A sharper arsenal: the Commission’s new theories of harm and what they mean for your deals

The European Commission (the Commission) published its new draft EU merger guidelines (the Guidelines) on 30 April 2026. In our blog, here), the draft Guidelines shy away from introducing any formal rebuttable presumptions around market power. Rather, they emphasise the need for a case-by-case assessment and state that no single factor is “individually decisive”. While this flexibility is a welcome development, ensuring a more objective assessment and protecting parties' rights of defence, the draft Guidelines do still suggest a shift in evidentiary burden that arguably contain a presumptive element (more on this below).

The draft Guidelines introduce several new aspects to the Commission's market power assessment, including:

• Market share qualifications are introduced (<10% is “low”; 10-25% is "moderate"; 25-40% is "material"; 40-50% is "high"; >50% is "very high"), the HHI benchmarks are broadly consistent with the prior guidelines, but are now integrated directly into the competitive assessment, and reference is made only to markets deemed unconcentrated (HHI of <1000) or highly concentrated (HHI of >2000).
• High profit margins are introduced as a new potential indicator of market power. The draft Guidelines suggest benchmarking margins "in more competitive comparable markets or those of peers within the same market" but equally note that industry-wide high margins "[…] [do] not necessarily indicate that the merging firms lack market power". It remains to be seen how workable the Commission's new approach towards profit margins is in practice, given several industries will have high margins and be intensively competitive at the same time.
• An assessment of "dynamic competitive potential" is introduced to cover scenarios where a static assessment of market power is insufficient. The Commission's focus here is on industries where R&D and innovation are an important parameter of competition, such as pharma or tech.
• Out-of-market constraints are now recognised as a potential countervailing factor for market power, alongside entry/expansion and buyer power, although their potential for negating market power is framed as typically being limited. Helpfully, imports are now specifically identified as a possible source of entry or expansion, creating a clearer link between the EU's trade policy and merger control practice. Any entry or expansion still needs to be sufficiently likely, timely and meaningful to be considered. 

The revised market power framework in the draft Guidelines makes clear the Commission wants to look beyond a static snapshot of markets and traditional indicators. The key practical takeaway is that deal teams will need to engage with a broader set of factors from the early stages of deal planning — both to pre-empt any questions from the Commission and to prepare the evidence needed to tell a compelling positive story.

A significantly expanded theories of harm framework

The 2004 Horizontal Merger Guidelines and 2008 Non-Horizontal Merger Guidelines organised anti-competitive effects by merger type — horizontal, vertical, conglomerate — with separate analytical frameworks for each. The new draft Guidelines discard this architecture. Eight standalone theories of harm now apply to all mergers, regardless of whether the parties are competitors, vertically related, or have no direct commercial relationship. Every transaction now requires a comprehensive theory of harm assessment from day one — not just the most obvious category. The legal tests themselves have not changed — but the theories of harm have become broader, and the range of potential objections the Commission can raise has expanded materially.

The eight theories cover the full spectrum of competitive harm. Loss of head-to-head competition — the traditional "unilateral effects" theory — remains the foundational theory and is carried over in substance from the 2004 Horizontal Merger Guidelines. However, even here, the draft Guidelines introduce material new content: dedicated treatment of network effects and multi-sided platforms, a structured framework for assessing labour market monopsony effects (for the first time, a merger between employers may be assessed for its impact on workers' wages and employment alternatives), the introduction of "pivotal capacity"as a quantitative tool for capacity-constrained markets, and — of particular importance for financial sponsors and institutional investors — a new structured framework for assessing non-controlling minority shareholdings and common institutional ownership as potential standalone competition concerns. For any transaction involving financial sponsors or institutional investors with broad sector portfolios, a shareholding audit is now part of the pre-signing checklist. Coordination — the traditional coordinated effects theory — is likewise preserved in substance but updated for the digital age, as discussed further below. The remaining six theories are either genuinely new or have been materially restructured.

What is new

Three theories have no real counterpart in the predecessor guidelines, several of which codify approaches the Commission has already tested in recent cases:

• Loss of investment and expansion competition. A merger may now be challenged on the basis that it reduces the merged entity's incentive to invest — even if the merged entity proceeds with all of its planned investments as originally intended. The theory is that removing a competitive spur reduces the drive to invest in the future. This will be particularly significant in capital-intensive sectors such as telecoms, energy, defence and infrastructure, where investment trajectories are a central competitive dynamic.
• Loss of innovation competition. The Commission no longer needs to identify a specific product that will be delayed or withdrawn. What matters is whether the merger impedes the process of innovation rivalry. This encompasses the explicit codification of the so-called "killer acquisitions" theory — acquisitions designed to eliminate a competitive R&D threat — as well as the concept of "reverse killer acquisitions" where the acquirer's own R&D is at risk. The theory can apply even at the level of overlapping R&D organisations, before any specific future product can be identified. For transactions in pharma, biotech, technology and other innovation-intensive sectors, this will be a central area of focus.
• Entrenchment of a dominant position. Where a company is already dominant in a core market, the acquisition of even a modest adjacent asset — data, technology, a distribution channel, or a complementary product — may now attract scrutiny under a new standalone entrenchment theory. The concern is that the acquisition structurally reinforces barriers to entry and reduces market contestability over time. Critically, this applies across all sectors, not just digital — any dominant company making an adjacency acquisition needs to assess whether the acquired assets have strategic importance to competitive dynamics in its core market.

