The Brussels Bet: How Europe’s Merger Reform Could Birth Global Champions—or a Cartel in Disguise

In the autumn of 2025, three of Europe’s proudest industrial names—Airbus, Thales, and Leonardo—did something that would have seemed improbable a decade ago. They agreed to pool their satellite businesses into a single entity, provisionally codenamed “Project Bromo,” with combined revenues of roughly €6.5 billion and a workforce of 25,000 engineers spread across the continent. The target was unmistakable: SpaceX, whose Starlink network had already launched more than 10,000 satellites into orbit and was rewriting the rules of communications sovereignty across Europe and beyond.

Project Bromo is not merely a corporate transaction. It is a political statement—and perhaps the most vivid preview yet of the logic animating the European Commission’s landmark review of its EU merger guidelines, the first substantial overhaul since 2004. With a draft of the revised framework expected imminently in spring 2026 and final adoption pencilled in for later this year, Brussels is preparing to make a calculated wager: that the old orthodoxy of pure consumer-welfare competition law is no longer fit for a world where geopolitical rivalry, technological scale, and strategic autonomy have become existential concerns.

It is a wager worth examining with clear eyes—because the upside is a genuinely competitive, innovation-driven European economy, and the downside is something considerably less flattering: a continent that dressed up industrial protectionism in the language of strategic necessity.

What’s Actually Changing—and Why Now

The architecture of EU merger control has not changed at its foundations in over two decades. The 2004 Horizontal Merger Guidelines set out a framework rooted in the “significant impediment to effective competition” test—essentially asking whether a proposed deal would harm consumers through higher prices, reduced choice, or diminished innovation. It was a coherent, principled framework, and for much of the post-Cold War era, it served Europe reasonably well.

What it was not designed to do was navigate a world in which a single American entrepreneur could deploy more communications infrastructure in three years than Europe had built in three decades, or in which Chinese state-backed industrial groups were assembling champions in semiconductors, green energy, and rail at a pace that made European fragmentation look almost wilfully self-defeating.

The Commission’s review is exploring whether and how merger control should incorporate considerations such as resilience, investment incentives, sustainability, defence and security, and other public policy considerations—a significant departure from the narrower consumer-welfare calculus of the original guidelines. In December 2025, EU Competition Commissioner Teresa Ribera indicated that the European Commission would adopt a more forward-looking and innovation-focused approach to deal reviews ahead of the publication of its final revised merger guidelines.

The intellectual scaffolding for this shift was erected most forcefully by Mario Draghi. His September 2024 report, The Future of European Competitiveness, delivered a searing diagnosis: Europe as a business location must not put companies at a significant competitive disadvantage compared to other markets. Draghi drew explicitly on the wreckage of the Siemens-Alstom case—the proposed 2019 rail merger blocked by the Commission despite the looming dominance of China’s CRRC, which had become the world’s largest train manufacturer. That decision had become a kind of shorthand for everything the critics believed was wrong with European competition policy: technically correct, strategically catastrophic. Draghi called for regulatory reforms to facilitate industry consolidation and mergers, joint procurement in defence, and a new trade agenda.

The Competitiveness Compass, issued on 29 January 2025, appears more willing than Draghi to loosen merger rules to support the creation of European ‘champions’—the Commission’s five-year strategic roadmap that translated the Draghi Report’s ambitions into political commitments. Von der Leyen’s mission letter to Competition Commissioner Ribera included an explicit mandate to modernise competition law to ensure that “innovation and resilience are fully considered” in merger assessments—language that would have been unthinkable in Brussels just ten years ago.

The Case for Thinking Big

Let us be honest about what the proponents of reform are actually arguing, because their case is stronger than the headlines typically allow.

The central contention is not that consumer welfare should be ignored—it is that the timeframes and metrics used to assess it have become dangerously myopic. When a European telecoms operator wants to merge with a domestic rival to fund the €20 billion in capital expenditure required to build out 5G infrastructure, blocking that deal on the grounds of short-term price effects is a form of economic self-harm. The counterfactual is not vigorous competition between two financially strained operators; it is a decade of underinvestment, patchy coverage, and continued technological dependence on equipment from Huawei or Ericsson.

There is insufficient broadband infrastructure because there are too many national mobile or telecoms operators that lack the scale to make the necessary investments, while mergers are sometimes prevented by European competition policy. This is the Draghi diagnosis applied to one sector, but the logic extends across the economy.

In semiconductors, in defence, in artificial intelligence, and in clean technology, the story is similar. European companies are individually too small to fund the research pipelines that their American and Chinese competitors sustain. Since innovation in the tech sector is rapid and requires large budgets, merger evaluations should assess how the proposed concentration will affect future innovation potential in critical innovation areas—a framing that asks regulators to think less like price watchdogs and more like industrial strategists.

The satellite sector offers the most vivid illustration of what scale can enable. Until now, Europe lacked a space industry player comparable in scale to the likes of SpaceX or Lockheed Martin in the US, or CASC in China. Project Bromo is explicitly designed to rectify that. The merger will use economies of scale to defend its profitable business building large satellites while building the capability to compete in the new LEO broadband market. The new entity is also positioned as the prime industrial contractor for IRIS², the EU’s sovereign secure communications constellation—a programme that is simultaneously a defence asset, a climate monitoring tool, and an assertion of European technological autonomy.

