Efficiencies in the Draft EU Merger Guidelines: A Glass Half Full

Before the Commission published its draft guidelines on the assessment of mergers under the EU Merger Regulation (the Draft Guidelines), Executive Vice-President (EVP) Teresa Ribera highlighted the guidelines’ “updating [of] the way [the Commission looks] at efficiencies.” EVP Ribera promised that the Commission “will commit to engaging early and openly with companies on the efficiencies of their deals. So that they have the time to show the ‘theory of benefits’, and bring forward the evidence we need.” Such a rebalancing in the treatment of efficiencies seems in line with Ribera’s mission to “modernise the EU’s competition policy to ensure it […]  contributes to our wider objectives on competitiveness and sustainability, social fairness and security.”

In contrast to the current horizontal and non-horizontal guidelines (the HMG and NHMG, respectively; together, the Current Guidelines), the Draft Guidelines place the “theory of benefit” on an equal footing with the Commission’s theories of harm – at least in principle. In practice, significant revisions will be needed before the Commission can weigh efficiencies and harms on an equal footing. In some respects, in fact, the Draft Guidelines are more restrictive than the Current Guidelines.

In Section I, we summarise the key changes in the Draft Guidelines’ treatment of merger efficiencies. In Section II, we suggest several revisions that, in our view, would contribute towards achieving the balanced approach that EVP Ribera promised and the Draft Guidelines announced.

I.   Overview

Among the “technical novelties” introduced in the Draft Guidelines, the Commission cites a significant expansion of “the Commission’s guidance on merger efficiencies.” In particular, the Commission highlights that the “[the Draft] now explicitly covers benefits to innovation, investment, resilience and sustainability”, including an “[e]xpanded section on direct efficiencies […] a new category of dynamic efficiencies that confer the ability or increase the incentives of merging firms to invest or innovate, and whose benefits may materialise over a longer timeframe” and “[d]etailed guidance on resilience and sustainability benefits”.  Moreover, the Draft Guidelines include “[g]uidance on how to balance harm and benefits, including for out-of-market and collective benefits of mergers”. These innovations are discussed in more detail below.

Theories of benefit, theories of harm

An important contribution of the Draft Guidelines is the introduction of a “theory of benefits” in parallel to the Commission’s theory of harms. The “theory of benefits” sets out how “specific merger efficiencies occur and maintain or enhance effective competition, to the benefit of consumers [in particular by] profitably decreasing prices; increasing output, innovation, choice or quality; or positively influencing other relevant parameters of competition, such as investment intensity underpinning stronger competitive behaviour across multiple products or geographies, thereby offsetting, on a lasting basis, the harm to consumers brought about by the merger” (para. 25; throughout this article, footnotes are omitted in quotes). Therefore, to establish “whether a merger overall gives rise to a SIEC”, the Draft Guidelines outline that the Commission will consider the theory of benefit and theory of harm in an integrated assessment (para. 21), rather than treating efficiencies as a “defence” to alleged anticompetitive harm. 

In principle, the same evidentiary standards apply to the assessment of benefits and harms. For example, the Draft Guidelines state that “[t]he Commission supports its conclusions [on potential harms] with a sufficiently cogent and consistent body of evidence. The merging parties are subject to the same evidentiary standard when establishing the facts in support of their claimed efficiencies” (para. 26).  However, as we discuss further in Section II, a closer examination reveals important discrepancies.

Efficiency Taxonomy

The Draft Guidelines distinguish between “direct” and “dynamic” efficiencies: direct efficiencies “result directly from the integration or combination of merging firms’ assets and businesses” (e.g., cost savings), while dynamic efficiencies “confer the ability or increase the incentives to invest or innovate into new or improved products or services, improved distribution or production or other procompetitive parameters of competition” (paras. 295 and 296).

