Short answer
The European Commission can act under Regulation (EU) 2022/2560, the Foreign Subsidies Regulation (FSR), when support attributable to a non-EU country selectively benefits an undertaking and may distort EU competition. It has three routes.
First, a large acquisition, merger or full-function joint venture must be notified before implementation where an EU-established party meets the EUR 500 million EU-turnover threshold and the relevant parties received more than EUR 50 million in combined foreign financial contributions during the previous three years. Second, a bidder in a procurement worth at least EUR 250 million generally must notify where its relevant group, main subcontractors and main suppliers received at least EUR 4 million per third country during the previous three years. A special threshold applies to lots.
Third, the Commission can investigate on its own initiative, including below-threshold transactions, awarded procurement and other economic activity. It can call in a particular below-threshold concentration or procurement contribution. Remedies include operating restrictions, divestment, repayment, prohibition and, for an implemented concentration, dissolution.
The trigger is a foreign subsidy, not merely foreign money
A foreign financial contribution can include grants, capital, loans, guarantees, tax exemptions, debt forgiveness, goods, services or public purchases. Notification thresholds count contributions whether or not each is ultimately a subsidy.
Substantive intervention requires more. Article 3 sets a four-part test:
“a foreign subsidy shall be deemed to exist where a third country provides, directly or indirectly, a financial contribution which confers a benefit on an undertaking engaging in an economic activity in the internal market and which is limited, in law or in fact, to one or more undertakings or industries.”
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The Commission must establish third-country attribution, economic benefit and selectivity. A contribution can come from government or an attributable public or private entity. EU State aid law instead concerns Member State resources.
A subsidy is distortive where it is liable to improve an undertaking's competitive position in the internal market and thereby actually or potentially harms competition. The Commission considers amount, nature, market conditions, the undertaking's position, and the subsidy’s purpose and use. Unlimited guarantees, support directly facilitating a concentration and support enabling an unduly advantageous tender are among the categories most likely to distort. The undertaking may still show that the specific facts do not produce distortion. The Commission may also balance proven positive effects, but only after identifying the negative effects.
The Commission's , explain whether a subsidy is liable to improve competitive position and actually or potentially harms competition. They also address procurement distortion, balancing and below-threshold call-ins. They state the Commission's approach without changing statutory tests or thresholds.
When an acquisition must be notified
The concentration module covers lasting changes of control and full-function joint ventures. Under Article 20(3), notification is mandatory where:
- at least one merging undertaking, the acquired undertaking or the joint venture is established in the EU and has aggregate EU turnover of at least EUR 500 million; and
- the specified parties received more than EUR 50 million in combined foreign financial contributions during the three years before signing, announcement of a public bid or acquisition of control.
The relevant parties are acquirer and target, merging parties, or the joint venture and its parents. A notifiable deal must be filed before implementation. Standstill ordinarily lasts through a 25-working-day preliminary review and, if opened, a 90-working-day in-depth review, subject to extensions and suspensions.
Falling below the thresholds does not guarantee that a deal escapes review. Article 21(5) provides:
“The Commission may request the prior notification of any concentration which is not a notifiable concentration within the meaning of Article 20 at any time prior to its implementation where the Commission suspects that foreign subsidies may have been granted to the undertakings concerned in the three years prior to the concentration.”
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Screening should identify all relevant contributions, not merely grants. Filing procedures are prescribed by .
When public procurement is caught
The procurement module normally requires notification where the estimated contract or framework value, net of VAT, is at least EUR 250 million and the economic operator received at least EUR 4 million in aggregate financial contributions per third country during the prior three years. For a procurement divided into lots, the overall procurement must exceed EUR 250 million and the bidder's lot or combined lots must be worth at least EUR 125 million, alongside the same contribution threshold.
The calculation includes the relevant group and known main subcontractors and suppliers. A supplier is “main” if it supplies a key element or its share exceeds 20% of tender value. Below threshold, the bidder generally files a declaration instead.
The Commission may call in contributions before award if it suspects subsidies during the prior three years. Procurement steps may continue during in-depth review, but award to the investigated bidder cannot. The Commission can clear, accept commitments or prohibit award. It asks whether the subsidy enabled an unduly advantageous tender in that procedure.
