The EU’s Foreign Subsidies Regulation (‘FSR’) is now in effect. It will create a level playing field for all companies operating in the EU.
The FSR applicable to all EU economic activities. It will cover mergers and acquisitions, public procurement procedures, and all other market situations. The new rules empower the Commission to investigate financial contributions made by non-EU countries to companies conducting economic activity in the EU and, if necessary, redress the distortive effects.
Companies will be required to notify the Commission about M&A involving a financial contribution from a non-EU government under FSR. The obligation will be triggered when the acquired company, merging party, or JV generates at least €500 million in EU turnover and at least €50 million in foreign financial contribution.
In the case of public procurement, the estimated contract value must be at least €250 million, with a minimum foreign financial contribution of €4 million per non-EU country. The Commission may forbid such procedures from awarding contracts to companies that receive distortive subsidies.
In all other market situations, the Commission may initiate its own investigations if it suspects the involvement of distortive foreign subsidies.
The FSR gives the Commission broad investigative powers to gather the necessary information, including the ability to query for information and conduct fact-finding. This is possible both within and outside the Union. The FSR allows the commission to conduct market research into specific sectors and types of subsidies.
The Commission will also be able to request relevant information from companies and levy fines and penalties if they provide incomplete, incorrect, or misleading information or fail to provide the requested information within the time frame specified. It may also conduct on-site inspections, including in non-EU countries, if the country concerned does not object.