Frankfurt: European competition policy is in the middle of a long-running debate about its relationship to industrial policy, and the merger control framework sits at the centre of that debate. The decisions taken under the European Merger Regulation continue to shape large parts of the corporate landscape, and recent cases have surfaced tensions between the consumer welfare standard that has been the policy’s organising principle for decades and the strategic considerations that some member states believe should weigh more heavily. Frankfurt, as one of the largest financial centres of the bloc and as the host of several pan-European corporate headquarters, has been an active site of this debate.
The Commission’s approach has been to insist on the integrity of the consumer welfare standard while incorporating dynamic considerations more explicitly. Recent revisions to the horizontal merger guidelines have given greater weight to innovation competition, to entrenchment of dominant positions in digital markets and to the effects of mergers on labour markets. The framework remains analytical rather than political in its formal structure, but the cases that attract the most attention are those that test the boundaries of the framework.
The European champions debate has resurfaced with particular force in recent years. Proponents argue that consolidation is necessary to allow European companies to compete with global rivals at the scale required in sectors such as telecommunications, banking, technology and defence. Critics argue that consolidation in the European market would harm domestic competition without delivering global competitiveness, and that the evidence from previous waves of consolidation is at best ambiguous. The empirical literature offers support for both positions depending on the sector and the time horizon considered.
Banking provides a useful test case. The European banking sector has remained more fragmented than its American counterpart, with a structure that reflects national markets and the historical role of universal banks in domestic economies. The case for further consolidation has been made by several large banks and by some policymakers, while supervisors have been more cautious about systemic risks of further concentration. The recent transactions that have advanced have been a mix of national consolidation and selective cross-border acquisition, and the regulatory architecture has been refined to accommodate the integration of cross-border banking groups.
The digital sector raises distinct questions. The Digital Markets Act has introduced ex ante obligations for designated gatekeeper platforms, addressing some of the concerns that merger control was struggling to handle in fast-moving digital markets. The interaction between the DMA and traditional merger control is still being worked out, particularly in cases involving acquisitions of companies that are not gatekeepers but operate in ecosystems shaped by them. The Commission has used Article 22 referrals to capture transactions below national notification thresholds in cases of concern, though the Court of Justice’s recent ruling has narrowed the legal basis for this practice.
State aid policy has moved closer to industrial policy in several recent decisions, particularly those involving the Important Projects of Common European Interest. The framework allows substantial public support for cross-border industrial projects in semiconductors, batteries, hydrogen and other strategic technologies. The competition concerns are managed through specific design conditions, but the cumulative effect of expanded state aid has changed the playing field in ways that distinguish the current period from the more restrictive approach of earlier decades.
The next phase will test whether the framework can absorb these pressures without losing analytical coherence. The risk is that adjustments accumulate into a system whose principles are no longer legible to firms, courts or citizens. The opportunity is to articulate a renewed framework that combines the discipline of competition policy with the strategic considerations that the moment requires.
