Theory of Benefit or Theory of Burden? Reconciling Innovation and Scale under the 2026 Draft Merger Guidelines

Abstract

This article examines the European Commission’s 2026 Draft Merger Guidelines, focusing on the newly formalized “theory of benefit”. While the integration of merger efficiencies into the competitive assessment marks a positive shift toward dynamic enforcement, the framework’s stringent evidentiary standards risk stifling high-technology markets. The analysis introduces the “innovation-scale paradox”, arguing that in sectors like advanced semiconductors, massive market scale and capital deployment are vital inputs for breakthrough research and development, rather than inherent competitive threats. Drawing on the NVIDIA/Arm transaction, the article highlights the regulatory bias caused by demanding deterministic, short-term proof for probabilistic, long-term innovation benefits, while relying on asymmetric standards for potential harms. The central proposal advocates for a structural reversal of the burden of proof through a rebuttable presumption of dynamic efficiencies for transactions combining complementary assets in high-innovation sectors. By recalibrating this evidentiary threshold, the article urges European merger policy to prioritize scale-driven synergies and prevent the theory of benefit from devolving into a prohibitive “theory of burden”.

Introduction

The publication of the draft Merger Guidelines on 30 April 20261 represents the most significant structural realignment of European competition policy since the 2004 Merger Regulation. By retiring the separate horizontal and non-horizontal frameworks in favor of an integrated approach organized around theories of harm, the European Commission has signaled a transition toward a more dynamic enforcement model. The central innovation of this draft is the formalization of a “theory of benefit” which, in short, mandates that efficiency gains be assessed under the same evidentiary standards as theories of harm. While this symmetry is theoretically sound, its success depends on reconciling the inherent tension between market concentration and the scale required for global innovation.

The New “Theory of Benefit”

The new “theory of benefit”, brought about in the Guidelines, introduces a framework that elevates the role of demonstrated merger efficiencies in the European Commission’s competitive assessment. Operating as the “pro-competitive engine” of the 2026 Draft Guidelines, it reflects a growing consensus that consolidation is sometimes necessary to build industrial scale and foster “European champions” capable of massive technological investment and global competition.2 If merging parties believe their transaction creates efficiencies, they must proactively articulate and substantiate a “theory of benefit” explaining how these efficiencies will occur, and how they will maintain or enhance effective competition to the ultimate benefit of consumers. The framework provides a detailed account of the types of efficiencies that can be claimed, ranging from direct efficiencies to dynamic ones while new types of efficiencies related explicitly to market resilience and sustainability are also mentioned. Despite however this expanded definition of acceptable benefits, the burden of proof remains firmly on the merging parties, while the evidentiary and analytical threshold remains, still, exceptionally high. All efficiencies must be merger-specific, verifiable and likely to benefit consumers, consistent with the traditional framework.

The Innovation Scale Paradox

This stringent demand for deterministic, verifiable proof directly exposes a critical vulnerability in the framework when applied to high technology markets. A primary challenge in modern merger control is the “innovation-scale paradox”, wherein the massive capital deployment required for breakthrough R&D necessitates a level of market concentration that traditional antitrust frameworks often view with suspicion. In high-growth sectors such as advanced semiconductors, scale is not merely a byproduct of success but a vital input for innovation. The development of next-generation GPU architectures and artificial intelligence infrastructure requires specialized talent, vast datasets, and capital-intensive research programs that nascent enterprises cannot sustain.

The scrutiny faced by NVIDIA in its attempted acquisition of Arm illustrates the risks of a regulatory environment that discounts these synergies. NVIDIA's main argument against this regulatory scrutiny was that the proposed acquisition would serve as a vehicle for innovation and ultimately dramatically boost competition in the semiconductor industry. Notably, the parties argued that “NVIDIA will not foreclose its competitors in downstream markets. Far from it. NVIDIA wants these other companies to thrive and succeed”.3 Despite these well-founded arguments, competition authorities prioritized the well-understood and immediate risks of vertical foreclosure over the more hypothetical, long-term benefits of enhanced innovation, effectively ignoring the possibility that the transaction offered a clear pathway for integrating complementary IP to accelerate innovation in data centers and autonomous systems. Under the 2026 Guidelines, the Commission must ensure that the “theory of benefit” accounts for these intangible synergies. Failure to do so risks “exporting innovation capacity” to jurisdictions with clearer pathways for growth, a concern echoed in recent reports on European competitiveness.4

Redefining the Evidentiary Burden for Dynamic Efficiencies

The decision by the Commission to subject theories of benefit to the same evidentiary rigor as theories of harm,5presents a significant hurdle. Unlike static cost savings, innovation-driven efficiencies are inherently uncertain and resistant to the deterministic quantification traditionally demanded by competition authorities. Traditional legal regulatory frameworks often apply asymmetric standards and timelines when weighing the pro-competitive and anti-competitive effects of mergers in relation to innovation. Authorities frequently consider potential harms to innovation that may only materialize in the distant future, such as the termination of a research project at an early stage yet demand that merging parties demonstrate efficiency gains within a very short timeframe, typically two to four years. This structural asymmetry tends to cause regulatory bias against innovation.6 

