The European Commission has released new Guidelines under the Foreign Subsidies Regulation (FSR), providing clarity for businesses on how foreign subsidies may affect competition within the EU internal market. The Guidelines aim to enhance predictability and transparency for companies operating in the EU, setting out the Commission’s approach to assessing distortive effects and applying remedial measures where necessary.
The Guidelines detail how the Commission evaluates whether a foreign subsidy distorts competition. Once a subsidy has been identified, the Commission examines whether it strengthens a company’s competitive position in the EU and assesses the potential impact on market dynamics and competitors. Special attention is given to subsidies not directly targeting the EU, with a focus on whether they may cross-subsidize activities within the internal market.
In the context of public procurement, the Guidelines explain how the Commission determines whether foreign subsidies may have influenced bidding behavior. If a bid is found to be unduly advantageous, the Commission will evaluate whether the advantage stems from the foreign subsidy or from other legitimate factors. A balancing test is applied to weigh any positive effects of the subsidy against its potentially distortive impact, with the Commission able to accept commitments or impose corrective measures as appropriate.
The Guidelines also clarify the use of the call-in mechanism, which allows the Commission to request prior notification of certain concentrations or public procurement contracts where foreign subsidies are suspected. The Guidelines introduce safe harbors, exempting low-value procurements and smaller subsidies from prior review, while ensuring that higher-risk cases receive scrutiny before transactions are completed or contracts awarded.
The publication of these Guidelines follows extensive consultation with stakeholders, including Member States, businesses, legal and economic experts, academia, and consumer groups. Feedback from public consultations in 2025 informed the final text, ensuring that the Guidelines are practical and aligned with market realities.
The FSR, which came into force on 13 July 2023, empowers the Commission to address distortions caused by foreign subsidies across all sectors and economic activities within the internal market. It covers acquisitions of control, public procurement, and other forms of investment, reinforcing a level playing field while maintaining openness to trade and investment.
The Commission is required to publish these Guidelines by January 2026 and will provide a report to the European Parliament and Council by July 2026 reviewing the application of the FSR, potentially accompanied by legislative proposals.
The Guidelines are expected to provide businesses with a clearer understanding of compliance requirements and facilitate responsible investment decisions, contributing to fair competition and industrial competitiveness across Europe.