Ex officio review reaches other EU market activity
Article 9 allows the Commission to examine information from any source on its own initiative. Natural or legal persons, associations and Member States can supply information. The Commission can investigate an undertaking's investment, financing, commercial strategy, acquisition of assets, or provision or purchase of goods or services even when no mandatory filing threshold is met.
Sufficient indications after preliminary review lead to an in-depth investigation and published notice. The Commission may request information and inspect EU premises or, absent third-country objection, premises abroad. Serious non-cooperation can lead to penalties and a decision on available facts.
The first judicial proceedings have been procedural. In , the Vice-President of the Court dismissed an appeal seeking interim suspension of an FSR inspection-related measure because urgency had not been established. The order did not examine the prima facie merits, so it is not final authority on the reach of the Commission's inspection powers.
For procurement, ex officio review is limited to contracts already awarded and cannot cancel the award decision or terminate the contract. That limit distinguishes it from the pre-award notification route. The Commission may also investigate an entire sector, type of activity or subsidy instrument where the available information supports reasonable suspicion.
What remedies can the Commission impose?
The governing principle is proportionality and effectiveness:
“Commitments or redressive measures shall be proportionate and fully and effectively remedy the distortion actually or potentially caused by the foreign subsidy in the internal market.”
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Measures include fair infrastructure access, reduced capacity or market presence, investment restrictions, licensing, divestment, repayment with interest, governance changes and reporting. The Commission can clear, accept commitments or prohibit a concentration; if implemented, it can require dissolution or restoration. In procurement it can accept commitments or prohibit award. Interim measures are unavailable in procurement procedures.
Failure to notify, prohibited implementation or circumvention can lead to fines of up to 10% of aggregate turnover under the relevant module. Incorrect or misleading notification information can attract fines up to 1%.
What an in-depth concentration decision shows
In Commission Decision FS.100011 of 24 September 2024, concerning e&'s acquisition of PPF Telecom Group, the Commission found no distortion in the acquisition process itself. It nevertheless found that foreign subsidies would distort competition in the combined entity's later EU telecommunications activities. The inquiry therefore extended beyond who won the target and at what price.
The final commitments removed provisions enabling an unlimited guarantee, restricted financing into the target's EU businesses, required relevant transactions to be on market terms, and introduced monitoring. The Commission concluded:
“the Commission considers that the Final Commitments are appropriate and fully and effectively remedy the distortions resulting from the foreign subsidies in the Transaction identified in Section 8.”
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That decision is fact-specific, but it demonstrates a crucial point: deal analysis must consider both acquisition financing and the route by which foreign support could affect competition after closing.
A practical screening checklist
- Map every financial contribution received from non-EU public authorities and attributable entities during the relevant three-year period.
- Separate the broad contribution count from the narrower question whether any item confers a selective benefit.
- Test the EUR 500 million/EUR 50 million concentration thresholds or the EUR 250 million/EUR 4 million-per-country procurement thresholds, including the correct group and transaction perimeter.
- Identify support most likely to distort: unlimited guarantees, direct deal financing, rescue support without a viable restructuring plan, non-OECD export finance, or support enabling an unduly advantageous tender.
- Assess both the immediate transaction and the combined undertaking's future EU activity.
- Plan for possible call-in, information requests, standstill, commitments and monitoring even where automatic thresholds are not met.
Conclusion
The Commission can investigate a foreign subsidy whenever it may distort an undertaking's economic activity in the EU, not only when a headline notification threshold is crossed. Large acquisitions and procurement procedures create mandatory pre-completion review; below-threshold matters can be called in; and ex officio powers reach other market conduct. The decisive questions are who provided the contribution, whether it conferred a selective benefit, how it could improve the undertaking's competitive position, and which proportionate measure would remove that advantage without going beyond the identified distortion.
Sources
This article provides general legal information, not advice for a specific matter. Laws, facts and procedural deadlines may change the result. Follow the linked primary sources and obtain local advice before acting.