Goodwin’s Submission in Response to the European Commission’s Public Consultation on the Draft Guidelines Accompanying Council Regulation (EC) No 139/2004 on the Control of Concentrations Between Undertakings

Introduction

Goodwin welcomes the opportunity to respond to the European Commission (the “Commission”)’s public consultation on the draft guidelines accompanying Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (the “Draft Guidelines” or “Guidelines”). We submit these observations on our own behalf and informed by our experience advising acquirers, financial sponsors, and innovation-driven undertakings across the technology, life sciences, and digital sectors. The consultation affords stakeholders a valuable opportunity to engage with the Commission on the substantive concepts and procedural mechanisms that will govern EU merger control for the coming decade.

The Draft Guidelines, published on 30 April 2026, consolidate two decades of decisional practice and articulate, with welcome transparency, the analytical frameworks through which the Commission assesses concentrations. In several respects, the Draft Guidelines represent a material improvement over the instrument it replaces and advance the twin imperatives of administrability and legal certainty. We offer the following observations in that constructive spirit. They are directed to four discrete provisions where, in our respectful submission, the current drafting risks undermining the very certainty the exercise is intended to secure, and where modest refinement would materially improve the proportionality and predictability of the framework without diminishing the Commission’s capacity to address genuine competitive harm.

First, we address the innovation shield, and in particular our concern that the current formulation does not operate as a genuine safe harbour. Second, we address the reverse killer acquisition theory of harm, the evidentiary basis of which is in our view insufficiently bounded. Third, we address the entrenchment and ecosystem theory of harm, which presently lacks the limiting principles necessary to confine it to cases of genuine competitive concern. Fourth, we address the treatment of common ownership, which in its current form imposes unworkable compliance obligations on fund sponsors and other institutional investors. We address each in turn.

The Innovation Shield Does Not Operate as a Safe Harbour

The Draft Guidelines provide that the Commission “in principle does not find a[n] SIEC” where the conditions of the innovation shield are satisfied.¹ We respectfully submit that this formulation falls short of the safe harbour the provision is intended to furnish. A safe harbour, properly understood, is a commitment that assures parties that a transaction falling within its perimeter would not be challenged. The qualification “in principle” withholds precisely that assurance. It preserves the Commission’s discretion to pursue a significant impediment to effective competition (SIEC) finding even where every enumerated condition is met, yet it does not identify the circumstances in which that discretion would be exercised. The consequence is that an acquirer cannot determine, with the reasonable certainty that the provision is designed to deliver, whether a contemplated transaction will be cleared.

The final Guidelines should commit the Commission not to pursue a SIEC theory of harm where the shield conditions are satisfied, save in exhaustively enumerated exceptional circumstances. This is not a novel construction. The Draft Guidelines already deploy precisely this approach in relation to the 50% dominance threshold, and an analogous formulation for the innovation shield would deliver the legal certainty the provision is intended to provide.² A safe harbour qualified by undisclosed discretion is, in substance, no safe harbour at all.

Two further features of the shield require attention if it is to operate predictably. The first concerns the reference date. The shield conditions turn in part on the merging parties’ market shares and innovation space positions, but the Draft Guidelines do not specify the date at which those conditions are to be assessed. In the fast-growing digital, life sciences, and technology markets, a target that is immaterial at signing may be projected to reach a significant position within a short horizon, with the result that the shield would be unavailable in precisely the forward-looking transactions for which it was designed. The final Guidelines should establish the date of signing as the reference date for assessing the parties’ market shares and innovation space, with any forward-looking adjustment permissible only where the Commission demonstrates that a material change in market shares is both sufficiently certain and independent of the merger.³

The second feature concerns the carve-out for an acquirer that is “the largest firm in the relevant market or a gatekeeper”. Whilst a gatekeeper is well understood by reference to the Digital Markets Act, which establishes a legal framework for identifying undertakings that exercise significant control over digital markets through their provision of core platform services, the term “largest firm” is undefined by reference to any share threshold.⁴ On a narrowly drawn market, an acquirer holding only a modest position may nonetheless qualify as the largest firm in a fragmented space characterised by a long tail of suppliers and would thereby forfeit the shield’s protection despite holding no market power of the kind the carve-out is intended to capture. The final Guidelines should confine the carve-out to acquirers holding a market share of 40% or more in the relevant market, consistent with the Commission’s established framework, under which single-firm dominance is generally considered unlikely below that level.⁵

The Reverse Killer Acquisition Theory Requires a Bounded Evidentiary Standard

The Draft Guidelines confirm that the research and development (R&D) project at risk of discontinuation, delay or redirection may be that of either the target or the acquirer, and reason that a merger may heighten the incentive to discontinue an R&D project even where the project is at an early stage or remains a mere plan, on the basis that avoidable R&D costs are larger at that point.⁶ We do not question that a reverse killer acquisition could, in principle, be a cognisable theory of harm. Our concern is that, as presently drafted, the theory is not anchored to a disciplined counterfactual and is therefore insufficiently bounded.⁷

The difficulty is that this reasoning is too broad. Every early-stage R&D project entails avoidable cost and uncertain commercial return. Under the Draft Guidelines’ logic, the incentive to discontinue is greatest precisely where the project is most speculative and furthest from commercialisation. This creates a perverse result that virtually any acquisition of, or by, an R&D-active undertaking could be recharacterised as a reverse killer acquisition, because there will almost always be some early-stage initiative whose continuation is not assured. A theory of harm that applies to nearly every innovation-related transaction provides little practical guidance to merging parties. More troublingly, it invites enforcement action based on conjecture rather than concrete evidence.