The Airbus model lurks in the background of all these discussions. When European governments pooled their aerospace industries in the 1970s to create what became Airbus, the move was derided in some quarters as socialist central planning dressed up as industrial policy. Half a century later, Airbus employs 134,000 people, generates annual revenues exceeding €65 billion, and competes with Boeing on genuinely equal terms. There is nothing theoretically absurd about applying that logic to satellites, or to artificial intelligence, or to battery technology.

Von der Leyen stressed the EU’s Competitiveness Compass, saying that “Every single Member State has endorsed the Draghi report,” while regretting IMF analysis results of “internal barriers” within the Single Market, “equivalent to a 45% tariff on goods and a 110% tariff on services.” When internal fragmentation imposes a tariff-equivalent burden of that magnitude, the argument for mergers that can transcend national boundaries becomes very difficult to dismiss.

The Risks That Brussels Must Not Minimise

And yet. The sceptics are not wrong to be nervous, and their arguments deserve more than a dismissive paragraph.

Finland, Ireland, the Czech Republic and two Baltic countries warned against loosening EU merger rules in response to calls by some companies for easier regulatory scrutiny of their deals in order to better compete with non-EU rivals. Their February 2026 joint note to fellow EU ministers was blunt in its pushback: “Size in itself should not be the primary objective” of mergers; efficiency, innovation, and fair competition matter more.

This coalition of smaller economies is not being parochial. They are articulating a genuine and historically grounded concern. The history of European industrial policy is littered with champions that became comfortable monopolists—companies that used state protection and regulatory forbearance not to innovate and compete globally, but to extract rents from captive domestic consumers and suppress more agile domestic rivals. France Télécom did not exactly cover itself in glory during its period of dominance. European banking consolidation in the 2000s produced institutions that were too big to fail and too slow to evolve. The Alstom that Siemens wanted to acquire was itself a partially failed privatisation experiment.

There is a growing push from certain quarters to weaken merger control—ostensibly to spur greater investment and innovation, higher productivity and growth, or the creation of European champions. The CEPR economists who penned that warning are not ideological zealots for consumer welfare. They are registering a legitimate empirical concern: that the evidence linking larger firm size to higher investment, greater innovation, and better consumer outcomes is significantly weaker than the industrial-policy lobby suggests.

The telecom sector is the test case most frequently invoked by reform advocates—and it is also where the evidence is most contested. The five dissenting countries dispute telecom claims that consolidation boosts investment, calling the evidence inconclusive. What we do know from multiple markets is that reducing the number of mobile operators from four to three reliably produces higher prices for consumers. Whether those higher prices are eventually offset by better network investment is an empirical question that depends heavily on the regulatory environment, the specific market, and the commitments extracted at the point of merger clearance—not a general principle that can be assumed away in the guidelines.

There is also a subtler risk: that the champions framework becomes a vehicle for the largest incumbents to capture the regulatory process. Competition Commissioner Ribera has been admirably clear that the reforms are not intended to “shield” European companies from competition. Ribera has made many public statements that EU competition policy and enforcement should support the global competitiveness of European firms, but they should not be loosened to shield those firms from competition to create European champions. The question is whether that intention survives contact with the lobbying reality of Brussels, where defence contractors, telecoms operators, and technology companies are already positioning themselves to benefit from any loosening of the framework.

The Geopolitical Stakes: Why This Cannot Be Ignored

To understand why this debate has acquired such urgency in 2026, one must look beyond the competition law textbooks to the shifting architecture of the global economy.

The world that produced the 2004 Merger Guidelines no longer exists. That world assumed a stable, rules-based international trading system; cheap Russian energy underpinning European industrial competitiveness; and a transatlantic security relationship robust enough to allow European defence spending to remain at modest levels. All three pillars have crumbled simultaneously. The return of tariff-based industrial policy in the United States, China’s increasingly assertive mercantilist strategy, and Russia’s weaponisation of energy dependencies have collectively forced Europe to rethink assumptions it had treated as permanent.

The Draghi Report comes at a moment when the return of expansive industrial policy by the United States and China has caught the European Union flat-footed. Europe’s economic model has been premised on establishing an open and competitive market that benefits from free trade in a rules-based international system. That premise is now a strategic vulnerability as much as it is a principled commitment.

In defence, the pressure is most acute. European governments are under intense political pressure to scale up military production, reduce dependence on American platforms and munitions, and build an indigenous industrial base capable of sustaining a prolonged conflict if necessary. None of that is achievable with the current fragmentation of European defence industry—dozens of national champions competing on essentially national scales for essentially national contracts. Consolidation is not a luxury here; it is a security imperative.

In artificial intelligence, the gap with the United States is stark and widening. European AI research is world-class at the laboratory level; European AI companies are systemically under-capitalised at the commercial level. The challenge is not talent or ideas—it is the ability to assemble the compute infrastructure, the data assets, and the investment capital to convert laboratory breakthroughs into commercial-scale deployments. Larger firms, with deeper balance sheets and broader data access, are better positioned to make that conversion. The argument for consolidation in European AI is correspondingly stronger.

