Competition enforcers need to look more "dynamically" at how markets evolve when assessing mergers and "be more tolerant toward industrial policy," according to one of this year's winners of the Nobel Prize for Economics. Professor Philippe Aghion said that scrutiny should look beyond "market share" and take greater account of innovation.
Competition enforcers need to look more "dynamically" at how markets evolve when assessing mergers and should be "more tolerant toward industrial policy," one of this year's winners of the Nobel Prize for Economics has said. Philippe Aghion, a French economist, said scrutiny should look beyond "market share" and take greater account of innovation.
The European Commission is currently reviewing the guidelines for how it assesses mergers, while some countries and companies ask for more leeway to allow the emergence of large companies to compete on the global stage.
Over the past decade, antitrust authorities have looked increasingly at how innovation and market entry impacts transactions in sectors such as technology and pharmaceuticals. In some instances, this has led to approvals because markets are moving quickly and new competitors are emerging. In others, it's led to the imposition of conditions or prohibitions to stop a sector falling into the lap of a single, powerful company.
Merger enforcers "should stop just looking at market share and look at innovation," Aghion told a conference* in Portugal in a recorded interview.
"Agencies are too static in the way to assess merger policy. They should look at whether the merger inhibits innovation. That would be a revolution."
Aghion, who is a professor at the Collège de France and the business school INSEAD, won the Nobel Prize for Economics this month, alongside Joel Mokyr and Peter Howitt.
He explained that competition policy in Europe had originally emerged as a tool for integrating the bloc’s economies, and that this had put it in conflict with the "ambitions" of industrial policy.
But he said industrial policy had evolved from a previous "top-down" approach, where a government simply picked a specific company to dominate an industry. It was moving toward a more pro-competitive stance and it could co-exist with competition policy.
"Competition policy has to evolve toward a more dynamic, more innovation-looking [approach], and that would tolerate smartly designed industrial policy," Aghion said.
Aghion said China and the US had a more "competition-friendly industry policy," and this was an area where Europe could "improve enormously."
But the professor stressed that more work was needed on rolling back barriers to Europe's single market and access to capital for it to make the shift to a more competitive and innovative economy.
Aghion also backed Europe to keep moving ahead with its own "green industrial policy" and not miss out on the race with countries such as China.
He stressed it would create jobs and growth. "Competition reinforces the incentives to innovate green," he said, pointing out that companies needed to meet consumer demand for greener products.
— Artificial intelligence —
Aghion noted that the emergence of AI had harmed growth, but he noted that previous digital revolutions had initially provided huge economic advantages before creating a crop of large companies that had made market entry difficult.
“We don’t want the same to happen with AI,” Aghion said, noting that the cloud sector, which forms the backbone of AI services, was dominated by AWS, Microsoft and Google.
At the same time, he cautioned against "too many regulations" in Europe, which would stunt the growth of the sector.
* VII Lisbon Conference on Competition Law and Economics, Oct. 23, 2025
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