The Draft Guidelines also provide non-exhaustive “taxonomies” of synergies that may lead to direct and dynamic efficiencies. Merger synergies leading to direct efficiencies include, for example, combining scarce complementary assets or capabilities; economies of scale, scope or density; and wholesale cost savings. These synergies may directly allow the merged firm to lower prices, increase supply or improve quality (para. 302). Synergies leading to dynamic efficiencies include the elimination of hold-up in a vertical supply chain; technology transfer; access to finance that enables financially constrained firms to invest or innovate; and the optimal allocation of scarce resources needed in the R&D process (para. 325). The same mechanisms can lead to both direct or dynamic efficiencies; for example, economies of scale may lead to direct efficiencies insofar as they decrease the average cost of production and allow the merged firm to decrease unit prices, but they may lead to dynamic efficiencies by “decreas[ing] the incremental cost of investment or innovation” (paras. 302, 325).

Since the lines between direct and dynamic efficiencies may be difficult to draw, we recommend that the final guidelines clarify that the taxonomy is indicative and not intended to impose different criteria on different types of efficiency.

Efficiency Conditions

To be considered in the Commission’s assessment, both direct and dynamic efficiencies must “fulfil three cumulative conditions: be (i) verifiable; (ii) merger specific; and (iii) benefit consumers” (para. 294), mirroring the Current Guidelines (see HMG para. 78; NHMG para. 53). 

Verifiability

For direct efficiencies, the Draft Guidelines require the parties to show that the claimed efficiencies are likely to materialise, timely and sufficiently substantial to offset the merger’s claimed anticompetitive effects. In particular, the parties must demonstrate that the relevant “merger synergies occur by integrating their businesses” and explain how they “may enhance effective competition in the internal market on a lasting basis.” Direct efficiencies are timely where the synergies and resulting benefits “in principle occur without delay”, although the Draft Guidelines recognise that a longer time horizon may be appropriate “if that is consistent with the characteristics and dynamics of the market and the theory of harm.” At the same time, “a longer time frame for benefits to materialise may make them less predictable and quantifiable.” (paras. 305, 306)

The Draft Guidelines emphasise quantification, stating that “merger synergies and the resulting direct efficiencies should be quantified, where reasonably possible”; where exact quantification is not possible, the parties must “detail the nature of the efficiencies and establish the magnitude of the expected efficiencies” (paras. 307, 308).  The most persuasive evidence is likely to be contemporaneous, prepared in the ordinary course of business, or produced by independent experts before the transaction was negotiated (para. 309). The Draft Guidelines state that the evidence will be more credible where “corroborated by market dynamics, views of market participants, or past examples of realised efficiencies in the same or similar markets,” particularly if supported by third-party evidence independent of the merging parties (para. 309).

The Draft Guidelines’ approach to dynamic efficiencies is similar, though focused on the ability and incentives to invest and innovate. The parties must explain, “based on concrete evidence,” how merger synergies confer the ability and incentives to invest or innovate relative to the counterfactual, such that they counteract anticompetitive harm (para. 327). Ability may arise where the merger alleviates financial constraints or confers resources, while incentives rely on the expected profitability of the investment or innovation (para. 327). Dynamic efficiencies must also be timely and substantial.  Although they should, “in principle”, materialise shortly after closing, the Draft Guidelines recognise that consumer benefits from dynamic efficiencies may arise over a longer period, provided that it remains possible to verify that they will be substantial enough to offset any anticompetitive effects (para. 328). As with direct efficiencies, dynamic efficiencies “should be quantified, where reasonably possible”; otherwise, the parties must describe their nature and magnitude and explain how they would counteract the predicted harm (para. 329).

Merger specificity

To show that direct efficiencies are merger specific, the parties must demonstrate that the claimed efficiencies “would only occur because of the merger” and could not be achieved to a similar extent through “realistic and attainable” less anticompetitive arrangements (not “mere hypothetical possibilities”) (paras. 310-311). Choosing a merger because it is the most profitable option does not, in itself, show that alternatives are unrealistic, unless the distribution of the added value from those alternatives would render them “unrealistic or unattainable” (paras. 313-314).

A similar approach applies to dynamic efficiencies, but focused on whether any realistic, less anticompetitive alternative would provide comparable ability or incentive to invest or innovate (para. 331). Possible alternatives include R&D cooperation agreements or IP licensing, although the Draft Guidelines state that these may be unrealistic where the innovation requires substantial integration, sharing confidential know-how, or relationship-specific investments that create hold-up problems and impact the incentives to cooperate (paras. 331-333). 

