The governments of Finland, Ireland, the Czech Republic, Estonia and Latvia have formally warned against changing EU merger law to make regulatory scrutiny of corporate deals easier, according to a note that will be discussed at an EU ministers' meeting on Feb. 26.
Their intervention comes as the European Commission prepares a revision of merger rules that date from 2004 and plans to publish proposals for consultation in April. Sources have indicated the Commission aims in part to encourage pan-European mergers.
In the document, the five countries argue that Europe does not need to dilute its competition regime to create so-called European champions because the current framework already allows mergers where the economic evidence justifies them. They caution against using size as the principal objective of merger policy. As the note puts it: "Size in itself should not be the primary objective."
The note advances a preference for firms that prosper through operational gains rather than special regulatory carve-outs. It says member states should pursue "undertakings that succeed through efficiency, innovation and fair competition instead of exemptions or special treatment." This framing stresses competitiveness based on market performance instead of legislative exceptions.
Responding to arguments, particularly from some European telecom operators, that larger companies would encourage higher investment, the five countries side with regulators who find scant evidence of such an effect. The note states: "The empirical link between higher concentration and stronger investment incentives in telecom markets is at best inconclusive and should be analysed on case-by-case basis."
The signatories also flag concerns about resilience. They say assertions that larger operators would guarantee secure supply chains may have the opposite effect by concentrating dependence on a small number of suppliers and reducing overall resilience.
On that point the countries recommend a different policy route: "If strengthening resilience and secure supply chains is considered to require additional regulatory measures, these should be pursued through sectoral or industrial policy instruments rather than through changes to competition legislation."
As the Commission debates revisions to a framework established in 2004, this formal pushback from five member states highlights continuing divisions within the EU over how best to balance industrial policy goals, national concerns over competitiveness and the integrity of competition law.
Key points
- Five EU states argue against loosening merger rules, asserting current law can support larger firms where justified.
- The countries contest claims that larger telecom operators automatically lead to greater investment and warn of risks to supply chain resilience if market concentration increases.
- Sectors most directly affected include telecoms and industries subject to competition policy and industrial strategy.
Risks and uncertainties
- Uncertainty over how the Commission's April proposals will address calls to facilitate pan-European mergers could affect M&A activity in telecoms and other regulated sectors.
- Claims that larger market concentration drives investment remain inconclusive, introducing risk for policymakers who might rely on that assumption when shaping merger policy; telecom markets are specifically highlighted.
- Efforts to bolster supply-chain resilience via competition-law changes could unintentionally increase dependence on fewer suppliers, presenting a risk to industrial and telecom supply chains.