BRUSSELS — Commission President Ursula von der Leyen’s plan to create European companies that can compete at a global scale against U.S. and Chinese rivals is raising fears that executives may use the policy to justify mergers that would normally be blocked.

Following recommendations from former Italian Prime Minister Mario Draghi on how to build world-beating European companies, von der Leyen has pressed her competition chief Teresa Ribera to come up with a proposal this month to overhaul the way officials review companies’ proposals to merge with others.

The Commission president has signaled that she wants to give equal standing to resilience — the ability to withstand supply shocks — when reviewing merger deals, alongside their impact on competition and innovation.

CEOs with merger ambitions are already tasking highly paid advisers to craft narratives around the concept, which also serves strategic priorities like economic security and reducing dependence on expensive, unreliable and climate-harming fossil fuel imports.

But critics — including antitrust officials — are wary of applying this criterion too broadly in merger decisions.

“There is a real risk of resilience-washing,” former EU competition chief economist Tommaso Valletti told POLITICO. He added that the catchword was being used to dress up deals that are bad for competition.

“Resilience comes from diversification and redundancy: Fewer players mean more dependence, not less,” said Valletti, who led the Commission’s economic analysis of mergers between 2016 and 2019.

“If a merger leaves you relying on one large supplier for critical inputs, that is fragility, not resilience,” he added, while declining to comment on specific deals.

Staying alive 

The EU’s merger rules are aimed at preventing corporate behemoths from gaining the kind of market power that would enable them to gouge consumers and stifle smaller players across the supply chain.

Not even the backing of two political heavyweights like France and Germany was enough to change the Commission’s mind when it blocked a deal between trainmakers Siemens and Alstom in 2019, on the grounds that it would harm competition in markets for railway signaling systems and high-speed trains.

That has since changed, and today’s Commission says it is more open to hearing out pitches for deals that advance innovation or make the EU supply chain stronger. The new thinking will be enshrined in new merger guidelines — a non-binding instruction manual — on how to judge such deals.

France’s antitrust chief Benoît Cœuré worries about companies using the resilience umbrella to advance claims that had nothing to do with an antitrust assessment. “Resilience is not an open bar,” he told POLITICO.

The Commission’s competition department is yet to define how it would weigh resilience in a merger assessment and has specifically called for feedback on this point. Early signs point to a cautious approach: “There are still more questions than answers,” the department’s deputy director general for mergers, Guillaume Loriot, told an event at the OECD in Paris in February.

Loriot is a key decision-maker when it comes to the Commission’s vetting of mergers. He is also under pressure to deliver a first draft of the revamped guidelines in April, after von der Leyen’s call to advance the timeline.

Von der Leyen’s thinking is in line with that in Berlin and Paris, which have been lobbying for looser merger rules. 

A group of 46 French and German corporate bosses wrote to their heads of government last October, calling for an urgent change in the merger rules to allow for European champions. Their call was recently backed by the heads of leading Portuguese companies, who said that competition policy is holding continental champions back. 

But opposition is mounting from other EU countries, which suspect that the European champions being touted are, in reality, French and German ones in disguise.

“Europe’s global strength comes from open and contestable internal markets, not from companies that have been allowed to concentrate national or EU markets at the expense of competition,” reads a joint position paper spearheaded by Finland and backed by eight of the EU’s smaller and more open economies.

Managing expectations

Competition chief Ribera has stated that she would not give a free pass to deals that harm competition and consumers. The Spanish socialist and von der Leyen’s number two in the Commission has also narrowed the scenarios where arguments around resilience may fly. 

A merger that is good for resilience, for example, would create a European contender in a global market dominated by a foreign player. In that scenario, “a merger can enable a European alternative or increase European firms’ negotiating power towards non-EU suppliers,” she told a recent conference in Berlin.

An attempt by Airbus and continental peers Leonardo and Thales to create a €6 billion satellite champion could fit that description — as Elon Musk’s SpaceX extends its lead.

The three companies have pitched a deal to create “a unified, integrated and resilient European space player, with the critical mass to compete globally and grow on the export markets.” They are, however, still entangled in talks with EU competition officials, amid criticism from their only remaining competitor, Germany’s OHB.

Deals in the defense space may have better chances if they play the resilience card, according to Oliver Bretz of Euclid Law. “Companies may be successful if they argue that their deals will bolster continuity of supply for critical capabilities,” he said.

CORRECTION: An earlier version of this report misstated Guillaume Loriot’s title. It was updated April 7.