The proposed merger of the space business of Airbus, Thales and Leonardo to create a European satellite company capable of competing with Elon Musk’s SpaceX is likely to be a key development in 2026. The deal could provide a blueprint on the assessment of combinations involving European companies in strategic sectors. How the Commission handles Project Bromo will send a signal about the credibility of the entire reform programme—and about whether Brussels can calibrate the framework to reward genuinely strategic consolidation rather than simply providing cover for anti-competitive consolidation dressed up in the language of sovereignty.

My Verdict: Necessary, But Only Half the Answer

After examining the evidence, the lobbying, the institutional history, and the geopolitical context, my conclusion is this: the reform is broadly necessary but dangerously incomplete without accompanying measures that its proponents are not yet willing to discuss with equal candour.

The case for updating the 2004 guidelines is overwhelming. A framework that treats all efficiency arguments with the same scepticism, regardless of whether we are talking about a grocery chain merger or a satellite manufacturing consolidation designed to counter Chinese and American state-backed competitors, is not analytically coherent. The world has changed. The guidelines should reflect that.

But the reform will succeed only if three conditions are met simultaneously—and currently, only one of them is receiving serious attention.

First, the revised guidelines must embed robust, sector-specific criteria for assessing dynamic competition rather than simply inviting “innovation effects” as a general get-out clause that any large company can invoke. The Commission has good instincts here, and the stakeholder workshops held in December 2025 and January 2026 suggest that DG Competition understands the risks of opening the door too wide. The draft guidelines are expected to clarify how merger control should assess transactions in markets where competition takes place through research pipelines, technological capabilities, or access to data rather than traditional price competition. That is the right focus. It should be executed with precision, not generosity.

Second, and far more important, any relaxation of merger scrutiny must be paired with the completion of the Single Market. This is the point that the champions debate consistently obscures. European companies are not small because they are over-regulated—they are small because they operate in a fragmented market that prevents them from achieving the scale that the Single Market was theoretically designed to provide. Von der Leyen herself has acknowledged IMF analysis showing internal barriers within the Single Market “equivalent to a 45% tariff on goods and a 110% tariff on services.” Relaxing merger rules without dismantling those internal barriers simply rewards consolidation at the national level rather than creating genuinely European-scale companies. It would produce German champions, French champions, and Italian champions—not European ones.

Third, the governance framework for assessing “strategic” mergers must be ring-fenced from political interference with exceptional care. The moment that member state governments can effectively lobby for the clearance of a merger on “strategic” grounds—as opposed to the Commission making an independent, evidence-based assessment—the entire framework is at risk of capture. The Siemens-Alstom case is remembered as a story of bureaucratic timidity; it is less often recalled that the French and German governments were loudly demanding clearance. Had the Commission caved to political pressure then, the principle of independent merger review would have been significantly weakened. The same risk attaches to the reformed guidelines, at greater scale.

One year after the publication of the Draghi report, out of 383 recommendations, only 43 had been fully implemented, with 87 still untouched. That implementation gap matters enormously in this context. Reforming merger rules is, in Brussels terms, relatively tractable. Completing the Single Market, deepening the Capital Markets Union, and aligning national industrial policies behind common European objectives are profoundly difficult. If the Commission delivers on the former while making only rhetorical progress on the latter, it will have produced not European champions but European oligopolies—companies large enough to dominate European markets but not genuinely competitive on the global stage.

A Final Word: The Stakes of Getting This Right

The Siemens-Alstom decision of 2019 has become a kind of original sin in this debate—the moment when European competition policy, in the eyes of its critics, chose textbook purity over strategic realism. The reformers are right that the world has moved on since then. They are right that Europe cannot sustain its current fragmentation in sectors where the United States and China are deploying state resources at a scale that no European company, operating at a national level, can match.

But the lesson of industrial policy, throughout modern economic history, is not that it never works—it is that it works only when the politics are disciplined enough to resist capture by incumbents, the institutions are strong enough to enforce accountability, and the internal market conditions are deep enough to turn national consolidation into genuine cross-border competitiveness.

Project Bromo is a promising template. It is cross-border, strategically motivated, and explicitly designed to compete globally rather than to dominate domestically. If the Commission’s revised merger guidelines create conditions in which more mergers of that character can proceed, while maintaining robust scrutiny of deals that would primarily serve to eliminate domestic competition, then this reform will deserve to be remembered alongside the creation of Airbus as a genuine exercise in European industrial statecraft.

If, on the other hand, the guidelines become a mechanism through which large incumbents can neutralise smaller rivals under the banner of “strategic necessity,” Europe will have traded one kind of competitive failure for another—and the consumers and startups who currently benefit from the continent’s still-vigorous competitive markets will pay the price.

Brussels is placing a bold bet. The odds, for once, are not entirely unfavourable. But a half-reformed competition framework, without a completed Single Market to give it meaning, is not a European champion strategy. It is a European cartel strategy with better branding.