Speech by EVP Margrethe Vestager at the Merger Regulation 20th Anniversary Conference

The Merger Regulation at 20: still standing tall

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It is my great pleasure to welcome you today to celebrate 20 years of the 2004 Merger Regulation.

The last 20 years made a real difference. Merger enforcement has greatly developed in the EU, with the Merger Regulation at its root. The Merger Regulation has stood tall for all this time, and like every tall tree it caught its fair share of wind.

But it has shown that it can bend without breaking, even in the strongest of storms.

The Merger Regulation has served businesses and consumers and the European economy as a whole very well. By protecting competition in the Single Market. By keeping European markets fair and open.

Effective merger control is crucial to European businesses.

I said this when I became Competition Commissioner ten years ago, and I am even more convinced of it now: our merger enforcement sets the stage for European companies to rise up and become champions in their fields.

First, merger control invigorates the Single Market. Preserving competition pushes companies to invest, improve efficiency and innovate. Merger control helps keep supply chains diverse, to avoid dependencies from a few strong players, and it guarantees that businesses have access to top-notch resources at fair prices. And so it contributes to the resilience of the EU economy.

Second, merger control gives businesses of all sizes a fair shot at getting the most out of such a large home market, whether they are a start-up, an SME, or a multinational conglomerate. It provides all businesses with a fair chance to make it.

The Merger Regulation offers companies a stable and predictable framework that allows them to grow and scale up through mergers and acquisitions. It is an efficient regime. More than 90% of mergers that we review are cleared. And we do so very quickly, with very little red tape for businesses.

And let's put the record straight on the so-called “European champions”. Merger control rules do not stand in the way of procompetitive consolidation. In fact, we have given the green light to many mergers that directly produced truly global champions based in Europe. The examples in recent years are many, from the creation of Stellantis, to the consolidation of Veolia and Suez, or of Siemens and Gamesa. When competition problems arise, most companies are able to solve them by offering remedies. In some cases, commitments strengthen competition from other European players. This is what we recently saw in Novozymes/Chr. Hansen, a merger that created a European champion in bio-solutions, and led to the divestiture of part of the parties' business to another European biotech company. Or in Alstom/Bombardier, where the divestiture of a business to the Spanish manufacturer CAF benefits the whole European industry, at a time where demand for trains increases. We thus contributed to reinforcing the entire sector in the EU.

I agree with Mario Monti, whom we are delighted to have with us here today. One does not foster competitiveness by abandoning it within the EU in the hope that European monopolies will better compete with rivals outside the EU.

Global champions are competitive abroad when they are pushed to being efficient, lean and innovative because they face competition at home.

Competitiveness within the Single Market translates into external competitiveness. But if you shield large companies from competition at home, you risk wearing down the fabric of the European economy as a whole. European suppliers, customers, challengers and end-consumers of these “champions” would pay the price, with less innovation, higher prices and lower quality of service. The European economy as a whole would become less competitive, suffer weaker growth, and put people out of work.

So yes, effective merger control fosters competitiveness. And don't just take my word for it. We have asked a consortium of economic experts to examine the state of competition in Europe. We will announce the full results of their economic study, and our own work on this issue at the end of June. But as far as merger control is concerned, the findings clearly show that weakening our rules would reduce the EU's competitiveness.

Other global powers understand this. The US President has issued an executive order aiming to strengthen US competitiveness. The country's agencies have recently adopted new merger guidelines that open the door for bolstered merger enforcement. Legislative reforms in Canada and the UK are also reinforcing merger rules there to boost the competitiveness of their economies.

We are celebrating the twentieth anniversary of the 2004 Merger Regulation. The Regulation built on the merger control system created by the 1989 Merger Regulation, 35 years ago. So why has the Merger Regulation stood the test of time?

Because its framework has proved to be both stable and agile. The 2004 reform changed the substantive assessment from a dominance test to whether a merger lessens competition. This boosted the merger regime's ability to tackle new challenges whenever needed. Looking back at the past decade, we were able to respond to new economic trends that we had to face in quick succession: the rise of digital ecosystems, zero-price markets, low- or no-turnover targets with immense competitive potential, green innovation competition, and now the AI revolution.

The 2004 Merger Regulation has kept step with these trends. Trends that matter to society and to our economy. So how did we adapt?

