The European Commission has undertaken its broadest review of merger policy in 20 years. It
published the new draft Merger Guidelines on 30 April 2026 and started a public consultation on
them, with the final version expected before the end of 2026. Though not legally binding, the
resulting guidelines will determine how the Commission assesses future cases in practice.
“The new Draft Merger Guidelines are a genuine advance,” says Volker Nocke. “The Commission
explicitly incorporates resilience and geopolitical risk as relevant factors in merger assessment. But
some important issues are incomplete, notably, guidance on how to assess the cost and demand
shifts that reshape the competitive landscape. These gaps could lead to systematic errors: the
approval of mergers that should be blocked, and vice versa. Finalizing the guidelines is an
opportunity to correct that.”
Assessing cost increases caused by tariffs or supply disruptions
Recent theoretical results by the authors show that an adverse industry-wide cost shift — the kind
caused by tariffs or supply-chain disruptions — raises market concentration but reduces margins
and thereby lowers the likelihood that a horizontal merger of two competitors will harm
consumers. Tightening merger policy in anticipation of such a shift is therefore the wrong response.
Instead, the combination of two large competitors, for example in car manufacturing, is more likely
to be justified in the face of adverse cost or demand shifts.
Assessing AI-driven productivity gains and falling costs
The opposite holds when conditions improve. An industry-wide productivity gain or quality
improvement driven, for instance, by the diffusion of AI, widens margins and increases the harm a
merger can inflict. This calls for a stricter merger policy in industries that are expected to strongly
benefit from AI adoption, even as concentration falls.
The uncertainty dilemma
However, future developments are typically hard to predict with certainty and require an
assessment of the underlying uncertainty, an issue on which the current draft guidelines are
completely silent. “When the direction or magnitude of the shift is itself uncertain, our results show
that the appropriate policy response depends on the objective that the competition authority
pursues,” explains Nicolas Schutz. “A more conservative policy that is concerned primarily with the
worst developments, tends to call for a more lenient merger policy. By contrast, if the authority
values both the upside of favorable shifts and the downside of adverse shifts alike, then greater
uncertainty calls for stricter merger control.”
“In today’s geo-political and trade context, EU merger decisions have to account for these
dimensions,” concludes Martin Peitz. “The new Merger Guidelines must address them within a
coherent framework. Our work lays the groundwork.“