Efficiency defence 2.0: Do the draft Merger Guidelines mark a new dawn for substantiating efficiencies?

On 30 April, the European Commission published its long-awaited draft of new Merger Guidelines. In this article, we discuss perhaps the most eye-catching amendment: the Commission’s revisited approach to the assessment of efficiencies.

Efficiencies in EU merger control to date: a lost cause?

In EU merger control, a merger can be approved if the parties demonstrate that merger-specific efficiencies – such as cost savings or innovation gains – are likely to benefit consumers and outweigh any resulting harm to competition. However, to date, efficiencies have played a limited role and have rarely been decisive in securing clearance. The conventional view is that authorities have applied a high standard of proof when assessing efficiencies. Indeed, while merger notifications would often allude to the pro-competitive nature of the merger, there are relatively few mergers where the parties have presented any significant evidence to substantiate the claimed efficiencies. Where efficiencies have been reflected in authorities’ decisions, they have taken the form of cost efficiencies that feed into prices, thus directly offsetting the predicted adverse price effects.

As such, the Commission’s draft Merger Guidelines have been welcomed with cautious enthusiasm, with some commentators alluding to a paradigm shift in the EU merger control. Indeed, the Commission not only introduces new concepts – such as ‘the theory of benefit’ – but is also explicit in stating that ‘demonstrated efficiencies will play a key role in the assessment of mergers going forward’.[1]

Thus, the draft Merger Guidelines can be interpreted as a call for an increased, timely engagement on efficiencies in return for what looks like a more symmetric treatment of efficiencies and harms. It is less clear, however, whether the increased willingness to engage with efficiencies will open the floodgates for successful efficiency arguments. Based on established case practice and economic research, should we expect a lower bar for substantiating efficiencies?

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[1] Draft Merger Guidelines, para. 291.