Consumer benefits

To be considered beneficial to consumers, “direct and dynamic efficiencies should (i) lead to benefits that are valued by them and (ii) be assessed not with sole regard to the companies involved in the merger but having regard to competition as a whole” (para. 301).  In the case of direct efficiencies, “the improved conditions should not only relate to the merging parties’ activities but to the conditions in the relevant market overall, including rivals’ activities” (para. 315). Consumer benefits should be quantified “[w]here reasonably possible.” (para. 316).  Where quantification is not possible, the parties must explain the “nature and […] magnitude of the expected benefit” (para. 316).

Like the Current Guidelines, the Draft Guidelines highlight price and output benefits (paras. 317, 318) but they expand the discussion on quality benefits, including “greater choice or any improvement in other non-price parameters of competition, including resilience and sustainability” (para. 319). Quality benefits “should be understood broadly” to include characteristics affecting “the use value of the product (‘use value benefits’), as well as from product characteristics […] valued by consumers for other reasons, such as a concern for the environment, a concern for disruptions of future consumption (i.e., resilience) or a concern for the impact of their individual consumption on others (‘non-use value benefits’)” (paras. 320-321).  “[C]onsumers’ valuation for quality has to be appraised and to the extent possible quantified”, for instance based on their willingness to pay (para. 320).  The Draft Guidelines also recognise “collective benefits,” which accrue to a wider section of society as a result of externalities (para. 322), but only if any consumers who are harmed are not worse off as a result of the merger (para. 315).

In the case of dynamic efficiencies, consumer benefits are relevant where investment or innovation are important parameters of competition (para. 334). Where the outcome is uncertain, the parties must show both that investment or innovation are likely to succeed and that, if successful, consumers will likely benefit through lower prices, increased supply, etc. The assessment of price and quality benefits is otherwise broadly analogous to the assessment of direct efficiencies, including the need to quantify quality improvements where possible and establish at least the estimated magnitude of expected consumer benefits where quantification is not possible.  Again, for dynamic efficiencies to count, they must benefit substantially the same consumers as those who are harmed, such that consumers are not worse off as a result of the merger (para. 334).

Balancing of Harms and Benefits

Where efficiencies satisfy all three conditions, the Commission will balance likely harms and benefits to competition. If the demonstrated efficiencies produce benefits that, “on a lasting basis, at least offset the identified harm to competition brought by the merger”, the merger will be deemed compatible with the internal market (para. 339). In doing so, the Commission considers the parameter of competition affected, the timeframe and likelihood of the harms and benefits, and their respective magnitude. The Draft Guidelines also emphasise that the Commission has a “margin of discretion” and may need to weigh “different, sometimes incommensurable price and non-price parameters of competition” (paras. 341, 342).

The balancing exercise is most straightforward where harms and benefits both “concern the same parameter of competition and accrue over the same time period [and …] the two effects are directly comparable” (para. 343). For example, the increase in price from the reduction of competition may be offset by the incentive to decrease prices as a result of direct cost efficiencies. However, the Draft Guidelines note that “[t]he more a merger increases the merging parties’ market power, the less likely it is that a certain level of cost savings is sufficient to ensure that consumers will not be harmed” (para. 343).  Where exact quantification is not possible, the Commission will weigh the “magnitude of the claimed efficiencies” against harm resulting from the significant impact on the competitive process; the Draft Guidelines suggest that limited cost savings or small increases in product quality will be unlikely to offset harm from a merger between close competitors (para. 344).

Where harms and benefits affect different parameters of competition, the Commission will seek to make the effects “comparable to the extent possible”, for example by using consumers’ willingness to pay for quality improvements or by assessing the net present value of future effects. If rendering the harms and benefits comparable is not possible, the Commission will consider the relative orders of magnitude and conduct a “careful assessment” of the net effects on consumers (paras. 347-349). The Commission may give less weight to expected future effects, depending on the characteristics of the market or innovation cycles. The more immediate and certain the harm, the larger and more likely future benefits must be to offset the harm. Conversely, harm that is expected to materialise in the future may be offset by immediate and certain increases in the ability and incentive to innovate and resulting future benefits to consumers (paras. 350-351).

