EU and US authorities are increasingly considering national security when evaluating corporate mergers and acquisitions. This practice raises significant concerns about interventions for reasons beyond traditional competition law, which has historically focused on market competition and consumer welfare. The shift reflects a broader interpretation of what constitutes a threat to state defense, extending past military considerations to include economic vulnerabilities and the potential for foreign influence over critical infrastructure.
Expanding Definition of National Security
The OECD reports that the concept of national security now encompasses economic stability, supply chain resilience, and control over critical technologies. Sectors such as energy, food, critical raw materials, and advanced technologies are now within this expanded scope. This reclassification acknowledges that disruptions in these areas can have far-reaching consequences for a nation’s sovereignty and well-being.
The pandemic and the ongoing war in Ukraine have highlighted dependencies on external suppliers, prompting policymakers to reassess the risks associated with foreign ownership of strategic assets. These events showed the vulnerability of relying on single sources or regions for essential goods and services. As a result, governments are prioritizing diversification and domestic capacity building to mitigate potential supply chain disruptions.
EU officials included this broader view in their June 2023 European Economic Security Strategy. The document outlines four key risks: supply chain fragility, physical and cyber threats to critical infrastructure, technology leakage, and economic coercion. These risks reflect the interconnected nature of modern economies and the potential for adversaries to exploit vulnerabilities. The latter, economic coercion, refers to scenarios where a foreign power uses trade or investment to pressure EU decisions.
Merger Reviews and Strategic Concerns
The European Commission’s April 30 draft guidelines for updating merger control under Regulation 139/2004 emphasize reducing EU reliance on single suppliers or regions. These guidelines signal a shift toward proactive measures to safeguard strategic industries. One reviewed case involves the potential sale of Anglo American’s nickel business in Brazil to MMG, a Chinese state-owned miner. The asset produces low-carbon ferronickel, which is essential for manufacturing stainless steel, and holds significant market power in Europe.
The European Commission provisionally objected to the deal in September, arguing that MMG could redirect the output to Chinese steelmakers linked to the same state. This action potentially raises costs for European producers and undermines the EU’s goal of securing its own supply chains. While framed as a competition issue, the decision also reflects strategic fears about foreign control over vital materials. The Commission’s stance highlights the growing integration of national security considerations into merger review processes.
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