Sustainability in the New EUMR Guidelines: Time for an Efficient Look at Efficiencies?

The European Commission’s (the Commission’s) review of its Horizontal and Non-Horizontal Merger Guidelines (HMG and NHMG, respectively; together, the Guidelines) is well under way. While the update of the decades-old Guidelines is welcome, whether the Commission can deliver on Executive Vice President Ribera’s mandate – to ‘modernise the EU’s competition policy to ensure it supports European companies to innovate, compete and lead world-wide and contributes to [the EU’s] wider objectives on competitiveness and sustainability, social fairness and security’ and ‘give adequate weight to the European economy’s more acute needs in respect of resilience, efficiency and innovation [in merger control]’ – is unclear.

These ambitious goals, which echo the call for ‘updated guidelines to make the current Merger Regulation fit for purpose’ by the Draghi report on competitiveness in Europe (the Draghi Report), envisage greater consideration in EU merger control for mergers’ potential benefits (or harms) to industrial policy objectives.  The benefits could be referred to, in other words, as ‘efficiencies.’  However, the Guidelines set the bar for an ‘efficiencies defence’ so high that the Commission has never approved a merger based on efficiencies.

EVP Ribera recently commented at the Lisbon Conference on Competition Law and Economics that the revised Guidelines  ‘will provide clear and upfront guidance, including concrete criteria on when scale can benefit the Single Market [and] on mergers that may support competitiveness, innovation, and resilience.’  To do this, the Guidelines should include ‘modern metrics to assess market power, innovation, and investment’ and ‘support certainty for innovators and start-ups that need scale […] This is a sort of ‘innovation shield’ for procompetitive scale ups.’

Paradoxically, however, in some respects, the Commission’s recent consultation (the Consultation) suggests that – far from broadening the scope for merging parties to invoke efficiencies supporting notified mergers – the Commission plans to narrow the efficiencies defence still further.

The failure to consider new approaches to merger benefits is especially unfortunate in relation to sustainability benefits.  Indeed, the Commission’s increased focus on sustainability in market definition and competitive assessment may paradoxically increase the likelihood of mergers between ‘green’ parties being challenged. However, these transactions might provide benefits, such as enabling the parties to achieve economies of scale and scope needed to advance the EU’s sustainability goals. 

Fortunately, the EU Merger Regulation’s (EUMR’s) text, as well as the Commission’s previous work on sustainability benefits in the Article 101 TFEU context, offer multiple paths for the revised Guidelines to take a fresh approach to sustainability efficiencies and help achieve EVP Ribera’s mission to further integrate EU merger policy into the Clean Industrial Deal and the other sustainability objectives identified in EVP Ribera’s mandate.

Sustainability Considerations and the Law of Unintended Consequences?

Sustainability considerations have played a greater role in the Commission’s EUMR assessments for several years, particularly in market definition and competitive assessment. For example, the Commission’s 2024 Competition Policy Brief (the 2024 Policy Brief) identified sustainability as a key non-price parameter influencing market definition, competitive assessment, remedies and risks of killer acquisitions and efficiencies. Previously, the Commission devoted an issue of the Competition Merger Brief (the 2023 Merger Brief) to ‘Green Mergers & Acquisitions Deals.’ Sustainability considerations were also incorporated into the Commission’s 2024 notice on market definition (the 2024 Market Definition Notice). We next briefly summarise how sustainability considerations have figured into the Commission’s merger assessments.

First, the 2024 Market Definition Notice discusses sustainability as a parameter of differentiation in market definition. In particular, where consumer preferences differentiate among products based on sustainability attributes, sustainability considerations may lead to the definition of narrower product or geographic markets. This effect is observed in several recent cases discussed in the 2024 Policy Brief and the 2023 Merger Brief, including Norsk Hydro/Alumetal, KPS Capital Partners/Real Alloy Europe, and Marine Harvest/Morpol.

Second, sustainability considerations play a growing role in the Commission’s assessment of theories of harm. The In-depth Questionnaire included in the Consultation (the In-depth Questionnaire) noted that, ‘[i]n the context of merger control, the Commission may consider environmental and sustainability concerns as long as they are linked to the competitive dynamics and market realities at play. In fact, competitive markets support and often go hand-in-hand with green tech efforts to invest and innovate (footnotes omitted).’

