Just got the new EU merger guidelines. Still working through them. Sharing some first reactions. Tl;dr: this is a more complex document than headlines are likely to suggest. Some things I didn't expect. Some things I feared are in there. Thread 🧵 1/ ec.europa.eu/commission/pre…

Dynamic efficiencies seem to get a real evidentiary framework. There's also "evidentiary symmetry principle" where harm and claimed benefit should meet the same standard (rather than systematically making it harder to prove benefits). Will it actually be applied? 2/

The "innovation shield" is basically a safe harbor for startup acquisitions, but it operates only when the acquirer has <40%. This leaves out some of the buyers w deepest pockets and most likely to buy. I guess Brussels fears US Big Tech more than it wants startups to scale. 3/

Now the worrying part. The general innovation competition theory lets the Commission find a problematic merger before any product market is even defined using something called "innovation spaces". This is going to be hard to rebut. Probably deliberately so. 4/

The entrenchment theory... As far as I can read it: dominant acquirer + "related" asset that's "important to compete" = potentially blocked. No market share floor, no mechanism requirement. That's a very wide net. Likely type 1 errors. 5/

The guidelines expand what counts as a "competition parameter": sustainability, resilience, innovation potential. When there's no methodology for measuring harm on these imponderable dimensions, you've essentially given the Commission discretion to weigh almost anything. 6/

One such dimension is "global competitiveness." This one makes me uneasy. The logic is: EU firms need scale to compete globally. This isn't wrong in industries with high fixed costs. But "competitiveness" is also the oldest fig leaf in industrial policy.7/

Meaning...without a clear limiting principle, this could easily become a tool for approving EU champion mergers while blocking foreign ones. Hopefully not. But the framework invites it. 8/

First take: genuinely mixed doc. Recognition of scale and dynamic efficiencies is progress...in principle. But some theories are more speculative than I'm comfortable with and are too easily turned into political tools. A lot depends on courts. Will keep reading. /end

Paragraph 20 of the Merger Guidelines says the Commission will make an "overall assessment" of mergers based on a series of competition parameters, including non-price parameters that it acknowledges cannot be quantified.

It further says it enjoys a margin of discretion in weighing these parameters against each other — which it later describes as "incommensurable" (paras 300, 342).

"Incommensurable" refers to things that cannot be evaluated against each other because they lack a common standard of measurement. Apples and oranges.

So let me get this straight: in deciding whether a merger should go ahead, the Commission is going to (i) measure the unmeasurable and (ii) compare the incomparable.

So, what we are witnessing is the transformation of a legal standard into a discretionary judgment.

This is great if you think the Commission is infallible. Less so if you happen to like the rule of law, legal certainty, and predictable, universal standards.