National governments will have to identify “specific risks to a fundamental interest of society” if they are going to overrule EU regulators and intervene in mergers that affect banking, media or public security, according to draft guidelines seen by MLex. They explicitly warn states against defending favorite national companies, pointing to the European Commission’s “particularly close” scrutiny of moves to hinder foreign acquirers.
National governments will have to identify "specific risks to a fundamental interest of society" if they are going to overrule EU regulators and intervene in a merger, under draft guidelines under consideration. Amid a wave of contentious banking deals, the European Commission appears set on ensuring the power to pull rank over Brussels is tightly defined. It said that the scope for states to intervene has gotten smaller after a raft of EU prudential legislation.
"Member states must clearly identify the specific risks to a fundamental interest of society that their measures intend to prevent, or the overriding reasons in the public interest that justify the measures," the European Commission says in draft guidelines seen by MLex.
EU commissioner Teresa Ribera is finalizing the document, which is designed to signal how companies can achieve scale without falling foul of competition rules (see here). It also sets out a new framework for how enforcers will look at the dynamic effects of a deal on innovation and consumer harm (see here).
While EU law gives the commission a bloc-wide power to review mergers and block them if they harm competition, national governments can weigh in under a specific power — Article 21 of the 2004 Merger Regulation — if the transaction poses a threat to public security, media plurality or banking stability.
That balance of powers has come into focus in recent years as M&A in the banking sector picked up and certain national governments sought to condition takeovers.
In July 2025, the commission said Italy may have breached those rules when it invoked “public security” to impose conditions on UniCredit’s roughly €10 billion bid for Banco BPM (see here).
The EU executive has gone after Spain for imposing conditions last year on BBVA’s €19 billion bid for Banco Sabadell, although that action was based on the Spanish government allegedly overriding financial regulation.
Officials are also closely monitoring the actions of the German government in relation to a possible bid by UniCredit to take control of Commerzbank, which Berlin said it opposes.
— Favoritism —
In the new guidelines, the commission wants governments to "clearly state the exact reasons and provide specific evidence why they consider that their measures fulfil such objectives."
If a member state falls short, then the commission says it will rule the intervention illegal.
"Member states cannot adopt measures constituting a means of arbitrary discrimination or a disguised restriction of fundamental freedoms in the internal market, including freedom of establishment or the free movement of capital," the draft reads.
Attempts to stand in the way of deals — by withholding authorization from an agency — could draw the commission's ire. It says it has the power to suspend national measures pending a closer look from Brussels.
Over the years the commission has found five concrete breaches of Article 21 by national governments across all sectors, ranging from a Hungarian move to block the takeover of insurer Aegon by Vienna Insurance Group in 2021, to Banco Santander’s attempts to acquire Portuguese banking assets in 1999.
Specifically for banking, the draft guidelines list an entire body of financial-services law that has been adopted over the last decade, all of which harmonizes prudential rules at EU level.
"This legislative framework has decreased the scope for standalone member state intervention in mergers and acquisitions on grounds of prudential rules, even though the application of some prudential rules is supervised by member states’ relevant authorities at national level," it says.
In another message to the banking sector, the commission calls out the EU's fundamental rules of non-discrimination, signaling that M&A involving foreign acquirers can't be worse off than if there is a domestic acquirer.
The draft guidelines explicitly warn states off of "favoritism," pointing to the commission’s "particularly close" scrutiny of moves to hinder foreign acquirers.
— Legitimate interests —
Governments can overrule the usual EU competition review for mergers if they say there is a threat to public security — a factor left up to them to define. But the draft guidelines tell governments not to push the envelope.
"Public security derogations must not be misapplied to serve purely economic ends, such as the promotion of the national economy or its proper functioning," the commission warns.
The EU executive says it may ask for non-confidential documents explaining what sensitive sectors may be at stake, in a merger. If they don't, then the commission says it might be unable to conclude the intervention is legitimate.
Governments can also intervene if they think a merger could harm media plurality in their country, such as when the UK scrutinized News Corp’s aborted takeover of BSkyB from 2010.
The commission stresses that its own merger review of a press M&A deal could "factor in diversity or choice" as far as that affects competition.
But otherwise its review remains separate to a government's stance on the impact of a merger in the media sector on democracy, looking at “whether the number, range and variety of persons controlling media enterprises will be sufficient.”
The text remains under discussion. A final draft of the guidelines will be published for consultation in the coming weeks.
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