In the Commission’s review of horizontal mergers, sustainability considerations have influenced the assessment of closeness of competition under a traditional unilateral effects analysis and have figured in innovation theories of harm, particularly in the context of incentives to innovate and pipeline products (e.g., Norsk Hydro/Alumetal and Sika/MBCC).  The Commission has also expressed concerns about ‘killer’ horizontal acquisitions, whereby, for example, large firms may acquire small climate technology innovators to potentially discontinue or deprioritise their innovations.

While vertical mergers are traditionally considered less likely to impede competition than horizontal mergers, they can raise significant concerns when they result in foreclosure of access to critical sustainable inputs. Similarly, sustainability considerations may be relevant to coordinated effects, for example increasing the risk of coordination where the target had previously competed aggressively on sustainability attributes.

Considering sustainability within market definition and competitive assessment is in line with the Commission’s greater consideration for non-price parameters. However, treating sustainability as a non-price parameter of competition for the purposes of market definition and competitive assessment may lead to the definition of narrower markets, or to ‘green’ competitors being considered closer competitors within a broader market, particularly in mergers involving ‘greener’ and ‘less green’ competitors. Without a similar consideration for the potential non-price benefits, the likelihood of the transaction being blocked would increase.

For example, in a merger between two sustainability-oriented companies, defining narrower product markets limited to more sustainable products may result in higher combined market shares and larger market share increments than if non-sustainable alternatives were included in the same market. Alternatively, in a broader market encompassing both sustainable and traditional products, merging ‘green’ companies may be viewed as close competitors. By contrast, in a merger between a ‘green’ company and a ‘less-green’ company, the Commission may find that the parties operate in different product markets or innovation spaces, with no overlapping products or pipelines, or consider them distant competitors within a broader market. Paradoxically, therefore, a large traditional industry player acquiring a ‘green’ new entrant may face a lower risk of prohibition than a merger between two smaller ‘green’ companies attempting to achieve the scale necessary to compete with traditional incumbents.

Thus, the Commission’s approach may disadvantage transactions involving ‘green’ parties or ‘green’ products, increasing the risk of ‘false positives’ – that is, transactions that are blocked but that, if cleared, would, on balance, benefit consumers. Notifying parties caught in such a catch-22 could, in principle, raise an ‘efficiency defence.’ As discussed in more detail below, however, ‘green’ merging parties are unlikely to be able to invoke sustainability-related benefits under the Guidelines.

The Efficiency ‘Defence’ and Sustainability Benefits

As noted, the Commission has never approved a merger under the EUMR based on efficiencies.  The HMG state that the Commission considers efficiency benefits if they (a) benefit consumers in the relevant markets ‘where it is otherwise likely that competition concerns would occur’, (b) occur in a timely manner, (c) are merger specific, and (d) are verifiable. The NHMG also acknowledge the potential for efficiencies to counteract anticompetitive effects in non-horizontal mergers but do not address whether – and, if so, how – the HMG criteria may differ in the context of non-horizontal mergers.

The four HMG requirements for efficiencies to be taken into account derive in part from the EUMR.   Recital 29 – the only provision in the EUMR addressing the role of efficiencies, states:

‘In order to determine the impact of a concentration on competition in the common market, it is appropriate to take account of any substantiated and likely efficiencies put forward by the undertakings concerned. It is possible that the efficiencies brought about by the concentration counteract the effects on competition, and in particular the potential harm to consumers, that it might otherwise have and that, as a consequence, the concentration would not significantly impede effective competition’.

The EUMR thus requires that efficiencies be ‘substantiated’ and ‘likely,’ but some of the HMG’s elaborations on these requirements are open to question, as discussed below.  More generally, the Guidelines do not apply the same criteria to the Commission’s assessment of potential competitive harms.  The divergence is questionable, since, once the parties have ‘put forward’ proposed efficiencies, the Commission must consider potential harms and benefits together to determine whether a notified transaction risks creating a substantial impediment to effective competition (an SIEC).  Hopefully the revised Guidelines will align the Commission’s guidance on the standards for assessing potential harms and benefits.

In any event, whether competition authorities need to consider efficiencies more meaningfully is a topic of ongoing debate.  The 2024 Policy Brief notes that ‘[e]fficiencies can […] result in the development of newer technologies, novel “green” products and more generally “green” innovations (footnotes omitted)’.  However, sustainability benefits are arguably particularly ill-suited to the HMG’s narrow criteria, since they are often more challenging to quantify and materialise over longer timeframes.

Although the Consultation invited input on how EU merger policy may support broader EU objectives, including sustainability, it did not contemplate reconsideration of the efficiency defence criteria nor of the differences in those criteria outside the horizontal merger context. Below, we discuss the existing criteria and considerations for the Commission.

