European Commission | Review Finds Foreign Subsidies Regulation Fit for Purpose, Commission Considers Targeted Changes

The European Commission’s first review of the Foreign Subsidies Regulation (FSR) has found that the regulation is fit for purpose to address distortions in the internal market caused by foreign subsidies. Its objective of maintaining a level playing field in the internal market is widely acknowledged and remains relevant.

The review of the first three years of FSR enforcement shows the instrument is working well in practice. The procedures for reviewing concentrations and foreign financial contributions in public procurement procedures are important components of the FSR framework, enabling the Commission to identify and address potentially distortive foreign subsidies before a merger is concluded or a high-value public contract is awarded. The Commission’s ‘ex officio’ powers provide an effective complementary framework to investigate and address potential distortive foreign subsidies in the internal market.

At the same time, the review shows certain concerns about complexity and administrative burden, so the Commission is looking into ways to simplify where possible.

Stakeholders confirm FSR’s relevance while calling for simplification

Feedback from most stakeholders through targeted consultations underlines that the FSR framework is overall fit for purpose.

In concentration cases, replies to consultations and early enforcement practice highlight the value of prenotification engagements, which improve clarity and efficiency in the notification process. Stakeholders have also welcomed the available exceptions to reporting obligations and the possibility of requesting waivers for certain information requirements.

In public procurement cases, the Commission successfully reviewed over 5,000 submissions, ensuring public authorities could secure essential goods and services without delays. While formal prenotifications remained low, the Commission proactively managed numerous requests from companies and public authorities to guarantee smooth and efficient procedures.

In ex officio cases, the recent opening of in-depth investigations in two cases, one concerning threat detection systems and the other in the wind sector, offers further insight into the Commission’s approach when assessing potentially distortive foreign subsidies.

At the same time, the review highlighted some areas of concern:

• the administrative burden in the collection and reporting of data on foreign financial contributions (FFC);
• the length and complexity of certain procedures linked to the investigations;
• the uncertainty over the Commission’s call-in powers for below-threshold concentrations, despite their legitimate aim; and
• the need for enhanced clarity regarding certain reporting obligations, as well as greater transparency in enforcement practice.

Commission to propose adjustments to FSR framework

Considering these findings, the Commission will launch initiatives to make some targeted adjustments to the FSR procedural framework. These adjustments may include, in particular:

• Under the concentration chapter:
  • Increasing the turnover notification threshold through a delegated act;
  • Introducing a simplified notification possibility for specific cases or FFCs;
  • Moderately increasing the reporting thresholds for FFCs;
  • Introducing additional exemptions from reporting requirements for FFCs not categorised as foreign subsidies most likely to distort the internal market.
• Under the public procurement chapter:
  • Introducing simplifications and clarifications in the forms used for notifications and declarations;
  • Revising the framework for companies to request waivers to limit the disclosure of information of certain FFCs;
  • Clarifying and limiting the reporting of FFCs not categorised as foreign subsidies most likely to distort the internal market;
  • Clarifying the rights and obligations of companies and the contracting authority, including for processing of confidential information, in the context of access to files.

These adjustments would reduce the administrative burden related to the number of submissions, streamline reporting requirements and ensure a focus on cases that are more likely to raise concerns, while preserving the effectiveness of the FSR.

The Commission has started work on the targeted adjustments. The draft targeted adjustments will be published in the autumn, giving stakeholders the possibility to submit comments. Based on the feedback and any additional evidence gathered, the Commission will adopt the targeted adjustments in 2027.

Background

Under Article 52(2) of the FSR, the Commission is obliged to review its practice of implementing and enforcing the rules every three years, and present a report to the European Parliament and the Council. This is to ensure that the regulation meets its objectives and remains effective in preventing distortions in the internal market caused by foreign subsidies.

The present review is based on a comprehensive analysis, including the assessment of 103 contributions received from two consultations, and on an independent study conducted by an external party. This input has helped the Commission assess the impact of the FSR and identify targeted adjustments to its framework.

Compliments of the European Commission