A related challenge is the so-called “Apples-to-Oranges” problem: the difficulty of balancing a quantitatively determinable, short-term harm against a non-quantitatively determinable, long-term benefit.7 The current evidentiary burden is often insurmountable for merging parties, precisely because innovation is inherently probabilistic rather than deterministic. The ECJ clarified in the CK Telecoms case that the European Commission must demonstrate, on the basis of a “balance of probabilities” that it is more likely than not that a merger will significantly impede effective competition.8 In the Meta/Within case, the standard of proof was formulated as a requirement of a “reasonable probability” that Meta would have entered the market on ist own, which was further clarified as a probability “noticeably greater than 50%”.9

To make the “theory of benefit” functional, the regulatory framework must acknowledge that transactions combining complementary assets, intellectual capital, and specialized talent can generate profound consumer benefits, that transcend short-term price effects, even if they lack the deterministic certainty traditionally demanded by competition authorities. This, in turn, mandates the development of novel econometric models capable of capturing the probabilistic outcomes of innovation. Furthermore, European merger policy must divest itself of the presumption that market size and concentration are inherently suspect. In many high-growth sectors, breakthrough innovation is not the exclusive preserve of nascent enterprises or “garage start-ups”, but increasingly the domain of large-scale incumbents possessing the resources to sustain capital-intensive, high-risk, and long-horizon research programs. The development of pharmaceuticals, advanced semiconductors, and generative artificial intelligence, requires massive capital deployment, access to vast datasets, and specialized infrastructure. Transactions that enable European companies to achieve global competitive scale should be viewed constructively in the absence of demonstrable theories of harm.

Specifically, a reversal of the burden of proof could be introduced with respect to efficiency gains. European merger control should operate under a rebuttable presumption that combinations of complementary assets in high-innovation sectors generate dynamic efficiencies. This shift would align the legal framework with economic reality, where the majority of mergers in technological ecosystems are motivated by synergy realization rather than the accretion of market power. Without such a recalibration, the “theory of benefit” remains a theoretical construct that effectively reinforces a “theory of burden” for European firms.

Institutional Courage and the Path to Reform

The 2026 draft Guidelines are a commendable step toward a dynamic competition regime, yet their efficacy depends on institutional courage. Europe must resist the “siren song of prophylactic regulation” that protects incumbents under the guise of promoting competition. Regulatory certainty is a competitive asset; when market participants cannot predict the outcome of a review or the nature of mandated remedies, they rationally discount the value of European opportunities.

The proper function of the regulator is to preserve the conditions for innovation to flourish - contestability, competitiveness, and access to essential inputs - rather than to ordain market structures by administrative fiat. By embracing the complexity of the innovation economy and providing a predictable pathway for scale, the Commission can signal that European markets remain open to the investment required to reverse the continent's relative decline. Innovation must serve as the lodestar for this transition, ensuring that Europe remains a nexus of technological dynamism in the 21st century.

• 1European Commission, 'DRAFT COMMUNICATION FROM THE COMMISSION, Guidelines on the assessment of mergers under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings', (Public Consultation Document, 30 April 2026) https://competition policy.ec.europa.eu/document/download/46dde10f-85c1-4590-a3f4 2b71f85685ef_en?filename=Merger%20Guidelines%20-%20final%20for%20public%20consultation.pdf accessed 12 May 2026.
• 2In 2019, the European Commission blocked a proposed mega-merger between the rail mobility divisions of Siemens and Alstom due to concerns over reduced internal competition. This veto intensified the “European champions” debate. Proponents, notably France and Germany, argued for relaxing EU competition rules to allow the creation of massive industrial giants capable of competing with state-backed global rivals like China. Conversely, the Commission and smaller Member States maintained that politicizing merger control to prioritize global scale would harm European consumers by creating inefficient domestic monopolies and stifling internal competition. See in this regard, Case M.8677 Siemens/Alstom (Commission Decision, 6 February 2019; European Commission, 'Mergers: Commission prohibits Siemens' proposed acquisition of Alstom' (Press Release, 6 February 2019) https://ec.europa.eu/commission/presscorner/detail/en/ip_19_881 accessed 12 May 2026.
• 3The parties’ argument was based on the idea of promoting a new, stronger “ecosystem” around Arm’s architecture, which could finally pose a credible challenge to the long-standing dominance of the x86 architecture used by Intel and AMD, particularly in the data centre and PC markets. See in this regard, NVIDIA Corp, SoftBank Group Corp, and Arm Ltd (Answers and Defences of Respondents) FTC Docket No 9404 (2021) 2, 5 https://www.ftc.gov/system/files/documents/cases/d09404_answer_and_defenses_of_respondentsv_nvidia_corporationsoftbank_group_corp._and_arm_ltd.pdf, accessed 12 May 2026.
• 4Mario Draghi, The future of European competitiveness: A competitiveness strategy for Europe (European Commission 2024).
• 5European Commission (n 1) para. 26.
• 6Justus Haucap, 'Merger effects on innovation: A rationale for stricter merger control?' (2017) DICE Discussion Paper No 268, 12.
• 7Alexandra Telychko, 'Innovation in High-Tech Mergers: Should Competition Law Bother?' in Klaus Mathis and Avishalom Tor (eds), Law and Economics of the Digital Transformation (Springer 2022) 248.
• 8Case C-376/20 P European Commission v. CK Telecoms UK Investments Ltd [2023] ECLI:EU:C:2023:561, para. 87.
• 9Federal Trade Commission v Meta Platforms Inc,. et al, Case No 5:2022cv04325 (ND Cal 2023) 41.