The final Guidelines should therefore confine the theory by reference to four limiting principles. First, the Commission should be required to articulate a defined and evidentially grounded counterfactual, namely, that, absent the merger, the project would in reasonable probability have been carried forward to a competing product with a realistic prospect of commercialisation. Second, the analysis should rest on contemporaneous evidence of the parties’ intentions and capabilities, rather than on an ex-post reconstruction of incentives derived from the structure of the transaction. Third, the anticipated discontinuation, delay or redirection must be merger-specific. In other words, it should be attributable to the combination itself rather than to a rationalisation of the R&D portfolio that would, on the evidence, have occurred in any event. Fourth, the project must exhibit a sufficient degree of materiality and proximity to the market that its loss would represent a genuine, rather than a merely theoretical, diminution of competitive constraint. These principles are consonant with the standard of proof that the Court of Justice requires for prospective analyses of this character, which must be supported by convincing evidence and conducted with particular care.

The Entrenchment and Ecosystem Theory Lacks Limiting Principles

The Draft Guidelines articulate a theory of harm under which an acquisition may impede effective competition by reinforcing the acquirer’s position across an ecosystem of complementary products or services, thereby raising barriers to entry and deepening the incumbent’s entrenchment.⁸ We recognise that the integration of complementary assets can, in particular circumstances, give rise to foreclosure concerns.⁹ Our concern is that the theory as presently framed lacks the limiting principles necessary to distinguish such cases from the ordinary, and frequently procompetitive, expansion of a successful undertaking into adjacent activities.

Breadth of product range, scale and the assembly of complementary offerings are not, in themselves, indicia of competitive harm. In fact, they are also the hallmarks of vigorous competition and of the efficiencies that integration can deliver to consumers. A theory that treats the reinforcement of an “ecosystem” as harmful without more, risks condemning conduct that benefits consumers and chilling investment in the very innovation the merger regime is meant to protect. The absence of a defined mechanism by which entrenchment translates into a lessening of competition leaves merging parties unable to predict when integration will be regarded as benign and when it will be regarded as foreclosure.

The final Guidelines should anchor the theory in the established framework for the assessment of non-horizontal and conglomerate effects. In particular, the Commission should be required to demonstrate, on the basis of convincing evidence, the cumulative presence of three elements: (i) the ability of the merged entity to foreclose rivals; (ii) the incentive to do so; and (iii) a likely adverse effect on effective competition and, in turn, on consumers. The Guidelines should identify the specific mechanism, whether tying, bundling, the leveraging of data or control of an essential interface, through which the alleged entrenchment is said to operate, and should require that the efficiencies and procompetitive rationales of integration be weighed. Anchoring the theory in this manner would preserve the Commission’s ability to address genuine ecosystem foreclosure while ensuring that the theory is not deployed against integration that enhances, rather than impedes, the competitive process.

The Treatment of Common Ownership Imposes Unworkable Obligations

The Draft Guidelines treat common ownership, the holding of minority interests in competing undertakings by the same institutional investors, as a factor relevant to the competitive assessment, on the premise that overlapping shareholdings may soften rivalry between portfolio companies.¹⁰ We respectfully submit that the empirical foundation for this premise remains contested, and that its incorporation into the Guidelines as a settled analytical proposition is premature. More fundamentally, the provision in its current form imposes compliance obligations that are, for diversified asset managers, index funds and fund sponsors, unworkable in practice.

The holdings at issue are typically non-controlling, passive and, in the case of index-tracking vehicles, dictated by the composition of a benchmark rather than by any investment judgment directed at a particular issuer. Such an investor exercises no influence over the commercial strategy of its portfolio companies and has no plausible mechanism through which to soften competition between them. To treat the mere coincidence of such holdings as relevant to the assessment of a concentration would require a sponsor to map, as a condition of transacting, the complete common-ownership topology of every competitor of every portfolio company, an exercise that is neither feasible with the information available to the sponsor nor probative of any genuine competitive effect.

The final Guidelines should accordingly provide a clear safe harbour for non-controlling minority interests. We would encourage the Commission to exclude from the common-ownership analysis any holding that confers neither a controlling influence nor negative control rights, that carries no board representation, and that falls below a defined shareholding threshold, and, in any event, to disregard purely financial and passively managed holdings. Where the Commission considers that a particular constellation of holdings warrants scrutiny, it should be required to identify the specific mechanism, whether governance rights, board interlocks or channels of competitively sensitive information, through which the holdings are said to influence conduct, rather than to rest the analysis on the coincidence of ownership alone. So confined, the provision would address genuine concerns arising from structural links between competitors without imposing disproportionate and unworkable obligations on the broad universe of institutional investors whose holdings raise no such concern.

Conclusion

We commend the Commission for the Draft Guidelines that advance the transparency and administrability of EU merger control. The four refinements set out above, rendering the innovation shield a genuine safe harbour, bounding the reverse killer acquisition theory by reference to a disciplined counterfactual, anchoring the entrenchment and ecosystem theory in the established (albeit controversial) conglomerate-effects framework, and confining the treatment of common ownership through a clear safe harbour, would, in our respectful view, materially enhance the legal certainty and proportionality of the framework without in any way diminishing the Commission’s capacity to address transactions that give rise to genuine competitive concern. We would welcome the opportunity to engage further with the Commission on any of the matters raised in this submission.

We are grateful for the Commission’s consideration of these observations.