The European Commission is preparing a significant update to its merger control framework that could make it easier for startups to secure approval for acquisitions, particularly where deals are expected to generate innovation benefits. The proposed changes, expected to be unveiled in the coming weeks, mark the first major revision of EU merger rules in more than two decades.(Reuters)
At the centre of the reform is a concept informally described as an “innovation shield.” Under this approach, transactions involving startups or research-driven businesses may face less regulatory intervention if they are likely to enhance competition through innovation. The initiative reflects growing pressure on EU policymakers to support the scaling of smaller, high-growth companies, especially in sectors where Europe is seen as lagging behind global competitors.
The reform comes in response to calls from industries such as telecommunications, where companies have argued that stricter merger control has limited their ability to consolidate and compete with large players from the United States and China. By allowing more flexibility in assessing deals that contribute to technological development or market dynamism, the Commission appears to be seeking a more balanced approach between enforcement and industrial policy objectives.
However, the proposed framework draws a clear line when it comes to dominant digital platforms. The innovation-friendly treatment is not expected to apply where the acquiring company holds a leading market position or is designated as a gatekeeper under the Digital Markets Act. This limitation signals continued caution toward acquisitions involving major technology firms, where concerns about market foreclosure and so-called “killer acquisitions” remain central to enforcement policy.
In addition to innovation, the draft proposals indicate that companies may increasingly rely on broader arguments when seeking merger approval. These include contributions to sustainability, economic resilience, investment, and employment. While these factors are not entirely new, their more explicit recognition suggests a shift toward a more holistic assessment of mergers in line with wider EU policy goals.
Despite the introduction of new elements, officials do not anticipate a radical overhaul of the existing system. The current framework is widely viewed as effective and has been upheld in multiple court rulings, which limits the scope for fundamental change. Instead, the reform is expected to refine how certain factors are evaluated rather than alter the core principles of merger control.
The Commission is expected to consult stakeholders before finalising the new rules, allowing companies, advisers, and other market participants to provide feedback. The outcome of this process will determine how far the EU ultimately goes in integrating innovation considerations into its competition policy while maintaining strict oversight of deals involving dominant players.
