Strict Competition Policy Is Not a Barrier to Firm Growth

Europe should reconsider plans to weaken its merger control rules, as evidence suggests stricter competition policy does not prevent the growth of large firms and may instead support long-term market stability and innovation.

The warning comes from a new analysis published by the Centre for European Policy Studies (CEPS) on March 24, 2026, which reviewed merger outcomes across the European Union over the past decade. The study found that despite having some of the world’s most rigorous merger review processes, the EU has seen consistent growth in the size and market concentration of leading firms in sectors such as technology, pharmaceuticals, and telecommunications.

Contrary to the argument that strict merger rules hinder corporate expansion, the CEPS report shows that large firms have continued to grow through internal investment, innovation, and strategic partnerships rather than relying solely on acquisitions. Between 2016 and 2025, the top 10 firms by market capitalization in the EU’s technology sector increased their average size by 68%, even as the European Commission blocked or required remedies in 22% of notified mergers — a rate higher than in the United States or China.

“There is no clear evidence that preventing certain mergers stops companies from becoming large,” said Maria Lutz, senior fellow at CEPS and lead author of the report. “What we see instead is that firms adapt. They invest more in R&D, expand into adjacent markets, and grow organically when acquisition paths are restricted.”

The analysis comes at a time when several EU member states, including France and Germany, have called for a more permissive approach to mergers, arguing that current rules put European companies at a disadvantage compared to counterparts in the U.S. And China, where state-backed consolidation is more common. Proponents of reform argue that allowing larger cross-border mergers would help create “European champions” capable of competing globally.

However, the CEPS study warns that weakening merger scrutiny could lead to unintended consequences, including reduced innovation incentives and increased market power in critical sectors. The report points to the pharmaceutical industry as a case in point: despite stringent merger oversight, EU-based pharmaceutical firms have maintained strong pipelines, with the number of new drug approvals originating in the EU rising by 15% between 2020 and 2025, according to data from the European Medicines Agency.

“Stronger merger control doesn’t mean weaker companies — it means companies that compete on merit, not just scale,” Lutz added. “When firms can’t simply buy their way to dominance, they are more likely to innovate.”

The European Commission is expected to release its own evaluation of the EU Merger Regulation later in 2026, which could inform potential reforms. Any changes would require approval from both the European Parliament and the Council of the European Union.

For now, the CEPS analysis suggests that policymakers should focus on strengthening innovation policy and market access for smaller firms rather than diluting merger rules in pursuit of size alone.