Sustainability concerns in EU merger control: from output-maximising to polycentric innovation competition

Abstract

Abstract This article examines whether sustainability concerns play and should play any role in EU merger control. While competition authorities have commenced exploring pathways to excuse prima facie anticompetitive mergers on sustainability grounds, little progress has been made in setting out whether and under which conditions mergers that adversely affect sustainability parameters can be found anticompetitive. Under the EU merger control regime, the adverse effects of mergers on sustainability are only cognizable as innovation-related issues, as recently evidenced in Dow/Dupont and Bayer/Monsanto. In these cases, the Commission pioneered a novel approach aimed at predicting the impact of a merger not only on prices but also on innovation competition. This theory of harm, although a welcome improvement to the current framework of merger analysis, fails to accommodate all competition-relevant sustainability concerns because of its exclusive focus on innovation capabilities, efforts, and output. On this basis, we argue that innovation competition should not be understood only as an output-maximizing device but also as a polycentric process under which independent decision-makers pursue various innovation paths. Such an approach gives prominence to the diversity, quality, and direction of innovation and constitutes an alternative to the predominant output-centred understanding of innovation. To operationalize this notion of innovation competition as a polycentric process we explore four pathways: adopting quality-related and sustainability-sensitive innovation metrics; using indicators of industry-wide structural effects; endorsing a structural filter; and protecting nascent competitors. Adding such an approach to the existing analytical framework would, arguably, enable the Commission to deal with all sustainability concerns related to the notion of innovation competition.