In the discussion of the balancing exercise, the Draft Guidelines also address benefits accruing to different groups. Harm in one geographic or product market, or on one side of a multi-sided market, cannot generally be offset by benefits arising in unrelated markets. However, these “out-of-market” benefits may be taken into account where there is substantial overlap between consumers harmed by the decrease in competition and those benefitting from efficiencies. This is the case also for collective benefits – accruing to a “wider section of society” – which are considered to the extent that harmed consumers substantially overlap with the group of beneficiaries (paras. 352-356). As discussed below, for this proposition, the Draft Guidelines rely inappropriately on European Court case law.

In the balancing test, the Draft Guidelines reiterate the conditions of verifiability and merger specificity but introduce an additional requirement that any harmed consumers be “fully compensate[d]”. Out-of-market and collective benefits are relevant only to the extent that they “are valued by and fully compensate substantially all harmed consumers and improve parameters of competition in the relevant market(s) in the EU where they accrue.” The Draft Guidelines require that the merging parties show that “the share of the out-of-market or collective benefits accruing to harmed consumers, possibly together with the benefits accruing to these consumers in the relevant market where anticompetitive effects have been identified, are sufficient to fully compensate harmed consumers” (para. 357).  As discussed below, the basis for the “full compensation” criterion is not clear.

II.  Analysis: Progress and Room for Improvement

The Draft Guidelines represent a substantial shift in the Commission’s approach to merger efficiencies, signalling that efficiencies may play a greater role in merger assessment. However, several issues should be addressed in the final guidelines to place benefits and harms on an equal footing.

In this section, we first identify relatively simple consistency and conforming changes to reflect the new approach and scope. Then, we highlight several conditions that impose a higher evidentiary standard on efficiencies than on harms.  Finally, we discuss two novel restrictions that are not required by EU law and limit the consideration of efficiencies. 

Consistency and Conforming Changes

(i)     Adopt a More Balanced, Iterative Approach to Evidence

The Draft Guidelines encourage merging parties to articulate their theories of benefit at an early stage of the notification process.  This shift is welcome insofar as it represents a greater openness to considering efficiencies arguments alongside theories of harm, rather than as a late-stage defence. However, the practical implications of early engagement are not fully reflected in the Draft Guidelines, which include holdovers from the Current Guidelines’ approach of considering efficiencies only after theories of harm have been communicated to the parties. In our view, the new approach to efficiencies requires a more neutral, iterative approach consistent with developing theories of harms and benefits in parallel.

The Draft Guidelines skew the analysis at an early stage, stating that the merging parties bear the burden of demonstrating efficiencies (para. 24), since “the relevant facts to substantiate these claims are typically in possession of the merging parties” (footnote 99). Recital 29 EU Merger Regulation (EUMR) refers to efficiencies the parties “put forward,” but the Commission bears the burden of showing that an SIEC is more likely than not after taking account of those efficiencies.  While much efficiency evidence will be in the parties’ possession, the same is true of harms (cf. para. 28), and much evidence is developed during the review process.

The Draft Guidelines also insist that the parties provide evidence that benefits outweigh potential harms. That is inconsistent with engaging on efficiencies early, before the Commission has communicated its expected harms, much less quantified them. Similarly, the Draft Guidelines prioritise evidence drawn from pre-transaction, internal documents prepared “in tempore non suspecto” (para. 309). To respond to the Commission’s theories of harm, however, parties may need to develop new evidence, potentially with assistance from economists or other third parties (para. 309).  Often, the Commission will also participate in developing and testing efficiency evidence, for example with help from its own economics team and market tests.

In short, the new approach of early engagement and parallel treatment requires an iterative process that evolves in parallel with the assessment of potential harms.  Similarly, the final guidelines should take a more neutral approach to evidence, noting that all efficiency evidence will be evaluated on its own merits.  For example, pre-transaction evidence may be more persuasive to support an argument about the transaction rationale, but an economic study commissioned in response to the Commission’s theories of harm is not less persuasive simply because it is prepared during the notification process.  This approach would be consistent with the UK Competition and Markets Authority’s proposed revised guidance on merger efficiencies (the CMA Efficiency Guidance), which notes that the CMA “may seek additional evidence from third parties, industry experts, [or] sector regulators” when assessing merger efficiencies.

