators that lack the scale or incentive to invest, creating competitors on paper but not durable competition.
Competition is not about headcount. It is about contestability — the credible possibility that firms can enter, expand or reposition within the market.
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