Foreign Subsidies Regulation (FSR): Measures to Promote Fair and Open Markets in the EU Take Effect
The European Union's Foreign Subsidies Regulation went into effect on January 12, 2023. It aims to prevent distortions caused by foreign subsidies and maintain fair markets within the EU. The EU's new rules for addressing foreign subsidies will ensure a level playing field for companies in the Single Market and maintain open trade and investment.
The EU's prosperity and resilience rely on a strong, open and competitive internal market. To maintain fair competition, EU rules on competition, public procurement, and trade defense must be enforced. However, these rules do not cover foreign subsidies, leading to an unfair advantage for recipients in the takeover of EU companies, participation in public tenders, and other investment decisions within the internal market. This creates a gap in regulation.
According to EC vice-president Margrethe Vestager, "This new regulation will enable us to tackle distortive support from third countries, to the benefit of competition and for a level playing field in the Single Market."
What Is the Scope of the Foreign Subsidies Regulation?
The regulation aims to create equal opportunities for all economic activities within the internal market by applying to all sectors and companies operating in the EU. However, it also grants the Commission the authority to conduct market surveys on specific sectors, activities, or foreign subsidy instruments to identify potential distortions or practices specific to those areas. The regulation applies to all non-EU subsidies that distort the internal market, regardless of country of origin.
The new instrument will allow the Commission to investigate financial contributions made by non-EU public authorities to companies operating in the EU. If the Commission finds that these foreign subsidies distort competition, it can take action to remedy it. The regulation establishes three instruments for this purpose, which will be maintained by the Commission.
- Companies must notify concentrations if their EU turnover is at least CHF 501 million and the relevant foreign financial contribution is at least CHF 50 million.
- Notify public tenders in advance if the contract value is at least 250 million CHF and the tender includes a foreign financial contribution of at least 4 million CHF per non-EU country.
- The Commission may initiate investigations and request notifications for small concentrations and public tenders without prior cause.
Transferees or tenderers must disclose any financial contributions received from non-EU governments or authorities for mergers or tenders above the threshold. Also, the merger or contract award cannot proceed while the Commission investigates.
How Long Will the Commission Conduct the Assessment?
The process for examining foreign subsidies will include an initial evaluation and, if evidence suggests a foreign subsidy is impacting the internal market, a detailed investigation. The Regulation sets a 25-day timeframe for the initial evaluation and a 90-day timeframe for the detailed investigation, similar to the EU Merger Regulation deadlines. These timeframes may be extended in exceptional cases.
The preliminary assessment for public procurement has a 20-day time limit, with the possibility of a 10-day extension in certain situations. The in-depth examination has a 110-day time limit from when the notification is received, with the possibility of a 20-day extension in exceptional cases.