Benefits to consumers:

Out-of-market efficiencies. The In-depth Questionnaire stated that, ‘[i]n line with the Mastercard case law, where efficiencies arise outside of the affected markets, these efficiencies can only be accepted by the Commission if the benefits cover substantially the same customers otherwise harmed by the merger.’ This position aligns with the Commission’s guidelines on horizontal cooperation agreements (the HGL), although the HGL’s approach is disputed.

However, the Mastercard case law does not apply in the EUMR context.  The Commission acknowledged in its note for the June 2025 OECD roundtable on efficiencies in merger control that the Mastercard analysis of out-of-market benefits applies only ‘by analogy,’ and it did not elaborate on why such an analogy would be appropriate.  Indeed, we argue that this analogy is not appropriate.  In the Article 101 TFEU context considered in Mastercard, the Article 101(3) TFEU efficiencies analysis is applied to an existing agreement, decision or concerted practice already 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.  The analogy seems especially inappropriate in the context of vertical or conglomerate mergers, where competitive harms and benefits, by definition, affect different consumers in different markets.  At a minimum, the relevance of Mastercard in the EUMR context merits further consideration.

This restrictive approach to the treatment of out-of-market benefits is also arguably inconsistent with the EUMR.  As mentioned, Recital 29 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).  Thus, the EUMR does not limit consideration of efficiencies to those that benefit the same consumers potentially harmed.  Indeed, the phrase ‘in particular’ indicates that cognisable efficiencies are not limited to consumer benefits at all.    

Greater flexibility in the types of benefits taken into account in the Commission’s merger review would be particularly important for the assessment of ‘green’ mergers. Sustainability benefits often relate to externalities that interact across multiple markets and stakeholders. In vertical mergers, such benefits may accrue in multiple vertically related product or geographic markets, which are likely to involve distinct consumer groups.

As the OECD noted in its June 2025 policy paper on efficiencies in merger control (the OECD Efficiencies Paper), ‘[e]nvironmental and similar efficiencies are often ‘out of market’ [and] [s]everal competition authorities have vigorously argued that environmental crises are so severe and urgent that environmental efficiencies deserve special treatment.’ 

Timeliness. Both the HMG and the In-depth Questionnaire state that efficiencies should be ‘timely,’ typically meaning that they are achieved within a three-to-five-year timeframe. The In-depth Questionnaire sought input on whether this timeframe is appropriate and whether it should vary across industries (¶105).  But the Consultation did not consider whether the appropriate timeframe for assessing benefits may also depend on the nature of the benefit itself, as well as on the characteristics of the industry involved.

This narrow notion of timeliness risks undervaluing sustainability-related benefits, which typically materialise over a longer time horizon.  Indeed, such benefits – or harms – may compound over time through feedback loops, magnifying their future value. The OECD Efficiencies Paper notes that ‘[d]ynamic efficiencies tend to materialise in the long run, thus being excluded by strict criteria on how timely the efficiencies should be.’

Applying an artificial cutoff to the assessment of sustainability benefits in the EUMR context also conflicts with the approach taken in other domains. Regulators and financial institutions routinely account for long-term effects of policies or investments. Similarly, research institutions tasked with the empirical assessment and projection of sustainability-related benefits and harms routinely publish quantitative evaluations over longer periods. 

Verifiability: The current HMG state that efficiencies should be ‘verifiable,’ ‘quantified’ and ‘likely to materialise.’ The In-depth Questionnaire suggests a more flexible approach in this area, noting that, ‘[w]here reasonably possible, efficiencies should be quantified. If this is not possible, it must be possible to foresee a clearly identifiable positive impact on consumers, not a marginal one’ (¶109). This is in line with the HGL, which note that ‘there is currently little experience with measuring and quantifying collective benefits,’ and ‘[w]here there is no available data that allows for a quantitative analysis […], other evidence may be considered, provided that it shows a clearly identifiable positive impact on consumers in the relevant market, not a marginal one.’