What has changed in existing theories

• Foreclosure — a unified and expanded framework. The vertical/conglomerate distinction is gone. A single framework now covers input foreclosure, customer foreclosure, and conglomerate foreclosure under the same analytical template. The catalogue of foreclosure mechanisms has been substantially expanded. Where the previous guidelines described foreclosure in relatively general terms — refusal to deal, restriction of access, quality degradation, technology incompatibility — the new draft Guidelines add an explicit list that includes data restriction, interoperability restrictions, delayed product releases, preferential access to the merged entity's own affiliate, degraded post-sale services, and impeding rivals' pipeline products from reaching the market. The draft Guidelines also introduce the concept of dynamic foreclosure incentives — the idea that a merged entity may have strategic reasons to degrade rivals' access to inputs, customers or complementary products over time, even where traditional profitability analysis would not support a profitable foreclosure strategy in the short term. In digital, data-driven and platform markets, this fundamentally changes the analytical terrain. And the new concept of diagonal mergers opens up a further analytical test: where one party controls a product or customer base accessed primarily by the other's rivals, foreclosure scrutiny now applies even in the absence of any vertical supply relationship.
• Loss of potential competition — tightened and expanded. The guidance on incumbent/potential entrant combinations has been substantially expanded. The draft Guidelines now distinguish between removal of an “actual constraint” — where the potential competitor is already visibly influencing the incumbent's behaviour today — and removal of a "future constraint" — where the potential competitor could enter the market at some point in the foreseeable future. Critically, the draft Guidelines explicitly state that the relevant time period for future constraint is not limited to any fixed number of years. For dominant companies considering acquisitions of firms that could plausibly become competitors, this is a material tightening — the larger the incumbent's market power, the more the Commission will prioritise preserving even a distant potential competitive threat.
• Coordinated effects — updated for the digital age. The core Airtours conditions are preserved, but the list of factors facilitating coordination has been substantially expanded. Most notably, the use of AI, advanced algorithms, and automated pricing tools is now explicitly identified as a factor that may facilitate tacit coordination. The Commission singles out the use of a common external provider of automated pricing decisions as a specific coordination risk. In markets where algorithmic pricing is prevalent — energy, financial services, retail — this will require careful analysis that goes well beyond traditional coordinated effects frameworks.
• Other anticompetitive effects — access to commercially sensitive information and portfolio effects. The draft Guidelines introduce a miscellaneous eighth category covering two distinct sub-theories. The first — access to commercially sensitive information — is a material elevation of what was previously a single paragraph in the 2008 Non-Horizontal Merger Guidelines.  The catalogue of sensitive data is broad, ranging from pricing to rivals' pipeline products and "other competitively relevant data". Critically, the draft Guidelines make clear that access to this information can give rise to a SIEC even in the absence of any foreclosure — it no longer needs to sit within a vertical or conglomerate theory of harm. Neither regulatory nor contractual safeguards — such as information barriers or data protection rules — are treated as safe harbours. The second sub-theory — portfolio effects — is also elevated to a structured standalone concern for the first time, targeting mergers that combine products across different markets in a way that strengthens the merged firm’s bargaining position vis-à-vis customers, even where those products are neither substitutes nor complements.

A note on the evidential framework

The draft Guidelines also introduce a differentiated evidential standard that cuts across all of these theories. Where combined market shares are high or very high, or post-merger HHI exceeds 2,000, the practical burden falls on the merging parties to produce substantial evidence pointing away from a SIEC — the Commission can rely heavily on structural indicators. This stops short of a formal legal presumption (consistent with the CK Telecoms judgment), but materially changes how investigations play out, particularly in Phase II. The evidential burden for parties remains high, particularly for some of the newer, less articulated theories of harm which are untested in practice and where the underlying legal test for the Commission is unchanged. The path to clearance in high share transactions requires a thorough upfront analysis across a wider range of potential harms, and strong evidence to support any claimed benefits — evidence that will need to withstand scrutiny from the Commission, customers and other market participants.

What this means in practice

Three priorities stand out for deal teams:

• Map theories of harm at deal origination, not at notification. A strategy to address competitive risks that would not previously have registered  — loss of investment competition, entrenchment, diagonal foreclosure, dynamic foreclosure incentives — may now be decisive.
• Build the affirmative case for clearance from day one — do not wait for the Commission to articulate its concerns, but pro-actively work on a positive efficiencies case to counterbalance anticipated concerns. Ensure any claimed benefits are supported with strong corroborating evidence, including internal documents prepared in the ordinary course, economic analysis and reports by industry experts.
• Identify innovation space overlaps and pipeline competitor landscapes early. For the right transactions, the new innovation shield framework (as discussed in our first blog) provides meaningful protection against full-blown innovation competition scrutiny. But the conditions for the shield are novel and untested — careful upfront analysis is essential.

As we noted in our earlier blog, the new framework creates new opportunities for dealmakers. The innovation shield offers a genuine path to clearance for start-up acquisitions where overlaps are genuinely limited; the explicit recognition of investment, innovation and resilience as positive parameters creates more room to tell a pro-competitive story; and the clearer evidential framework — whatever its limitations — at least gives parties a better sense of where they stand. But the framework also leaves significant questions unanswered: the boundaries of several new theories remain untested, the evidential threshold for some of the more novel concepts is deliberately open-ended, and the Commission retains wide discretion in areas where precision would have been welcome. Navigating that combination of expanded opportunity and genuine interpretive uncertainty is not straightforward — and getting the analysis right from day one, before signing rather than after, is what will determine whether a transaction benefits from the new framework or is disadvantaged by it.

The Commission is expected to apply these principles from now, ahead of formal adoption. There is no benefit to waiting — please do reach out to your usual Freshfields contact to work through implications for your transactions.