Clean Industrial Deal: the European Commission sets out new plans to reform competition policy

Earlier this week, the European Commission (EC) published the Clean Industrial Deal (CID), which sets out a suite of measures designed to transform decarbonisation into a driver of growth for European industries. Ursula von der Leyen had previously pledged to deliver the CID within the first 100 days of her Commission. 

Recognising the urgency of the intertwined challenges of the climate crisis, competitiveness concerns, and economic resilience—embedded into a complex wider landscape of rising geopolitical tensions, slow economic growth, and technological competition—the CID seeks to provide a unified growth strategy for the EU that combines incentives to decarbonise with a strong business case for stimulating substantial climate neutral investments in energy-intensive industries and clean tech.

In this post, we turn the spotlight onto the competition law and State aid/subsidy control aspects of the CID, which the EC plans to reform to facilitate greater investment into decarbonisation and clean tech.

Competitiveness and competition policy

The Draghi Report, published in September 2024, made the stark claim that slowing growth and weak productivity posed an “existential challenge” to Europe that would require radical change to “reignite sustainable growth”. The report identified three main areas of action to achieve this: (1) closing the innovation gap in advanced technologies; (2) developing a joint plan for decarbonisation and competitiveness; and (3) increasing security. The report highlighted competition policy as one of the crucial building blocks of Europe's industrial strategy. In particular, it called for competition policy to “continue to adapt to changes in the economy so that it does not become a barrier to Europe’s goals".

Building on the EC's publication of its Competitiveness Compass (a roadmap to boost EU competitiveness), the CID presents the first concrete indicators of how the EC plans to reform competition policy to support competitiveness objectives.

Competition policy under the CID

Merger control

The CID signals that the EC will revise its Merger Guidelines to “better integrate into the competition analysis” factors such as: (i) the impact of mergers on the affordability of sustainable products and on clean innovation; (ii) efficiencies that bring sustainable benefits; and (iii) innovation, resilience, and the investment intensity of competition in certain strategic sectors.

Whilst the EC has previously explored how the existing merger control framework can support the EU's sustainability objectives, acknowledging in a September 2023 edition of its Competition Merger Brief that “there is a clear trend towards the sustainability-related aspects of the Commission’s merger review becoming increasingly important”—the CID constitutes an important first step towards a formal revision of the EC's official stance on sustainability considerations in merger control. 

Of particular interest is whether the Commission will mirror the sustainability-related amendments made to its Horizontal Guidelines (part of the EU’s antitrust toolbox) in the revised Merger Guidelines. We will be watching closely to see whether, for example, the revised Merger Guidelines adopt the concepts of “individual use value benefits”, “individual non-use value benefits” (where consumers value their consumption of a sustainable product more), and “collective benefits" (which accrue to a wider section of society than the consumers in the relevant market) when evaluating merger-related efficiencies. It also remains to be seen how the revised Merger Guidelines will balance “innovation, resilience, and the investment intensity of competition” with more ‘traditional’ competition law considerations.

Antitrust

The CID reaffirms the EC's willingness to provide informal guidance to businesses on whether proposals to cooperate with competitors to achieve EU priorities (particularly those relating to innovation, decarbonisation and economic security) are compatible with antitrust rules. We discussed recent examples illustrating European antitrust agencies' openness to providing informal guidance on sustainability-related collaborations in this blog post. To date, the EC has received few such requests for guidance (contrary to the experiences of other European agencies).

State aid and foreign subsidies

Acknowledging that national level support such as State aid and tax incentives will play a key role in decarbonisation, the CID outlines proposals to simplify State aid rules and introduce additional flexibility to facilitate faster approval of State aid measures for decarbonisation and clean tech projects. Under a new CID State Aid Framework, EU Member States will be able to select from a range of ‘off-the-shelf’ options to demonstrate the compatibility of proposed measures with State aid rules, reducing the need for complex individual assessments. The Framework will also allow for separate support schemes focused on specific priority technologies such as wind and solar. The introduction of this new Framework forms part of a wider project to review, and if necessary update, the EU's State aid regime.

To fight “unfair global competition”, the EC will also make use of its powers under the EU Foreign Subsidies Regulation (FSR) to conduct ex officio investigations of M&A transactions in “strategic sectors”. The EC will also provide further details on the circumstances in which it may decide to use these powers in guidelines on the application of the FSR, which it will adopt by January 2026. The FSR (which came into force on 12 January 2023) is intended to address distortions in the EU internal market caused by foreign subsidies. It introduced a new mandatory and suspensory regime for M&A transactions (and joint ventures) as well as public tenders above certain financial thresholds. So far, however, the EC has intervened in only one transaction, the acquisition by Emirates Telecommunications Group Company PJSC (e&) of PPF Telecom Group B.V. (see our article here).

Zooming out

The various interlocking features of the CID—of which competition and State aid policy is only one lever—highlights the complexity of climate transition policy-making at national and regional levels. Whilst many of the finer details are still to be hashed out, the CID’s sections on reforming competition policy show, however, that competition is an important element of the policy toolkit to achieve decarbonisation and competitiveness objectives. These objectives are likely to flow downwards to Member States in the form of increased pressure on national competition agencies to support, and to be seen to be supporting, sustainability objectives in their decision-making—particularly with regards to key industries such as clean tech. The competition policy reforms outlined in the CID suggest the further integration of sustainability (and potentially even other social objectives) into competition and State aid policy and enforcement may well be on the horizon.

Businesses considering mergers with a sustainability dimension and/or foreign subsidies aspect should stay alert to further developments in this area.