The regulation of merchant transmission investment is an increasingly important issue in European electricity markets. Due to the structural underinvestment in interconnection, an increased interest from both regulatory authorities and market players can be depicted and an analysis of recent legal and regulatory proceedings evidences that a coherent regulatory strategy exists. It consists in relying on weakly unbundled TSOs to build merchant lines, while a strong suspicion against dominant generators has emerged. This paper first shows that this strategy, if confirmed, is largely misguided as it fails to recognize the conflict of interest between the regulated and non-regulated activities of incumbent TSOs. It then investigates the new opportunities raised by the enactment of the Third Energy Package in September 2009, in particular its impact on the opportunity to let dominant generators with low generation cost undertake merchant transmission investment. It finds both that reconsidering the role of dominant generators could be welfare improving if potential abuses of dominance can be mitigated and that an enforcement regime based on a clear demarcation between transparency monitoring by ACER and antitrust enforcement by the European Commission could allow the European Community to more effectively boost the development of interconnection through merchant transmission investment.