First, we've always taken a broad view of consumer welfare in the EU. For us consumer welfare essentially means protecting competition. We ensure competitive outcomes to the benefit of consumers. Not just end-consumers, but also large and small companies that also act as consumers in their daily business and suffer greatly from competition harm. This standard therefore applies to all parameters of competition that a merger can affect: price, but also innovation, choice, quality.

Innovation, in particular, has become a focal point in our merger enforcement. Two decades ago, in most industries, innovation shaped competition only ten or twenty years down the line. Nowadays, in many markets, innovation can impact competitive dynamics within a couple of years, if not months.

This sharpened our focus on innovation and led us to develop innovation theories of harm. We adapted the assessment to capture risks to innovation whether research takes place decades before reaching the market, or is incremental to a market presence. And we have done so effectively not just in tech and digital, but also in pharma and basic industries.

The second area of change concerned digital markets. When the digital revolution took off, we saw that digital mergers often involved firms that are only active in related markets, not head-to-head competitors.

We saw that interoperability, access to data and technology, the value of data, network effects, the notion of ecosystems, were key issues if we wanted to keep competition in digital markets fair and effective. And that mergers giving too much power to one player could damage competition for all businesses operating within or at the margins of the dominant player's ecosystem.

We relied on our practice of reviewing what we call “conglomerate” mergers. Few agencies in the world had a comparable track record in this area. But because we were able to tap into a consistent body of enforcement, we were often the first or even the only agency to intervene against certain mergers in recent years.

The third area concerns oligopolistic markets. In keep with the 2004 Merger Regulation's mandate, we have not hesitated to intervene against competitive harm other than dominance.

The point of the change of the substantive test in 2004 was that mergers between oligopolists can do just as much competitive damage as in markets where one firm acquires market power. That is why we have taken action in several so-called “gap” cases, for example in the mobile telecoms sector, over the last ten years. We have all followed the CK Telecoms litigation with various degrees of anxiety. And in the end, our action in this sector won the backing of the Court.

Some argue that telecom companies in the EU should be allowed to merge within national markets to boost investment, even at the cost of higher prices, less choice or lower quality for consumers. I don't agree: no evidence suggests that more concentrated national markets lead to better outcomes. And certainly, consolidation at the national level would not lead to the creation of pan-European players. To the contrary, it would lead to less competitive national markets and to a more fragmented Single Market.

The best legal instruments are those that allow enforcement to modernize without changing legal texts. The Merger Regulation has allowed us to do so extensively.

Take our simplified merger procedures, for example. We've recently made them even simpler, to cut red tape for businesses and to let us focus on the cases that really matter. Or look at our new Market Definition Notice, where we stayed True to the core principles that made it so valuable, while making updates to keep up with the changing landscape of the market.

And then there's the rethink of our Article 22 referral policy. We've adjusted our approach to referrals to address the occasional flaw of a turnover-based system. As you know, the jury is still out on whether we will be able to follow through. We are eagerly awaiting clarification from the Court in the Illumina/Grail case.

But I am convinced that our approach to Article 22 strikes the right balance. Obviously, we are not engaging in a power grab. Article 22 simply empowers Member States to refer any potentially problematic transaction, and we have given that provision its full effect.

By doing so, we avoided introducing new notification thresholds at the EU level, which would unavoidably create more burden for businesses and for us.

Our enforcement practice over the last couple of years clearly shows that the possibility of such referrals does not create legal uncertainty. In fact, these referrals have remained exceptional, because the legal conditions are demanding. These conditions ensure that only mergers with a clear nexus to the EU that do pose a risk to competition can be referred to us. As a result, to this date, we have looked into only three cases under that new approach.

So both in design and in practice, we have introduced a proportionate and targeted policy to catch a certain type of mergers that otherwise escaped our turnover-based filing thresholds. And as we do so, we provide parties with all the rights and guarantees offered by the Merger Regulation.

And so like a tall and towering tree, the Merger Regulation has stood its ground, firmly rooted in the rule of law for the last 20 years.

The secret to its success has been its robust but flexible framework. But we are on a constant learning curve, and always open to hear your feedback.

That said, I do think we have to be careful about tinkering with the basic framework of the Merger Regulation.

Some are calling for some hard pruning to the tree. Others would like to see it chopped down altogether. If you ask me, I would prefer to see it continue to grow and blossom.

Thank you.