Regulation on distortive foreign subsidies (FSR)
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Summary
Regulation (EU) 2022/2560 establishes a framework to address distortions in the EU internal market caused by foreign subsidies granted by non-EU countries to undertakings active in the Union. It introduces notification obligations for certain concentrations and public procurement procedures, and empowers the Commission to investigate other market situations on its own initiative. Where a foreign subsidy is found to distort the internal market, the Commission may impose redressive measures or accept commitments.
Who is affected?
Undertakings active in the EU that have received financial contributions from non-EU public authorities, in particular those engaging in mergers/acquisitions or participating in large EU public procurement procedures. Public buyers and contracting authorities are indirectly affected through the procurement notification and review process.
Scope
Applies to foreign subsidies (via “financial contributions” from non-EU states) that may distort competition in the EU internal market, including in concentrations and public procurement, and in other market situations subject to Commission review.
Key Points
- Defines and targets distortive foreign subsidies granted by non-EU countries to companies operating in the EU internal market.
- Introduces mandatory prior notification for certain concentrations where the EU turnover and foreign financial contribution thresholds are met.
- Introduces mandatory prior notification in certain large public procurement procedures where foreign financial contribution thresholds are met.
- Gives the European Commission investigative tools (information requests, inspections, market investigations) and the power to act ex officio.
- Allows the Commission to impose redressive measures (e.g., structural/behavioural remedies) or accept commitments to remedy distortions, and to prohibit a concentration or award of a contract in relevant cases.
Key Deadlines
- — Date of application (most provisions apply from this date).
- — Start of notification obligations for concentrations and public procurement procedures.
Related Regulations
Frequently Asked Questions
Who must comply with the Foreign Subsidies Regulation (FSR)?
Undertakings active in the EU that have received financial contributions from non-EU public authorities must comply, especially those involved in mergers, acquisitions, or large public procurement procedures. Public buyers and contracting authorities are also indirectly affected through the procurement notification and review process.
What is the main objective of the FSR?
The FSR aims to address and remedy distortions in the EU internal market caused by foreign subsidies granted by non-EU countries to companies operating within the EU.
Which transactions are subject to mandatory notification under the FSR?
Certain concentrations (mergers and acquisitions) and large public procurement procedures must be notified to the European Commission if specified EU turnover and foreign financial contribution thresholds are met.
What are the penalties for non-compliance with the FSR?
The European Commission can impose fines and periodic penalty payments for failure to notify, providing incorrect information, or non-cooperation during investigations. It may also prohibit the implementation of a concentration or the award of a public contract.
What are the key obligations for undertakings under the FSR?
Undertakings must notify relevant concentrations and public procurement bids if thresholds are met, cooperate with Commission investigations, and may need to provide detailed information on foreign financial contributions.
How does the FSR interact with existing EU competition and procurement rules?
The FSR complements existing EU competition, merger control, and public procurement rules by specifically targeting distortions caused by foreign subsidies, filling a regulatory gap not addressed by current EU state aid or competition law.
What practical steps should companies take to ensure compliance with the FSR?
Companies should track and document all financial contributions received from non-EU public authorities, assess whether their transactions meet notification thresholds, and prepare to respond to Commission information requests.
What investigative powers does the European Commission have under the FSR?
The Commission can request information, carry out inspections (including dawn raids), and conduct market investigations, both in response to notifications and on its own initiative (ex officio).
What remedies can the Commission impose if a distortive foreign subsidy is found?
The Commission may impose redressive measures, such as structural or behavioural remedies, accept commitments from undertakings, or prohibit a concentration or contract award if the distortion cannot be remedied.
Key Terms
- Foreign Subsidy
- A financial contribution provided directly or indirectly by a non-EU country that confers a benefit to an undertaking active in the EU internal market.
- Financial Contribution
- Any transfer of financial resources or liabilities by a non-EU public authority, including grants, loans, tax incentives, or guarantees.
- Concentration
- A merger, acquisition, or other transaction that results in a lasting change of control over an undertaking, subject to notification under the FSR if thresholds are met.
- Public Procurement Procedure
- A process by which public sector bodies in the EU purchase goods, services, or works, subject to FSR notification if foreign financial contribution thresholds are exceeded.
- Notification Obligation
- The requirement for undertakings to inform the European Commission of certain concentrations or public procurement bids involving significant foreign financial contributions.
- Redressive Measures
- Remedies imposed by the Commission to correct or offset the distortive effects of foreign subsidies, which may include divestment, access commitments, or behavioural obligations.
- Commitments
- Voluntary measures offered by undertakings to address the Commission’s concerns about distortive foreign subsidies, which the Commission may accept in lieu of imposing redressive measures.
- Ex Officio Investigation
- An investigation initiated by the European Commission on its own initiative, without a prior notification, into potential distortive foreign subsidies.
- Thresholds
- Specific financial limits set by the FSR, such as minimum EU turnover or foreign financial contributions, which trigger notification obligations for concentrations and procurement.
- Market Investigation
- A broader inquiry conducted by the Commission into a particular sector or type of economic activity to assess the impact of foreign subsidies on the internal market.