(ii)    Further Incorporate Sustainability and Resilience Benefits

The Draft Guidelines rightly place greater emphasis than the Current Guidelines on dynamic harms and benefits, notably innovation and investment.  They also recognise sustainability and resilience benefits (“scale, resilience and sustainability may in some situations lead to verifiable, merger-specific benefits to consumers”, para. 298; see also para. 319), including  a paragraph on how such benefits may arise (para. 299) and cross-referencing the 2023 guidelines on the assessment of horizontal cooperation agreements (the Horizontal Cooperation Guidelines) (footnote 400).  The Draft Guidelines do not, however, integrate sustainability and resilience benefits into the framework as fully as innovation and investment benefits.  We recommend that the final guidelines more fully discuss how these benefits map onto the efficiency taxonomies and how the conditions for recognising efficiencies apply to these categories.  For example, where the Draft Guidelines focus on short-term benefits and discount long-term benefits, sustainability benefits may take longer to materialise but increase exponentially over time.

(iii)   Reduce Duplication

Compared to the Current Guidelines, the Draft Guidelines expand the discussion of verifiability, merger specificity and consumer benefits and incorporate a new section on balancing harms and benefits.  In doing so, the Draft Guidelines add significant repetition.  For example, the relevance of timeliness and quantification is discussed in relation to verifiability (e.g., paras. 306, 307), consumer benefits (e.g., paras. 316, 320), then again in relation to balancing harms and benefits (e.g., para. 343). To avoid confusion, we recommend including cross-references or at least stating explicitly that the guidelines do not create separate, cumulative requirements in relation to each step of the analysis.   

Eliminate Unnecessary Asymmetries between Harms and Benefits

The Draft Guidelines aim to place theories of harm and benefit on an equal footing. Across several dimensions, however, the Draft Guidelines apply more demanding requirements to efficiencies than to anticompetitive harms. These asymmetries, discussed next, may continue to render efficiency benefits difficult to establish.   

(i)  Verifiability

Like the Current Guidelines, the Draft Guidelines continue to impose stricter requirements on the substantiation of efficiencies than harms. In contrast to efficiencies claims, for example, the Draft Guidelines don’t require the Commission to quantify alleged competitive harm or, failing that, to detail its nature and magnitude (e.g., “[t]he Commission bears the burden of demonstrating any anticompetitive effects arising from the merger […] without, however, having to specifically demonstrate or quantify such consumer harm in every case”, at para. 22). Nor do they impose a specific obligation for the Commission to provide “concrete evidence” of how a merger would impede dynamic competition, only the general burden to show that a SIEC is more likely than not.  Again unlike efficiency evidence, for the Commission “there exists no hierarchy between non-technical (or qualitative) and technical (or quantitative) evidence” (para. 31).

Similarly, the Draft Guidelines impose more demanding timing requirements in relation to efficiencies.  The Commission need not show that competitive harms are “timely,” much less that they will “occur without delay” or (in the case of dynamic efficiencies) “shortly after closing.”  The Draft Guidelines only address the timeliness of harms in the balancing context. When harms and benefits accrue at different time periods, “the Commission may assign less weight to either element the later the effect is expected to materialise” (para. 350).

If qualitative evidence supports a theory of harm, it should also be capable of supporting a theory of benefit. Indeed, the CMA Efficiency Guidance seems more balanced and more practical in this regard, stating that “[w]hilst precise quantification is not necessary and, in many cases, is not likely to be possible, quantitative evidence can be useful in understanding the likely magnitude of both the potential adverse effects of a merger and efficiencies” (para. 28).  As we have previously argued, the treatment of timing should also be parallel across harms and benefits, which will require that the Commission clearly identify the relevant time horizons for both the anticipated anticompetitive effects (and synergies) and the resulting consumer harm (and benefits).  Again, the CMA Efficiency Guidance seems more balanced: in assessing timeliness, “the CMA recognises that different types of efficiencies may be realised over different timeframes” (para. 20). 