The Consultation sought input on the types of sustainability benefits that mergers may generate, and the metrics and evidence that can be used to assess them. A natural resource is the HGL, which include an extensive discussion of sustainability-related benefits and the available metrics and evidence.  In addition, the Commission should consider drawing on tools from environmental and behavioural economics to support the quantification of such benefits. For example, environmental economics tools are routinely used to estimate the economic value of unmarketable environmental goods, either directly or indirectly. Behavioural economics can also help address some of the limitations of stated preference techniques, particularly by accounting for information asymmetries and consumers’ behavioural biases in the elicitation of willingness-to-pay or willingness-to-accept metrics.  Research in environmental economics has benefitted from methodological and data advancements, including improved techniques for estimating the economic effects of temperature change and economic damage associated with environmental harm, as well as greater access to high-quality data and projections produced by leading research institutions and regulatory agencies.

Finally, the Commission takes the view that, ‘[t]he burden of proof for demonstrating efficiencies is on the notifying parties.’ This statement is not supported in the EUMR or the current Guidelines.  As noted, Recital 29 EUMR refers to efficiencies ‘put forward by the undertakings concerned’ that may ‘counteract the effects on competition, and [...]  that, as a consequence, the concentration would not significantly impede effective competition.’ In line with Recital 29, Section 11 of the Commission’s Form CO requires the parties to provide efficiency claims ‘[s]hould [they] wish the Commission specifically to consider [...] whether efficiency gains generated by the concentration are likely to enhance the ability and incentive of the new entity to act pro-competitively for the benefit of consumers,’ but does not purport to reverse the burden of proof. Thus, while it is for the parties to ‘put forward’ efficiency claims and supporting evidence, the burden of proving that a concentration risks creating an SIEC – taking account of those efficiencies – remains with the Commission.  In addition, while in Ceske Telecom, the Court of Justice referred to the parties as having the burden of proving efficiencies (¶243), this was in the context of rejecting the General Court’s finding that there is a presumption in favour of so-called ‘standard’ efficiencies.  A more compelling precedent is rather the Court’s holding in Intel that, where a dominant company puts forward economic evidence on the foreclosure effect of challenged conduct, the Commission must assess that evidence when considering whether the conduct infringes Article 102 TFEU (¶138 et seq.).

More generally, as noted, there is no requirement in the EUMR for applying stricter criteria for proving benefits than competitive harms. The SIEC test requires a balanced assessment of the potential benefits and harms of a merger. Applying more demanding evidentiary standards to efficiencies biases the Commission’s overall assessment of the merger by effectively placing greater weight on speculative harms than on equally plausible benefits. Such an asymmetry undermines the objectivity of the competitive assessment by systematically discounting effects that may benefit consumers but are more complex to quantify, such as dynamic or sustainability-related efficiencies.

Where the Commission doubts whether sustainability benefits will materialise, remedies can also play a useful role. The OECD Efficiencies Paper notes that remedies ‘can be designed to ensure that the efficiencies claimed will actually materialise, for instance by the merging parties explicitly committing to achieve them. […] Efficiencies may also complement remedies. Instead of designing remedies solely to help efficiencies materialise, considering remedies and efficiencies together may lead the authority to authorise a transaction.’

Conclusion

The Guidelines review offers the Commission a timely opportunity to modernise its treatment of sustainability considerations in merger assessments. Paradoxically, however, the greater emphasis on sustainability as a parameter of competition in market definition and competitive assessment without a balanced consideration for a transaction’s potential sustainability benefits could have the unintended consequence of disadvantaging mergers between ‘green’ companies – who may be seeking competitive scale. EU merger control could therefore become a barrier to transactions with potential to advance the EU’s sustainability objectives.

Fortunately, the EUMR provides the Commission considerable flexibility to address EU policy objectives within an updated framework for the consideration of efficiencies.  In particular, we recommend that the Commission broaden its approach to consumer benefits, including consideration of out-of-market benefits that account for potential externalities, incorporating modern tools for quantifying sustainability benefits and evaluating benefits that may are difficult or even impossible to quantify.  We further recommend that the Commission reconsider its approach to the timeliness requirement to eliminate arbitrary cut-offs and account for long-term effects.

The Commission should also align the criteria for proving competitive benefits with those applied to prove competitive harms, along with its reconsideration of the burden of proof.  Where merging parties put forward evidence of efficiencies, the EUMR requires the Commission to take account of such evidence before finding that a notified transaction risks creating an SIEC.

In her recent speech, EVP Ribera noted that ‘a big challenge [is to] ensure a fair competitive economy based on real costs being reflected in the final price — including externalities.’ A revised approach to the assessment of efficiencies provides the most practical means of accounting for externalities, including potential sustainability benefits, in merger assessments. Such an approach would advance the Commission’s goal of aligning competition policy with the objectives of the Clean Industrial Deal.