EK zahájila první hloubkové šetření zahraničních subvencí u akvizice

EC launches first in-depth foreign subsidies investigation concerning an acquisition

As a reminder, on 12 July 2023, the Regulation (EU) 2022/2560 of the European Parliament and of the Council of 14 December 2022, on foreign subsidies distorting the internal market (the “Regulation”) entered into force, setting out the rules and procedures for dealing with internal market distortions caused by foreign subsidies and introducing tools to control foreign subsidies and to assess and remedy such distortions. The Regulation introduces three fundamental procedures: (i) ex officio procedure to investigate foreign subsidies, (ii) notification-based procedure to investigate concentrations and (iii) notification-based procedure to investigate bids in public procurement procedures.

In this context, the Commission was notified last week (10 June 2024) of a concentration, based on which a State-controlled company based in the United Arab Emirates would acquire sole control of a major European telecommunication operator.

Following a preliminary review, the Commission concluded that there are sufficient indications on the existence of foreign subsidies distorting the EU internal market. These subsidies take the form of an unlimited guarantee from the United Arab Emirates and loans from banks controlled by the United Arab Emirates. The Commission expressed concerns that the subsidies provided could improve the capacity of the company concerned to implement the planned acquisition as well as to increase the future competitiveness of the merged entity on the EU market, in particular by facilitating access and better conditions for financing its activities in the EU.

On this basis, the Commission has opened an in-depth investigation and now has 90 working days to assess the factual and legal issues in this case, notably whether and to what extent the subsidies lead to negative effects on the concentration itself and on the EU internal market.

Following the in-depth investigation, the Commission will take one of the following decisions:

• a decision with commitments: the Commission will impose on the undertaking concerned commitments which the undertaking concerned has submitted to the Commission and which the Commission considers appropriate and sufficient to remedy the distortion fully and effectively;
• a no objection decision: the Commission will decide not to raise objections if, upon in-depth investigation, it finds that the preliminary review is not confirmed or that the distortion in the internal market is outweighed by positive effects within the meaning of the Regulation;
• a decision prohibiting a concentration: the Commission will prohibit the concentration if it finds that the foreign subsidies distort the EU internal market.

For more information on the case under assessment, see the European Commission's press release HERE.

This is the fourth case in which the Commission has opened an in-depth investigation under the Regulation (the first three cases concerned an investigation of public procurement procedures), and the first ever case in the context of concentration investigation. In addition, the Commission also opened two ex officio procedures. This shows that the Commission is actively addressing the issue of foreign subsidies. In the context of M&A, we therefore recommend not to underestimate this aspect and to take it into account especially in preparation of the transaction documentation or in timing of the transaction itself.

If you would like more detailed information, please contact the authors of this article or other members of the EY team with whom you work.

Authors:

Vladimír Petráček

Jakub Marko

Johanna Roháčková