The European Commission has presented on 17 June 2025 a comprehensive package aimed at enhancing the European Union’s strategic autonomy and industrial resilience in the defence sector: the Defence Readiness Omnibus Package (Omnibus). Against a backdrop of ongoing geopolitical instability and Russia’s aggressive war against Ukraine, this initiative marks a significant development in the way the EU is approaching competition and state aid in the defence industry. 

This insight focuses on the competition law implications of the Omnibus, including planned adaptations to antitrust, merger control, and state aid enforcement. Although the Commission confirms that EU competition rules remain fully applicable, it simultaneously proposes a more security-driven interpretation of these rules, particularly as to horizontal co-operation, consolidation, and public support in the defence sector. 

Long-term ambition

The Omnibus stems from the strategic White Paper on European Defence Readiness. The White Paper outlines the EU’s long-term ambition to achieve full defence readiness by 2030, in response to escalating global threats, supply chain vulnerabilities and the fragmentation of the European defence industrial base. 

The Omnibus is not a single legal act, but rather a comprehensive policy initiative that combines multiple legal and political instruments. It comprises, among other things:

• A communication from the Commission;
• Legislative proposals to amend selected internal market and environmental regulations; 
• A draft regulation to accelerate permitting procedures for defence-related projects; and 
• Future guidance on interpreting EU competition law in light of defence priorities. 

These proposals are currently at the draft stage and will require formal adoption by the European Parliament and the Council. The package's primary objective is to eliminate the legal, administrative and financial obstacles that currently impede the expansion of the defence industry. 

Among other measures, it facilitates access to EU funding instruments and streamlines permitting procedures by establishing centralised points of contact and statutory time limits. It also encourages Member States to apply EU competition rules, including Articles 101, 107 and 346 of the Treaty on the Functioning of the European Union (TFEU), in a manner that supports strategic autonomy.

Substantive developments

Antitrust and horizontal co-operation

Although Article 101 TFEU continues to apply, the Commission has made clear that co-operation between defence companies should not be unduly hindered by competition rules. In its communication, the Commission states that it will duly take into consideration the specificities of the defence sector, including the urgent need to increase production capacity and strengthen industrial resilience. 

Notably, the Commission expresses its readiness to provide guidance to defence companies that wish to engage in co-operation which might otherwise raise antitrust concerns. This includes informal guidance, particularly where joint action is necessary to produce strategically important defence goods that could not be supplied individually. 

Although no formal guidance document has yet been issued, the Commission's approach is consistent with the practice adopted during the pandemic, when temporary co-operation was permitted and evaluated based on efficiency considerations.

Merger control

The Commission will increasingly consider the contribution of a merger to defence readiness as well as the market structure of the European defence equipment market, which is usually more fragmented and underdeveloped than its global counterparts. For that, the Commission will take into account these considerations in its ongoing review of its Merger Guidelines^[1].

Although efficiencies, such as economies of scale or strengthened supply security, will not override competition concerns per se, they are expected to play a more prominent role in Commission’s enforcement as it hints at greater flexibility in applying its decisional practice, particularly where mergers enable the EU to compete globally and reduce strategic dependencies. Stakeholders can provide their views to the Commission in relation to its merger guidelines review by 3 September 2025.

State Aid

Most aspects of the Omnibus in relation to competition law concern State Aid. 

The Commission identified a number of objective factors that limit ramping up defence production (for example, fragmented procurement markets, uncertainty of demand over time, access to finance). Therefore, the Commission felt obliged to provide certain clarifications necessary to boost defence production:

1. Non-economic measures, such as military infrastructure or core military functions, are reaffirmed as not constituting State aid, falling within the scope of Article 346 TFEU^[2].

2. Aid for increasing defence production capacities may, in principle, fall under Article 346 TFEU, enabling Member States to provide such aid without prior notification if it is deemed necessary for safeguarding essential security interests.

3. For aid measures not covered by Article 346 TFEU, the Commission confirms that it will conduct a flexible and expedited assessment under Article 107(3)(c) TFEU. The Commission will explicitly consider the contribution of the measure to defence readiness, the resilience of supply chains and the reduction of dependencies as positive factors in its balancing test.

Furthermore, State Aid cases linked to defence readiness will be prioritized administratively. The Commission also encourages alignment with EU defence programmes (for example, the European Defence Fund) and cross-border co-operation.

Key takeaways

The Omnibus represents more than just a political declaration. It signifies a strategic shift in how the EU applies competition and state aid law to the defence sector:

• Companies in the defence industry can expect a more permissive environment for horizontal co-operation, including joint purchasing and production arrangements.
• The Commission is signaling greater openness towards consolidation, provided that it enhances the EU's defence capacity and supply security.
• In State Aid matters, Articles 346 TFEU and 107(3)(c) TFEU will be interpreted pragmatically, focusing on urgency and resilience.

At the same time, the core principles of EU competition law remain fully applicable. Undertakings must still assess whether any co-operation with competitors unduly restricts competition and ensure that any benefits outweigh the potential harm. 

Where uncertainties exist, companies are encouraged to proactively engage with the Commission. Otherwise, it is unlikely that the Commission will tolerate any abuse of its more permissive approach to the detriment of the competitive landscape and increased costs for Member States and ultimately the European taxpayers.

We would like to thank our trainee Suna Cavunmirza for valuable support in the preparation of this article.

Footnotes

[1] See also NRF Insight: Summer reading arrived early: European Commission aims for balancing act in its review of merger guidelines, 9 May 2025. 

[2] Article 346 TFEU allows EU Member States to take measures they consider necessary to protect their essential security interests, particularly in the defense sector, even if those measures would otherwise conflict with EU internal market rules — provided such derogations are strictly justified and proportionate.