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Competition Policy

Foreign subsidies

On 30 June 2022, the Council of the European Union and the European Parliament reached a political agreement on the Regulation on foreign subsidies distorting the internal market. The latest provisional public version of the legislation is available here.

The Foreign Subsidies Regulation (‘FSR’), proposed by the Commission on 5 May 2021, follows the publication of a White Paper in June 2020 and an extensive consultation process with stakeholders.

In recent years, foreign subsidies appear to have distorted the EU’s internal market, including by providing their recipients with an unfair advantage to acquire companies or obtain public procurement contracts in the EU to the detriment of fair competition.

The FSR addresses such distortions and closes a regulatory gap, whereby subsidies granted by non-EU governments go currently unchecked, while subsidies granted by Member States are subject to close scrutiny. It proposes new tools to effectively tackle foreign subsidies that cause distortions and undermine the level playing field in the internal market.

The proposed Regulation

Scope

Under the political agreement reached on 30 June 2022 on the text of the Regulation, the Commission will have the power to investigate financial contributions granted by non-EU governments to companies active in the EU. If the Commission finds that such financial contributions constitute distortive subsidies, it can impose measures to redress their distortive effects.

The Regulation will introduce three tools:

  • A notification-based tool to investigate concentrations involving a financial contribution by a non-EU government, where the acquired company, one of the merging parties or the joint venture generates an EU turnover of at least €500 million and the transaction involves a foreign financial contribution of at least €50 million;
  • A notification-based tool to investigate bids in public procurements involving a financial contribution by a non-EU government, where the estimated contract value is at least €250 million and the bid involves a foreign financial contribution of at least €4 million per third country; and
  • A general tool to investigate all other market situations, where the Commission can start a review on its own initiative (ex-officio) or it request an ad-hoc notification for smaller concentrations and public procurement procedures.

Procedure

With respect to the two notification based tools, the parties will have to notify ex-ante financial contributions received from non-EU public authorities prior to concluding a concentration or a public procurement procedure above the relevant thresholds. The Commission can also request ad-hoc notifications for smaller concentrations and public procurement procedures if it suspects the existence of distortive subsidies. Pending the Commission’s review, the concentration in question cannot be completed and the investigated bidder cannot be awarded the contract.

The general investigation tool would allow the Commission to start investigations on its own initiative (ex-officio). This would cover other types of market situations, such as greenfield investments or concentrations and public procurements below the thresholds.

If the Commission establishes that a foreign subsidy exists and that it is distortive, it will balance the negative effects of the subsidy, in terms of the distortion, with positive effects of the subsidy to determine appropriate redressive measures or to accept commitments.

With respect to the redressive measures and commitments, the Regulation includes a range of structural or non-structural remedies, such as the divestment of certain assets or providing access to infrastructure. In case of notified transactions, the Commission can also prohibit the subsidised concentration or the award of the public procurement contract to the subsidised bidder.

Next Steps

The Regulation will enter into force once it is formally adopted by the Council and the Parliament and published in the Official Journal. The Regulation will become directly applicable across the EU 6 months after entry into force.

The notification obligations will start to apply 9 months after entry into force.

Milestones of the initiative

White paper on foreign subsidies

On 17 June 2020, the Commission adopted a White paper on foreign subsidies, which launched a public debate on the topic of distortive foreign subsidies.

Public consultation

The adoption of the White Paper started a 14-week public consultation, which finished on 23 September 2020. The Commission has received 150 contributions: 17 from public authorities of Member States; 24 from third country stakeholders and governments; around 100 submissions from business and industry associations and individual companies; and the remainder from law firms, academic institutions, trade unions, NGOs and individual citizens.

Inception impact assessment

To prepare the ground for future action, on 6 October 2020, the Commission published an Inception impact assessment, which was open for feedback until 29 October. The feedback on the Inception Impact Assessment is published here.

Targeted consultation

Between October 2020 and January 2021, the Commission gathered feedback in a targeted way from business and industry groups active in sectors that appear to be affected by foreign subsidies as well as expert groups, public authorities, representatives of SMEs, consumers as well as third-country stakeholders.

Regulatory Scrutiny Board

On 3 March 2021, the Regulatory Scrutiny Board issued a positive opinion on the Impact Assessment report accompanying the proposal.

Adoption of the proposal for a Regulation

On 5 May 2021, the Commission adopted a Proposal for a Regulation, accompanied by an Impact Assessment Report, which is summarised in this executive summary.

Political agreement reached on the Regulation

On 30 June 2022, the Council of the European Union and the European Parliament reached a political agreement on the Regulation on foreign subsidies distorting the internal market.