On Wednesday 5 May, the European Commission will publish its proposal for a regulation to combat unfair foreign subsidies. In a working document of which EUROPE has a copy, it specifies its exclusive role in the prevention and repression of this type of distorted competition and details the scope of the regulation. The Commission’s proposal is subject to change before its official publication on 5 May.
While the Commission suggested in its White Paper on Subsidies, published in June 2020 (see EUROPE 12508/1), that Member States should have a role in monitoring foreign subsidies, it now states in its working document that it will have exclusive competence. “This responds to a concern, raised by many stakeholders, that a new instrument on foreign subsidies would be applied inconsistently between Member States and overburden national authorities”, the paper says.
The regulation to be presented is divided into six chapters specifying what is considered a foreign subsidy that distorts competition and how the Commission can investigate such a case. It also details the conditions of unfair competition when foreign subsidies are involved in merger cases or public procurement. Finally, it indicates the general procedures and the relationship of this new instrument with existing ones.
Thresholds for distortion effects
The Commission considers that a foreign subsidy of less than €5 million over a three-year period is “not likely to distort the market”.
For mergers and acquisitions, players must notify the Commission if any of the companies involved in the merger is established in the EU and has a turnover of more than €500 million and if the merger itself or any of the companies involved has received a financial contribution of more than €50 million from third countries in the three years preceding the operation.
Regarding public procurement, the Commission estimates that, for any public procurement procedure exceeding €250 million, candidate companies must declare any foreign financial aid received during the last three years to the contracting authority. The other possibility is to formally declare that they have not received any foreign money during the previous three years.
Possibilities for action by the Commission
In case of suspected distortion of competition, the European Commission may adopt a decision to launch an investigation.
It therefore reserves the right to examine “information from any source” to judge the disruptive potential of a foreign grant.
In order to remedy the distorting effects, it may impose remedial measures up to and including the repayment of the subsidy to the third country of origin. The offending company can also provide commitments to the Commission to rebalance its position in the market.
The Commission will present its final proposal on 5 May, together with its Industrial Strategy for Europe. (Original version in French by Léa Marchal)