Avisha Dhiman, a law student at Maharashtra National University, delves into the implications of anti-competitive practices in the context of mergers and acquisitions (M&A) and their impact on sustainability. M&A is a strategic method for companies to grow rapidly, enhancing their position in the global market and increasing their competitive edge. However, the rise of ‘killer acquisitions’—where large companies acquire smaller ones with strong potential to eliminate future competition—has led to concerns about innovation and market progress. To counteract this, merger control has become a crucial aspect of competition law, designed to prevent M&A from stifling fair competition.
M&A deals are scrutinized by competition authorities to safeguard market competition and protect consumers. In the European Union (EU), the EU Merger Regulation (EUMR) serves as the primary legislation for merger control at a regional level. There is a growing trend of interventionism by antitrust authorities worldwide, often leading to frustrated deals, and this is coupled with an increased recognition of the importance of innovation and sustainability in M&A. The EU has acknowledged the role of competition law in achieving its commitments to the European Green Deal, leading to stricter regulatory oversight.
Green killer acquisitions occur when larger companies acquire smaller entities with robust environmental credentials as a shortcut to transition towards a low-emissions economy. This practice can potentially suppress ‘green’ innovation and sustainability.
The EU’s Policy Brief from 2021 emphasized the need for the Commission to rigorously apply and advocate for innovation-based harm theories in merger evaluations. This is aimed at safeguarding against the erosion of ‘green’ innovation. The European Commission (‘EC’) has expanded the definition of ‘market’ to include various competition parameters that customers consider relevant. These parameters encompass not only the product’s price but also its degree of innovation, quality, sustainability, resource efficiency, durability, and other aspects such as the product’s ability to integrate with other products, the image it conveys, and the security and privacy it provides. Policy changes are accompanied by judicial shifts. The EC has delineated relevant markets based on parameters like sustainability through recent judgments. For instance, in Marine Harvest/Morpol, the Commission considered customer preferences for sustainably farmed salmon when differentiating product markets. The EC’s decisions highlight a recognition of changing market dynamics and consumer preferences for green or sustainable products, necessitating separate treatment for these markets. This is further evident in the Andel/Energi Danmark case, where the Commission contemplated a separate market for electricity produced from renewable sources. In the assessment of competition, sustainability is a significant factor in distinguishing between merging entities and their competitors. An example is the Sika/MBCC case, where the Commission identified the concrete/cement sector as being significantly influenced by innovation and research and development, particularly in the creation of new polymers and the introduction of more eco-friendly chemical admixture formulations.Sika and MBCC have showcased robust innovation in eco-friendly research and development (R&D), which is crucial for addressing sustainability issues. This innovation is a key factor in evaluating their competitive proximity with other industry participants.
Environmental objectives set by European governments have created a significant impetus for both public and private entities to move towards a net-zero economy. This shift necessitates changes to business frameworks to align with ecological sustainability, and as a result, environmental considerations are increasingly influencing the direction of mergers and acquisitions (M&A). Massive environmental deals are happening across the EU, and this landscape is poised to be affected by the USA’s recent policy changes on climate change and sustainability. The European Commission (EC) is delineating “green” killer acquisitions from “non-killer” innovation, reflecting a deeper policy move in light of the EU’s commitments under its Green Deal. The EC is using competition law to protect these commitments and foster sustainability-focused innovation. Through merger control, the EC is making it clear that large businesses cannot simply buy environmental credentials—they must earn them through genuine, sustainable practices. In an innovation-driven, sustainability-oriented transaction landscape, the EU’s vigilance over what it defines as “green” killer acquisitions is crucial. Research by McKinsey and Nielsen IQ in 2023 showed that consumers often prefer sustainable options to regular alternatives. In this market, where consumer preferences are shifting, the EC’s proactive stance ensures both market integrity and consumer protection. Avisha Dhiman, a penultimate year law student pursuing BA LLB (Hons) from Maharashtra National University Mumbai, is interested in financing and M&A with a focus on technology and ESG. The Legal Cheek Journal is sponsored by LPC Law.