(ii)  Merger Specificity

Similar to the parties’ requirement to show the “merger specificity” of claimed efficiencies, the “Commission assesses whether there is a causal link between the merger and the effects on competition” (para. 37). The Commission, however, has considerable discretion to include in the relevant counterfactual future market conditions unrelated to the merger, non-representative market conditions and alternative mergers or agreements, without any requirement to assess “hypothetical future events” (paras. 38-44).  This flexibility contrasts with the parties’ obligation to prove that alleged efficiencies could not be achieved by any other means, i.e. to prove a negative.

The CMA Efficiency Guidance appears to offer a less demanding, more common-sense, approach to merger specificity: “[t]he CMA will consider the feasibility of such potential alternatives, and whether it would be commercially rational for the merger firms to pursue them. This may involve considering the extent to which these alternatives would deliver the same scale of benefits, whether there are significant barriers to implementing them (including dependencies on third parties), and the relative costs and risks of these alternatives compared to the merger” (para. 33).

(iii)  Consumer Benefits

As noted above, the requirement that parties quantify consumer benefits, or at least detail their nature and establish their magnitude, goes beyond the requirements applicable to the Commission when assessing harm. It is also difficult to reconcile with the principle that there is “no hierarchy” between quantitative and qualitative evidence. 

This asymmetry is particularly relevant to the treatment of innovation. On the harm side, the Draft Guidelines recognise that innovation competition has value even where the specific future outcome of innovation is uncertain. In particular, the Draft Guidelines state that “[t]he assessment of the loss of innovation competition is not focused on a specific future outcome, which may be uncertain, but on whether the merger significantly impedes the process of innovation rivalry, which has the potential to generate innovation and therefore has competitive value in the present” (para. 175). On the benefits side, by contrast, the Draft Guidelines require parties to show that the expected investment or innovation is likely to materialise and generate benefits substantial enough to offset the harm “shortly after closing”.

These requirements will often be impossible to meet, because the innovation process is inherently uncertain; innovation may result in different benefits than those originally anticipated; and in any case they are likely to be realised over substantial time periods. In addition, the innovation process itself may generate benefits (e.g., learning-by-doing effects, capability-building, option value, etc.) independent of the “success” of a particular project.  If the Draft Guidelines recognise that the process of innovation rivalry can have present competitive value for the purposes of assessing harm, the final guidelines should also recognise that increases in the ability or incentive to innovate may generate cognisable benefits even where a precise innovation outcome cannot be predicted with certainty.

(iv)  Balancing Harms and Benefits

The Draft Guidelines’ discussion of balancing harms and benefits builds on their discussion of verifiability, merger specificity and consumer benefits but introduces further asymmetries that make efficiency claims more difficult to establish. 

The Draft Guidelines state that balancing “requires that the effects of a merger are made comparable” through, for example, the estimation of harms and benefits in monetary units or the calculation of a net present value (para. 347).  As noted, the Commission is not required to quantify alleged harms.  Even when quantification of benefits and harms is feasible, net present value calculations are imperfect and rely on several important assumptions, including, for example, the choice of a discount rate. If short-term, quantifiable efficiencies are considered more timely and verifiable, the assessment will inevitably   disadvantage potential benefits that may require short-term costs but may increase the likelihood of important future benefits.

In carrying out these calculations, the Commission could align its approach with appropriate methodologies used by regulatory authorities and public bodies in comparable contexts. For example, the European Network of Transmission System Operators for Electricity is required to perform long-term cost-benefit analyses for electricity interconnection and grid projects, assessing time horizons that range from mid-term (five to ten years) to very long-term (30 to 40 years).  More generally, where harms and benefits accrue over long time horizons, the Commission could rely on probability-weighted outcome analyses or other methodologies that account for uncertainty surrounding the realisation of future benefits and harms.

Novel and Unexplained Requirements

Finally, the Draft Guidelines appear to impose novel constraints on cognisable benefits that are not clearly required by the EUMR or case law.

