"Large companies are not always the solution, especially if they reduce options instead of increasing them," said the Executive Vice-President of the European Commission, Teresa Ribera, last autumn at a conference dedicated to Competition Law. In reality, the Spanish official was talking about the revision of the merger guidelines that she has to present in the coming weeks and which could represent one of her greatest legacies during her community mandate.
A measure that hides in the background a clash between two ideological families of European competition. A duel in which Ribera could also be willing to withstand the pressure from President Ursula von der Leyen, who wants to open the filters to allow more business mergers under the justification of “resilience” understood in the geopolitical framework.
France pushes the debate
According to what Demócrata has learned, after an orientation debate among the European commissioners, the battle, days before the first drafts are presented, is currently in the technical departments of the community executive. Ribera wants the revised guidelines to provide “clear and direct guidance, including concrete criteria on when scale can benefit the Single Market”. But the tension lies in the fact that some legislators fear that resilience will end up eliminating essential suppliers and forcing customers to opt for riskier alternatives. “Our objective is simple: the guidelines must provide companies with the clarity they need to pursue their industrial ambitions, while preserving the competitive market,” says the commissioner.
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The main driver of greater flexibility in the new merger models that Competition would be encountering at the Schuman roundabout would be the Frenchman Stéphane Séjourné. The Vice-President and head of the community Internal Market is in favor of Brussels allowing national alliances and ultimately opening the door to national champions that operate as European champions. Supporters of this reform argue that merger control must positively recognize when a merger strengthens resilience.
This school of thought argues that larger companies have greater financial capacity to invest in the stability of supply chains and absorb market shocks. In these conversations, some stakeholders who participated in a consultation process that the Commission carried out last summer suggested that vertical mergers can improve supply security by giving companies better control over their critical inputs.
In an international context marked by volatility and uncertainty, those who are in Séjourné's orbit, among them Von der Leyen herself, assure that in sectors such as telecommunications, consolidation allows necessary investments in cybersecurity and in the physical robustness of networks.
Contain the enthusiasm
However, all these good wishes do not calm the concern of a good part of the Directorate-General for Competition of the Commission, which fears that the opening of the model will end up resulting in an uncontrollable outcome with direct repercussions on the citizenry.
Some competition authorities of the Twenty-Seven and consumer organizations have warned during this process of some dangers detected when prioritizing scale over competition. They warn that excessive consolidation can create systemic risks. If the market depends on one or two dominant operators, a shock affecting those entities could paralyze the entire system, making the economy more “fragile” instead of resilient.
In this regard, these national authorities conveyed to the Executive that competitive markets with multiple providers are by nature more resilient, since, in their opinion, diversity allows other actors to take over if one fails.
Thus, in Brussels there is also an additional concern. It is feared that the idea of including public policy objectives such as resilience in merger control could politicize technical decisions and generate legal uncertainty. Conversations are advancing in the community capital, to the point that this Wednesday Ribera held a meeting with the competent MEPs to exchange views before the presentation of the final text on the new guidelines. After this meeting and the response generated by the co-legislators, the Commission, in response to questions from Demócrata, has stated that it does not have a concrete assessment.
When designing the update of these measures, the European Commission services have identified specific sectors where resilience and security of supply must be evaluated with special attention. On the one hand, energy, in relation to electricity and renewable grids, given geopolitical volatility, as in the case of the war in Iran and the closure of the Strait of Hormuz. On the other hand, the health sector is also valued, especially regarding critical medicines; advanced technologies, such as semiconductors; and telecommunications as a backbone of the digital economy and defense.
"Resilience can also acquire greater relevance in our evaluation, in those cases where it is important for the market or for consumers," explained the vice president in October when assessing the context of Russia's war against Ukraine or the "uncertainty surrounding global trade." In her opinion, these events demonstrate the "clear need for reliable and resilient supply chains".
Gaining scale yes, control also
Their team aims to demonstrate when mergers improve the resilience of the single market. For this reason, they cite as an example those vertical mergers that guarantee access to critical inputs or foster investment in secure infrastructure.
Ribera maintains a similar position to that of other veterans of European Competition who defend the complexity of creating European champions precisely through national champions. For this reason, in the corridors of the Belgian capital, it is expected that the Spanish official may challenge the intention of the French and German leaders and score another point in defense of control over traditional European merger rules.
Until now, the objective of community regulations has been to preserve a competitive internal market, seeking for companies to offer innovative, affordable, and high-quality products. The philosophy followed was to allow, on the one hand, companies to gain scale and be able to invest, preventing the excessive accumulation of market power in the hands of a few from ultimately harming productivity. In the Commission, they explain that merger control serves to evaluate whether a concentration of companies could “significantly impede effective competition”. If a merger is harmful, the executive can censure it or demand remedies to correct competition problems.
The calendar remains
European sources confirm to Demócrata that, for the moment, the presentation date for this dossier scheduled for April is maintained. A delay in the initiative would mean a new clash between Ribera and Von der Leyen, who are already experiencing a complicated relationship after measures such as the environmental omnibus or the German's latest nuclear turn.