On September 3rd, 2025, Telefónica submitted its contribution to the consultation on the review of the EU Horizontal and Non-Horizontal Merger Guidelines. We welcome the Commission’s initiative, as this review marks a unique opportunity to reshape Europe’s competitiveness. Seizing this moment is essential to foster a merger control framework that supports innovation, resilience, and strategic autonomy in the EU.
The key points of Telefónica’s contribution to this relevant review are the following:
From Static economic analysis to Dynamic Efficiency in EU Merger Control
As outlined in our previous post, the Commission has traditionally adopted a static economic approach to merger analysis, placing excessive emphasis on short-term price effects and the number of players in a market. This narrow focus has often overlooked the other parameters of competition that conform consumer welfare—quality, innovation, and choice—which are essential to fostering the dynamic dimensions of competition.
Therefore, a more holistic and forward-looking economic approach is needed to consider all dimensions of consumer welfare which is the ultimate objective of merger control. An alternative approach to understanding the market is the dynamic efficiency approach.
By shifting the focus to the supply side—examining how firms and sectors operate in the markets—, the dynamic efficiency approach acknowledges that competition unfolds across multiple dimensions, including quality, innovation, and service differentiation, not just price. This enables a thorough analysis of companies’ ability and incentives to invest and scale up in relevant markets.
Telefónica proposes to apply the dynamic efficiency approach in all stages of the merger control analysis:
- in the identification of the loss of competition: by considering whether the merger creates sufficient conditions for competition in all dimensions of consumer welfare and not just prices,
- in the analysis of efficiencies: by extending the timeframe for the effects according to the features of each market and under a holistic assessment
- and eventually, in the remedy design, by imposing pro-investment and pro-innovation remedies.
How should this new approach be reflected in the reviewed Merger Guidelines?
Competitiveness and resilience: merger control should consider productivity and strategic autonomy objectives
The Guidelines should take into account mergers’ impact on competitiveness. A necessary and preliminary step for this, involves the assessment of supply side of companies and sectors, i.e. the identification of the production function of each sector.
For instance, in telco, the take up is our “function of production” impacting productivity. For network operators to operate and deploy a network, it is necessary to ensure a minimum take up – a certain number of customers within the network. When telecom operators decide to merge, the expectation is to achieve more scale (i.e. take–up) in the relevant markets, to increase the customer base of the network in order to get higher return on investment to innovate. Depending on the case, relevant markets might be local, regional, national, European or even global.
Resilience should also be considered by merger control when it affects consumer welfare; for instance, when critical infrastructures acquire through mergers the capability to resist stress tests.
Market power and structural features: static structural indicators and presumptions do not fit to analyze dynamic markets
Telefónica believes that current structural market indicators to assess market power are only useful for evaluating the static efficiency of the market and sacrifice the full analysis of consumer welfare.
The assessment of potential anticompetitive effects of transactions should be done on a case-by-case basis and not relying on economic or legal presumptions.
Innovation and other dynamic elements: focus should be on the incentives and ability to invest and innovate
Telefónica contends that the only way to assess whether merging parties would have the incentives and ability to continue investing in innovative and better products and services is by properly analysing the supply side of the particular company or sector, under the parameters of the dynamic efficiency approach.
Sustainability and clean technologies: merger control to help the green transition
Although sustainability has not traditionally been viewed as a parameter of competition, consumers are increasingly valuing more sustainable products and services. As a result, companies such as Telefónica are progressively integrating sustainability objectives into their strategies—often competing to offer more sustainable solutions.
Sustainability considerations are key in the assessment of efficiencies, including those that may be directly passed on to consumers within the market or, more broadly, the so called “out of market efficiencies” as sustainability externalities benefit a wider range of consumers across markets and society as a whole.
Digitalisation: a key public policy objective and economic sector that requires deeper understanding
Telefónica believes that the revised Guidelines should clearly distinguish between two aspects of digitalisation. First (i), digitalisation as a cross-sector objective, to be assessed in competition analysis as both an effect of a transaction and a driver of innovation that can generate efficiencies to offset potential negative impacts. Second (ii), digital markets and activities directly linked to digital products or services, where it is essential to understand business models and market dynamics specific to the digital sector.
Efficiencies: trying to find a workable test to effectively consider merger benefits
Telefónica advocates for a less rigid approach in the assessment of efficiencies. The Commission needs to set a balanced standard of proof in the assessment of efficiencies and theories of harm, built upon a rigorous analysis and knowledge of the production function of the companies involved – otherwise it makes it harder to recognise efficiencies based on long-term investment strategies. Moreover, in order to fulfil the mandate of the Mission Letter, it is key for the Commission to recognise out-of-market efficiencies, i.e. those that indirectly benefit a wider number of consumers across markets and society as a whole.
Public policy, security and labour markets considerations: only relevant for merger control to the extent that consumers care, and companies compete about it
Public policy objectives should only be considered in the competitive assessment to the extent consumers take them into consideration and companies compete in relation to them in the relevant markets. Moreover, public policy objectives may also be taken into account in efficiency analysis (as in-market or out-of-market efficiencies).
The path forward for EU Merger Control
All in all, Telefónica believes this review, together with the application of the new approach in specific cases, is a unique opportunity for the Commission to make a real change in the way it assesses mergers in the EU, fostering European companies be more competitive and drive investment and innovation. In addition, the review of the Merger Guidelines should pave the way for a future review of the EU Merger Regulation (EUMR) and the remedies Notice, consolidating in this way the new approach.
In the next posts we will delve deeper into each of these topics in greater detail, starting with Competitiveness and resilience.