(i)  “Competition as a Whole” Requirement

The Draft Guidelines should first clarify or eliminate the new requirement that efficiencies relate not only to the merging parties’ activities, but to “competition as a whole,” “including rivals’ activities” (paras. 301, 315). This requirement is arguably impossible for the merging parties to satisfy.  The merging parties cannot be expected to verify a transaction’s benefits to their rivals, especially based on information “in possession of the merging parties” (footnote 40) in tempore non suspecto.

(ii)  Overbroad Exclusion of Out-of-Market Benefits

The second significant novel constraint is the requirement that efficiencies benefit “substantially the same consumers as those who would otherwise be harmed by the merger.” This assertion seems inconsistent with the Commission’s recognition “that certain types of efficiencies can also bring benefits of much wider scope, including to society at large” (para. 315).  The legal basis for this requirement is also unclear.  The Commission cites the Horizontal Cooperation Guidelines “by analogy”, as well as two Article 101 TFEU cases. This case law also applies only “by analogy,” as the Commission acknowledged in its note for the June 2025 OECD roundtable on efficiencies in merger control.  The Draft Guidelines do not discuss the analogy, which in our view is unconvincing.

In the Article 101 TFEU context, the Article 101(3) TFEU efficiencies analysis is applied to an existing agreement, decision or concerted practice found to have infringed Article 101(1) TFEU. In the EUMR context, the Commission bears the burden of showing that a notified concentration will more likely than not create a SIEC. This exercise entails a necessarily uncertain assessment of future effects, with no finding (or even inference) that the transaction parties have or would infringe EU law.

Relying on Article 101 TFEU case law to exclude out-of-market benefits is especially inappropriate in the context of vertical or conglomerate mergers, which involve two or more markets in which the consumers are liable to be different. If a vertical merger creates sustainability, security or resilience benefits across a complex supply chain, we see no logic in excluding such benefits from consideration solely because the Commission finds a risk of foreclosure affecting downstream customers.

The requirement also raises practical difficulties. For example, whether this condition is fulfilled depends on how the Commission defines the harmed consumers, who change over time. For example, when considering offsetting efficiencies of particular harms manifesting in the short term, would the Commission account for long-term benefits accruing to future generations of the same demographic of harmed consumers?

The Draft Guidelines also state that out-of-market benefits are considered to the extent they are “valued by” harmed consumers. This suggests that benefits accruing to consumers who are not harmed may be taken into account insofar as harmed consumers value them. For example, consumers facing a short-term price increase in a given product market may value broader societal benefits accruing to others. This is consistent with the broader economics literature suggesting that consumers may derive utility from benefits accruing to others, future generations, or society more broadly, including through altruistic and social preferences and willingness to pay for public goods. In such circumstances, the distinction between benefits accruing to consumers in and outside of the harmed consumer group may be less straightforward than the Draft Guidelines suggest.

Finally, in the case of collective benefits, the Commission’s suggestion that only benefits that are attributed specifically to harmed consumers may not be straightforward to implement. For example, where a merger is expected to reduce carbon emissions, there may be multiple ways to estimate avoided climate damages for affected consumers, including per-capita allocations, willingness-to-pay and differential exposure to environmental harm. Each of these approaches may yield different results, and therefore, different balancing outcomes.

Fortunately, the EUMR does not preclude consideration of out-of-market efficiencies.  Recital 29 EUMR requires the Commission to consider whether “efficiencies brought about by the concentration counteract the effects on competition, and in particular the potential harm to consumers” (emphasis added). The phrase ‘in particular’ indicates that cognisable efficiencies are not limited to consumer benefits at all, and certainly not to efficiencies accruing only to the same consumers potentially harmed.

Again, the CMA Efficiency Guidance may offer a practical alternative.  Under the CMA Efficiency Guidance, the CMA may take account of benefits “in any market in the UK” (para. 35).  Similarly, the final guidelines could limit consideration to benefits to EU consumers, avoiding the need to identify all the potentially relevant consumer groups and allocate harms and benefits to each.

Conclusion

The Draft Guidelines represent a welcome attempt to place theories of benefit on a more equal footing with theories of harm. Nevertheless, important questions remain on the implementation of this framework. In this article, we have discussed several elements that would benefit from revisions to improve predictability and help ensure that efficiencies are assessed consistently with the Draft Guidelines’ stated objectives.