EU Compass: Boosting competitiveness as North Star
The European Commission recently presented its Competitiveness Compass to navigate the European Union to strengthened competitiveness. The Compass sets out three initiatives to reach this destination: (i) closing the innovation gap; (ii) introducing a joint roadmap for decarbonisation; and (iii) reducing excessive dependencies and increasing security. These initiatives are likely to affect the Commission’s competition law assessment and may lead to changes in foreign direct investment screening and outbound investment monitoring.
Background
The EU Competitiveness Compass, published on 29 January 2025, builds on the reports by Draghi and Letta on the future of European competitiveness. It is designed to “reignite economic dynamism in Europe”, amongst other things by setting out a number of proposed measures impacting the current enforcement of the competition law rules and of inbound and outbound investment rules.
Shift in focus in competition cases
According to the Compass, “rigorous and effective antitrust and merger enforcement” will help to close the EU’s current innovation gap (particularly when compared to the US and China). To protect fair competition and stimulate companies to innovate, a balance needs to be struck between ensuring a level playing field in the Single Market, whilst allowing companies to scale up in global markets.
To do so, the upcoming revised Horizontal Merger Guidelines will add “innovation, resilience and the investment intensity of competition in certain strategic sectors” as factors to be taken into account in the Commission’s assessment of horizontal mergers. The “changed defence and security environment” will also have a role to play in this assessment. Moreover, authorisation of transactions in strategic fields will particularly need to be accelerated.
Meanwhile, ‘killer acquisitions’ are likely to remain on the Commission’s agenda, given President von der Leyen’s emphasis on the cultivation of start-ups in the EU and Executive Vice-President Teresa Ribera’s mission to address “risks of killer acquisitions from foreign companies” (see our September 2024 newsletter).
At the same time, innovation will be further stimulated by clarifying how competition law will be enforced with regard to evolving markets and tech innovation through, first, the review of the Technology Transfer framework. The upcoming revised Technology Transfer Block Exemption and accompanying Guidelines will provide companies with “clear, simple and up-to-date rules for pro-competitive licensing agreements, thereby facilitating technology dissemination, incentivising initial R&D, and promoting innovation”. Second, the Digital Market Act’s enforcement is aimed to open up closed ecosystems and enable “innovative businesses to propose new digital services to customers”.
Competition law enforcement will, overall, need to be speedier and better targeted whilst not losing sight of the other initiatives mentioned in the Compass.
Outbound and inbound investment screening
According to the Compass, the current geopolitical competition and trade tensions call for a tighter integration of “security and open strategic autonomy considerations” into the EU’s economic policies.
Apart from accelerated authorisation of ‘strategic field’ transactions, companies can therefore expect more vigorous enforcement under the Foreign Subsidies Regulation of financial contributions granted by non-EU governments to companies active in the EU (see our September 2024 newsletter).
On top of this, national screening mechanisms of foreign direct investments in the EU are likely to be broadened in scope (see our February 2025 newsletter) and an additional EU-wide outbound screening mechanism is being considered. The Commission recently called on the EU Member States to review outbound investments made by their companies into non-EU countries in the key technologies of semiconductors, artificial intelligence and quantum technologies.
Conclusion
Closing the innovation gap is one of the Compass’ top priorities. To achieve this, competition law enforcement may soon provide more room for manoeuvre to companies wishing to innovate either through cooperation or by merging.
The upcoming Horizontal Merger Guidelines will clarify how to rely on innovation-related efficiencies and comfort on innovation-enhancing cooperation may be just a talk away. The Dutch Authority for Consumers and Markets (ACM), for instance, has indicated to be willing to talk to companies intending to cooperate on innovation and provide them with individual antitrust guidance.
At the same time, companies may be faced with higher – and possibly more – hurdles to cross. The Foreign Subsidies Regulation’s scrutiny will be more rigorous, national foreign investment screening mechanisms will be broadened in scope, and an additional EU-wide outbound screening mechanism may be on the way.
The Compass’ journey to its North Star of strengthened competitiveness is therefore unlikely to be smooth sailing only.
