The European Commission (EC) is increasingly invoking conglomerate theories of harm in its merger reviews. The complexity of these theories is resulting in more in-depth Phase 2 reviews and behavioral access commitments are relatively common for conglomerate mergers in the high-tech space.


A conglomerate merger is a merger between companies active in closely related, but not competing, markets. Typically this involves the supply of complementary products or products that belong within the same product range.


Conglomerate effects is the theory that the merged entity will be able to leverage a strong market position in one product market across to a complementary or similar product market in which the merging party is also active. The merged entity will be able to target a largely overlapping customer base for products that have a similar or related end use.

The main competition concern associated with a conglomerate theory of harm is anti-competitive foreclosure. Traditionally this has been alleged through ‘tying’ and ‘bundling.’ Tying is where a customer purchasing one product is also required to purchase a separate, and normally related, product. Bundling is where the supplier of a product will only sell that product with one or more related products. The supplier will not sell the components on an individual basis or will only do so on worse terms. 

Tying and bundling are common commercial practices that can be pro-competitive. However, in certain circumstances these practices can have a detrimental impact on a potential rivals’ ability to compete. In the long run this may reduce competitive pressure on the merged entity and increase prices. 

More recently, interoperability has been an integral feature of a conglomerate theory of harm. The concern is that the merged entity will degrade essential interoperability of rival products compared to captive use. If interoperability is important for a rival to offer the downstream product, then this can be an effective foreclosure strategy. This is particularly relevant for software and other technological capabilities more so than traditional products and services.  


The EC prohibited two high-profile transactions primarily on the basis of conglomerate theories of harm back in 2001 (M.2220 GE/Honeywell and M.2416 Tetra Laval/Sidel). However, both these cases were subsequently overturned on appeal by the EU courts. By confirming a high evidentiary standard to substantiate future conglomerate theories of harm, these appeals no doubt left the EC more hesitant to intervene based on conglomerate concerns. 

This was reflected in the enforcement activity in the decade that followed and in its enforcement guidelines. In 2008 the EC introduced its non-horizontal merger guidelines outlining how it will assess vertical and conglomerate mergers. The guidelines are clear that in the majority of circumstances conglomerate mergers will not lead to competition problems. The EC has not prohibited a merger on the basis of a conglomerate theory of harm since 2001. 


More recently the EC has shown a renewed willingness to intervene on conglomerate concerns. This has resulted in a series of cases requiring commitments and/or an in-depth Phase 2 review to obtain approval. 

In 2016 and 2017 alone the EC approved four mergers subject to behavioral commitments to remove conglomerate concerns (M.7822 Dentsply/Sirona, M.7873 Worldline/Equens/Paysquare, M.8124 Microsoft/LinkedIn and M.8314 Broadcom/Brocade).

More recently the EC launched in-depth Phase 2 investigations in three cases (M.8084 Bayer/Monsanto, M.8306 Qualcomm/NXP and M.8394 Essilor/ Luxottica) citing, among other things, conglomerate theories of harm in each. 

Although in Bayer/Monsanto and Essilor/ Luxottica the EC cleared the transactions without requiring commitments to address conglomerate concerns, this was only after a lengthy Phase 2 review. These cases indicate an increased focus on conglomerate theories of harm in EU merger reviews.


The recent increase in cases could simply be a coincidence. The EC of course has no control over the mergers that are notified to it. However, this trend has coincided with other merger reviews where the EC has adapted traditional analysis to be more interventionist for example by putting research & development, innovation and data etc. centrally within the scope of its theories of harm. In this wider context, these cases seem to reflect the EC’s greater skepticism about mergers in concentrated sectors or involving essential input/ interoperability mergers. 

We expect the EC will continue to focus on conglomerate issues in the coming year(s). This increases the prospect of an in-depth Phase 2 review, since conglomerate theories require detailed and complex economic defense. It is essential for companies to be able to identify conglomerate issues at an early stage.

If remedies are required, conglomerate mergers are also more suited to behavioral commitments, which can be complex and difficult to agree on with the EC. This makes a Phase 1 clearance strategy more difficult unless these issues are raised with the EC early.

The following features may indicate conglomerate concerns in a transaction:

  • complementary products: do the merging parties have product portfolios in similar or neighboring product markets? Conglomerate issues can exist in addition to traditional horizontal and/or vertical overlaps or in isolation;
  •  market power: will the merging parties have a market share in excess of 30% in any product market that is closely related to a product market a merging party is active in? At least one party must possess market power for a credible conglomerate theory of harm. This 30% threshold is useful as a rule of thumb; the higher the market share the more likely a finding of market power. Other market characteristics are relevant for this assessment;
  • interoperability: do the merging parties have software capabilities that rivals must utilize to compete? If so, the EC is likely to assess whether such interoperability could be degraded to afford the merging parties a competitive advantage. Interoperability has been a key focus of recent commitments;
  • intellectual property (IP) rights: do the merging parties benefit from extensive IP rights that reinforce their market position? In Qualcomm/NXP the EC accepted commitments to not acquire certain standard essential patents (SEP) and to not enforce/ grant worldwide royalties for other SEPs to ensure rivals would be able to compete fairly;
  • significant other barriers to entry: do the markets in question have a history of new entrant failure? The EC may view such a trend as conducive to anticompetitive foreclosure; or
  • network effects: do the merging parties’ products benefit from the volume of other users? Network effects can turn competitively neutral conduct into conduct that is harmful to competition. In Microsoft/LinkedIn, the EC determined that LinkedIn’s network effects would likely amplify the potential effects of Microsoft preinstalling LinkedIn on its machines. As a result, the parties entered into behavioral commitments to preserve an effective choice of installation for five years.


As markets become more concentrated, the scope for conglomerate concerns will only increase. Consistent with the trend that the EC will flexibly adapt traditional theories of harm when investigating mergers, this is something companies should consider carefully when contemplating future acquisitions.